Full text: Stayzilla CEO explains why he has to shut shop and reboot

Stayzilla has announced that it has suspended operations at a time when competition in India’s online travel sector is heating up through consolidation.

"This has been one of the toughest decisions that I have taken so far but it is the right thing to do. The hardest part is saying goodbye to a perfect team that has accomplished a lot by putting homestays on the map of India," said Yogendra Vasupal, co-founder and CEO at Stayzilla, in a blog post.

Here is the full text:

I would like to announce today that 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.

This has been one of the toughest decisions that I have taken so far but it is the right thing to do. The hardest part is saying goodbye to a perfect team that has accomplished a lot by putting Homestays on the map of India. I am the most fortunate to have had such a team on my side at this juncture. Whatever and how much ever I write about them is not going to do justice to their commitment. But try, I must!

Pankaj and SPeeD

A sincere shoutout to Pankaj who joined us in June 2016. In the short period that he has been here, he built up a really solid product, engineering and design team as well as robust processes to ensure their effectiveness. Today our engineers deploy more on a daily basis than what we used to do on a weekly basis before he came. And the results have been clearly visible.

We have a passionate and dedicated team of engineers and data scientists led by Santanu, and PMs led by Abhimanyu and Mouli. This team has shipped some amazing product features and technologies including cutting edge prediction engines that let us predict booking confirmation rate, forecast demand, predict price and optimize bids. This overall helped the company do much more with less (Stayzilla went from 600 to 200 people while adding over 8000 homestays across India).

I would like to give you just one example of the passion and dedication of this team. In the last 20 days — while the management was figuring out the next steps — the Stayzilla Product, Engineering and Design (internally called SPeeD) team was busy in a hackathon, developing new features for the homestay ecosystem. A lot of them—user uploaded videos of properties, map view, 360 degrees (panoramic) view, host-guest chat — even got deployed to production during this time. 

Anuroop and Marketing

I am also thankful to the marketing team headed by Anuroop, who joined in August 2016. From being known as a tier 2–3 hotel OTA focused on budget properties to being accepted as a major homestay player focused on experience has truly been a splendid makeover with zero ATL spends. His team proactively coordinated our PR efforts over the last 6 months that put Stayzilla at the forefront on government partnerships. In an industry where offers and promotions were the norm, his team was focusing on marketing ROI and getting bookings without any discounts.

Ankit and Marketplace

The Marketplace team, headed by Ankit, was responsible for scaling our popular townhall events promoting homestays to more than 900 towns and turning Homestays a pan-India phenomenon. The on-ground team was also crucial in building the ecosystem across various state and central agencies. Ankit also initiated the conversations with Central Government in April 2016 for easing the homestay guidelines.

Thanks to his team’s efforts, Stayzilla signed its first MoU with Madhya Pradesh State Tourism for the joint promotion and marketing of homestays in the state in June 2016. The team then continued its partnerships streak with 8 more states and 2 NGOs promoting ecotourism. They covered an extensive range of areas to promote homestays and explored the possibilities of implementing it in places from Tawang to Kutch and Spiti to Kanyakumari. New travel destinations like Majuli were also created with the creation of homestays there.

In a market where we discover new needs and problems almost everyday, it is impossible to automate everything. Ipe and his team have been the perfect partners where they have remained flexible while maintaining a sense of purpose towards ensuring customer experience.

We employ a product + people hybrid approach to customer service. However, on peak days, volumes can routinely reach up to 5x of regular volumes. In those times , when the manual part of the hybrid approach becomes more crucial, his team has always shined through. At times, there are holidays when the whole company is out except for him and his team managing all issues with check-ins or check-outs.

Support Functions

Whatever we have achieved would not have been possible without the support from Finance, Admin and HR. We have had 3 revisions of our financial plan in the last 18 months with an eye on increasing the runway via both cost restructuring and working the margins up and increasing the ROI for any investment. The finance team headed by Sachit always provided constant monitoring and gave early feedback. The Admin and HR teams worked shoulder to shoulder with all teams ensuring their comfort during all times.

