Tech-heavy budget brand Treebo Hotels has secured $34 million in a Series C round of funding from Hong Kong-based investment firms Ward Ferry Management and Karst Peak Capital to gear up for heavy competition from rivals, like OYO Rooms and FabHotels. SAIF Partners, Matrix Partners India and Bertelsmann India, who have already invested $23 million over two rounds, also participated in the round. Bertelsmann India Investments alone invested $17 million into Treebo in June 2016.
Since its opening in 2015, Treebo Hotels has raised $57 million in total capital so far. The company expects to invest the funds into building its brand, strengthening its technology team and expanding its portfolio in existing and new cities.
Sidhartha Gupta, Treebo Hotels co-founder, told the Times of India that the startup was seen as a hotel aggregator in its early days, but this view has started to change. "I am glad that over the last 12-18 months we have led the way in helping the ecosystem realize the importance of guest experience over everything else. This is not about hyper scale or deep discounting. Delivering a terrific value for money is the only real problem to be solved here," Gupta said.
Large travel aggregators have become attracted to the online hotel sector in the past year because the business is more lucrative and has higher profit margins than flight bookings do. Other contenders, like the U.S.-based and Priceline-owned Booking.com and payment web company Paytm, have also started strengthening their competitive edge in the market.
By using these hedge funds, the Bengalaru-based startup Treebo, which was established by former IIT Roorkee executives Gupta, Rahul Chaudhary and Kadam Jeet Jain, has expanded its portfolio to 300 properties with 6,000 guestrooms in over 50 cities operating under its brand.
Along with its Treebo investments, Ward Ferry has been investing in hotel manager Huazhu Hotels and MakeMyTrip, which has been negotiating plans with Treebo and FabHotels to acquire an equity stake. These investments would have allowed the company to make its first venture in India's budget hotel sector, but its talks with Treebo fell through. Goldman Sachs Investment Partners recently invested $25 million in FabHotels in this Treebo rival's Series B round of funding. Meanwhile, global investor SoftBank invested over $200 million into OYO.
In response to the fragmentation of the market and the potential to grow in a country like India, investor interest and money began flowing into the budget hotel sector in 2015. Gupta told the Times of India that Treebo Hotels has been working to improve its unit economics. Therefore, the company is now charging 18 to 20 percent of the overall revenue from hotel owners. These tech-backed hotel chains have also been partnering with traditional hotel groups, like Ibis, Ginger Hotels and LemonTree, who usually lease or own their properties.