Indian Hotels stirs up business with premium homestay experience

The 5-star hospitality chain blurs the line between homestays and hotels, draws new investors into the mix

Experiences drive the modern traveller, be it an adventurous forest trail or swimming with the sharks. And that is precisely what the big hospitality chains have struggled to deliver. Global brands such as Airbnb and  homegrown properties such as OYO, Vista have stepped in to fill in this void, carving out a billion dollar category and an alternative universe for travellers. Now as Indian Hotels (IHCL) jumps in with the promise of a premium homestay experience, are big legacy brands about to wrest the odds in their favour?

Not immediately warn experts, because big chains are likely to wait before investing in a category that is hugely price sensitive, despite its  potential. A recent BCG and Google report estimates non-hotel accommodations in India will touch $3 billion by 2020. But what will change with the entry of IHCL are traveller expectations and the nature of investments.

IHCL, under the brand ‘Ama Trails & Stays’ will open heritage bungalows and guest houses across the country, starting with eight in Coorg’s coffee estates and one near Chikmagalur. it opens for booking on March 1. Puneet Chhatwal, MD and CEO, IHCL  announced while launching the new venture that Ama properties will have the basic amenities that one associates with the chain, and some might have butler services. Starting with 11, IHCL plans to scale up to 100 properties by the end of 2020. The heritage homestays are a response to evolving guest needs for local, immersive and authentic experiences and is driven by the need to strengthen the chain’s loyalty programme, Chhatwal had said. 

With rates starting from upwards of Rs 21,000 for two to three nights, many of these properties and guest houses were once owned by Tata group companies. In the future if it looks to expand, it will have to look beyond its own backyard for new properties and will also have to find ways to differentiate its brand from the premium properties of Airbnb and other smaller labels. 

“An Airbnb has captured the segment very well, and anyone trying to get in has a long way to go.  Having said that, for a right location and a competitive price point, there will be many takers,” said Manav Thadani, founder, chairman, Hotelivate, a consulting firm. 

The latent potential in the category is probably best defined by the manner in which small brands have mushroomed. Consider the experience of a small premium homestay brand, Vista Rooms. It currently manages 160 rooms and plans to scale up to 1,000 by end 2022. For a four to five room villa, Vista’s rate is Rs 20,000 per night. “The supply in general doubles every year. As per our estimate, there are 500,000 homes which are of good quality and can be potential home stays but less than 1 or 2 per cent are unlocked today,” says Pranav Maheshawari,  co-founder, Vista Rooms. He believes that the future of travel lies in experiences and it can’t be delivered in hotels. The entry of IHCL will get people to start taking this segment a lot more seriously, he adds. 

“What Taj is doing is very different from an Airbnb. It will work well for someone looking at luxury with a personalised experience,” says Nandivardhan Jain, founder and CEO at Noesis Capital Advisors, an advisory firm in the hospitality sector.  However, he is sceptical about scalability and said that it would take a few years to see if this was a financially wise move. 

Many expect the IHCL entry to splinter the homestay business more sharply between premium and budget accommodations, much like what the hospitality industry is today. And there is enough value to be harnessed at every point in the spectrum. OYO Rooms, which plies the budget to mid-premium category, currently has over 7,000 fully-managed residential accommodations globally. It plans to take this up to 20,000 homes by the end of 2019, said Kavirut, chief growth officer at OYO Rooms.  “We also use our technological and operational capabilities to ensure seamless management of the property and map the customer journey to the smallest detail,” he said. 

Even as the category redefines itself, there is a fear it could lose the charm that drew travellers in, in the beginning. “I stay in a homestay because nothing is standardised or predictable. That will be lost if I stay in a property owned and maintained by a chain,” said a top official at a hospitality firm.