Investors

I am most thankful to my investors, Avnish Sir from Matrix and Anup Sir from Nexus. I have learnt a lot from them. Just knowing that they are always there by my side has been a major confidence boost. They have been an incredibly supportive team — looking at decisions as collective decisions, helping us plan various models and allowing time for them to take shape.

I am eternally grateful to the angels from Indian Angel Network who gave us the first capital to scale way back in 2012. The advice and guidance from Ravi Sir in the early stages was priceless.

Co-Founders

Sachit Singhi and Rupal have been my partners in this journey from the initial days. Without their support and flexibility I am sure we wouldn’t have walked this far. Sachit is one of my closest friends and Rupal is that + my wife! After a long discussion, we have arrived at the conclusion that, we need to spend the next decade strengthening our personal relationship which we have neglected for a more professional one in the last 10 years. At this time, I would also require all the support from as many friends and family that I can get. Having Sachit and Rupal as true friends by my side helps!

Reason for Failure

Despite having a very clear lead, despite a lot of firsts, despite being successful in getting an ecosystem up from scratch pan-India, there are a few reasons why we are at this juncture.

The travel marketplace does not have local network effects and, therefore, we 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.

Some of India’s key macro trends further deteriorated our ability to expand quickly and cost effectively. India does not have a lot of public goods, often taken for granted in mature markets like logistics, tech savvy suppliers and online user demand. A homestays marketplace needs to invest in educating the market on the concept and even using Internet (!) and not just the product. The costs, both financial and opportunity costs, creep up on you over a period of time and gets rationalized as cost of doing business in India.

This was further exacerbated by the discounting based growth rampant in the travel industry since 2015. Forced to match prices, we could not even recoup what we put in, necessitating very large capital requirement simply to sustain growth.

A change in what and how I value business also played a large part, I feel. More on that later.
 

Way forward as a Business

Looking forward, I see co-operation and specialization as the mantra for Stayzilla.

Our hosts still have a lot of needs that are unmet and problems that are unsolved. That’s something that excites me. I see Stayzilla becoming a hassle-free distribution channel going out to the right audience, wherever they may be. We will look to work closely with both online and offline travel partners to offer the best of Indian homestays to their valued customers.

Focusing all our energies on the supply side will allow us to build on our core strength that we have developed over the last 18 months. Specialized solutions such as the concept of ‘Stayzilla Verified Homestays’ excite me in particular. Originally conceived to increase trust, this could serve as the benchmark for the entire nascent and unstructured industry.

I believe that the market is at a phase where co-operation among players is going to be the most certain way in which we can create value for all stakeholders involved.

Way forward as a Founder

The last 11 years has been a great learning experience.

The initial 7 years were all about having negative working capital, positive cash flow and a sustained ability to fund our own growth. Those were the only metrics we tracked. In the last 3–4 years, though, I can honestly state that somewhere I lost my path. I started treasuring GMV, room-nights and other ‘vanity’ metrics instead of the fundamentals of cash flow and working capital.

I have come to realize that the value of a business is extremely subjective, like beauty. While there exist many benchmarks, true beauty is intrinsic and begins with the comfort one has with one’s skin. Similarly, while there exist many benchmarks for valuation of a company, its intrinsic value starts from inside and is tied very closely to the metrics that founders value and their comfort with that selection.

The last year has been a focused attempt to get back to our initial, and stable, value system. However, 12 months was just not enough time to shift paths, when we were already 36 months down a dramatically different path.

I am at a crossroads. I am looking at this as a clean start to get back to the roots I am comfortable with. I know there are a lot of other founders at the same juncture. I would like to share with you the song that set the perspective for me the first time I heard it. I hope this helps you find your path as it helped me.

Cheers to building a beautiful business again!

Note: New bookings on all Stayzilla platforms — website and app — are now suspended. Bookings with check-in dates on or before 28th February 2017 will be honoured. Any booking with check-in after that date will be cancelled and the guests will receive 100% refund.