Vedanta Wake Up seeks to raise Rs. 25-30 crore

“There is huge opportunity in the Indian budget accommodation space and we at Vedanta Wake Up! are seeking to raise Rs. 25-30 crore through debt and equity for our expansion plans.”

Jul 08, 2015 11:07 IST India Infoline News Service

Aadil Muscatwala
Blanket Hospitality Ventures Pvt Ltd (BHV), is a chain of hostels, currently operating 6 properties under the brand ‘Vedanta Wake up!’ founded in 2011 by Rishabh Gupta and Aadil Muscatwala. The seeds of introducing this concept of organised hostelling in India were sown during a trip to Australia in 2009. The trip lasted over two months and exposed them to the experience of hostelling. Since then they have backpacked extensively and have incorporated their experience and learnings in Blanket Hospitality Venture.
 
Aadil Muscatwala Founder, Blanket Hospitality Venture Pvt. Ltd (BHV) has worked as a Senior Analyst at Merrill Lynch in the Real Estate Investment Banking group in Sydney and the Mergers and Acquisitions group in New York.
 
Replying to Yash Ved of IIFL,  Aadil Muscatwala says, “There is huge opportunity in the Indian budget accommodation space and we at Vedanta Wake Up! are seeking to raise Rs. 25-30 crore through debt and equity for our expansion plans.” 
 
Tell us more about Vedanta Wake Up. What are the trends being seen in hostelling?
Hostelling is unique venture that seeks to redefine and disrupt the Indian hospitality sector by creating a niche that marries affordability with standardisation of product and service. The mission is to enable guests staying at Vedanta Wake up! to have a socially fulfilling experience. Revenue and profitability are the by-products of a well-run business. Everyday activities are organized at the properties to enable guests to socialize, at no extra cost. These include dinners at restaurants, bar crawls, music and movie nights, board game nights, cycling tours of the city, cooking classes and yoga sessions.
 
Hostelling allows travellers to be in a safe and secure environment where they can meet new people, share stories and experiences with complete strangers, make new friendships and learn about different cultures all at a very low budget. This isn’t always possible when staying at luxury hotels where the guests tend to have a completely different motivation for their travels. 
 
Give us a brief overview of the budget hotel industry?
India is one of the fastest growing tourism markets in the world at 9% - India’s FTA (foreign tourist arrival) growth rate is double that of the global average. The travel market is expected to double in the next 7 - 8 years to 1,700 million travellers. India is expected to be among the top 6 countries in domestic travel spending by 2023. India is short of 65,000 budget rooms – making India a relatively “un-hoteled” market.
 
What is the business model for Vedanta Wake Up? What would be the revenue drivers going ahead?
Our business model is based on leased properties as well as revenue sharing properties. The entire process of transforming a leased property as per the standards of a Vedanta Wake Up property takes 45 days. This involves centralised purchasing, vendor tie-ups and an adept on-the-ground execution team. This essentially means that a property becomes revenue generating within a period of 45 days from signing of the lease. 
 
The properties have multiple sources of revenue, room revenue being the largest contributor. We have 18 unique active sales channels which contribute to the high occupancies witnessed at each hostel. Unlike the long gestation periods typically witnessed by other budget hotels, we have a proven business model where we achieve operational break even at 20% occupancy levels and payback within 8-12 months. 
 
What are your fund raising plans in near future? 
We plan to raise Rs. 25-30 crore.  The funds raised would be used expansion plans — to add 100 to 150 hostels in our bouquet over the next three years. With this expansion our aim is to become of the most formidable brands in the Indian budget accommodation space and a dominant force in the world hostelling space. 
 
What is your domestic-international tourist mix?
Vedanta Wake Up! enjoys a healthy domestic-international tourist mix of 60:40.
 
What have been the overall occupancy rates and average room rate (ARR)? 
For the CY2014, Vedanta Wake Up reported ARRs of ~ Rs. 500 for dorm (dormitory) beds and Rs. 1500 for private rooms with occupancy of 60 to 65%. 
 
What is your outlook on hotel prices?
As per industry outlook the Average Room Rates (ARR) are expected to be largely flat. However, occupancies are estimated to improve for the year. 
 
For the CY2014, Vedanta Wake Up has reported ARRs of ~ Rs. 500 for dorm (dormitory) beds and Rs. 1500 for private rooms with occupancy of 60 to 65%. 
 
What is your revenue model?
Our business model is based on leased properties as well as revenue sharing properties. The entire process of transforming a leased property as per the standards of a Vedanta Wake Up property takes 45 days. This involves centralised purchasing, vendor tie-ups and an adept on-the-ground execution team. This essentially means that a property becomes revenue generating within a period of 45 days from signing of the lease. 
 
The properties have multiple sources of revenue, room revenue being the largest contributor. We have 18 unique active sales channels, which contribute to the high occupancies witnessed at each hostel. Unlike the long gestation periods typically witnessed by other budget hotels, we have a proven business model where we achieve operational break even at 20% occupancy levels and payback within 8-12 months.

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