India's FabHotels plans growth through partnerships

(Sai Village Sushant Lok)

Two-year-old Indian budget hotel chain FabHotels is planning to add 400 to 500 rooms to its portfolio per month, increasing its inventory to more than 3,000 rooms across 20 cities by December. FabHotels currently has partnerships with 100 hotels in 15 cities, with approximately 2,500 rooms in total.

Under its asset-light, franchisee model, FabHotels partners with smaller hotels. The ownership and name of the partner hotel remain unchanged but it operates under the FabHotels brand.

The company, which charges a fee of around 20 percent of the partner hotel’s monthly revenue, currently earns close to $2 million per month.

Backed by Accel Partners, RB Investments, Mohandas Pai’s Aarin Capital and Qualcomm Ventures, FabHotels raised $8 million in Series A round of funding in June, after raising $2.25 million as seed money in July 2015.

According to data provided by start-up tracker Traxcn, the budget hotel market in India has attracted total funding of $282.4 million so far across nine companies and 23 deals since 2013. These companies typically operate on an asset-light model and aggregate hotels by partnering with them.