2017 has been a bad start for the several Internet companies and tech-startups in India. Online homestay aggregator Stayzilla, run by Inasra Technologies Pvt. Ltd, has shut its operations and will  “reboot with a different business model,” co-founder and CEO Yogendra Vasupal has said.

“We would be bringing to a halt the operations of Stayzilla in its current form, and looking to reboot it with a different business model. The hardest part is saying goodbye to a perfect team that has accomplished a lot by putting Homestays on the map of India” said Vasupal in an official blogpost.

Stayzilla, started in 2007, had about 8000 homestay properties in about 900 towns and had tied up with various state tourism boards in the last one year including Madhya Pradesh, Rajasthan, Odisha among a few others. However, it was facing a stiff competition from Airbnb, Oyo and Treebo. Besides, it was facing some regulatory issues and had initiated the conversations with Central Government in April 2016 for easing the homestay guidelines.

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Stayzilla had raised about $34 million across four rounds of funding, with the last being a $13.5 million Series C round in May 2016. Yogendra also made it a point to thank all of Stayzilla’s backers like Indian Angel Network, Matrix Partners and Nexus Venture Partners, who had invested in the venture at different stages.

Citing the reasons for failure, Vasupal said that despite having a very clear lead and a first mover advantage, there were few roadblocks. He said that the travel marketplace in India does not have local network effects and, therefore, one can’t really take a focused city-by-city approach in terms of matching supply and demand.

“The demand and supply for Homestays was non-existent 18 months back, excluding a few small pockets. As a result, we had to invest extensively in both sides of the marketplace, creating Homestays as well as guests who would choose a homestay across the country. We were actually successful at this — we have created 8000 Homestays in over 900 towns — but this stretched us thin,” he said.

Vasupal said he sees Stayzilla becoming “a hassle-free distribution channel going out to the right audience.” He made it clear that the company will focus all its energies on the supply side in its next avatar, which will allow it to build on its core strength.

Specialised solutions, such as ‘Stayzilla Verified Homestays’, could be in the offing, the post suggests.

In the online hotel booking space, Stayzilla competed with online travel agencies such as MakeMyTrip, VC-backed Yatra.com, Goibibo and Oyo Rooms, among others. The segment has also seen the emergence of startups like Findmystay, a reverse-bidding OTA that enables customers to book hotel rooms at the price of their choice.

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Ankur Chandra

A software engineer by education, Ankur is go-getter, who leaves no stones unturned to find a solution to a problem. He is passionate about technology and automobiles. And, is a big foodie at heart. Watching cartoons is his favourite off-field indulgence. At KnowStartup, he is an integral part of the editorial team.

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