His business card is shaped like one of those “Do Not Disturb” cards that you hang on your hotel room door handle. One look at his card and you don’t need to guess his line of business. He is in the hospitality industry – not running hotels – helping customers book hotel rooms online in tier-2 and -3 towns in India.
Yogendra Vasupal, CEO, StayZilla.com, still remembers his first customer. It was an American national and he had helped her book a hotel room in Manali, Himachal Pradesh. He had paid almost the entire sum to the hotel and when the customer landed up at the hotel, she was told she did not have a booking. The hotel told StayZilla that the customer had not come.
“We had to refund the money. It was a loss. It was almost Rs 10,000. We refunded the entire amount and took it as a lesson,” says Yogi, sitting in his office in an apartment building in south Chennai. This was almost five years back. He has put that disastrous beginning behind him and moved on, learning lessons that have helped him grow his business.
How did he deal with that? First, StayZilla removed the hotel from its list.
Then, it shut down its site for almost three months, not accepting any further bookings. Yogi says he used this time to strengthen StayZilla’s post-booking process to ensure such problems did not recur.
It put in place a more rigorous system – once the booking is accepted and part of the money is paid to the hotel, StayZilla’s staff call up the hotel two days before the customer’s booking date and confirm that everything is all right. There is an email trail between StayZilla and the hotel. Then the staff check with the customer as to his or her actual arrival time at the hotel, re-confirm this with the hotel staff again, make sure messages are left for the staff who will be on duty when the customer lands up.
“It is an automatic process now, part of our customer relationship management,” Yogi says. There has been no similar experience for StayZilla. And, yes, that customer “did come back (to book a room through StayZilla) after two years,” Yogi recalls.
“We don’t trust the system to take care of the customer. You need to build in that as your company’s DNA,” he adds.
It is this process that helps StayZilla book 150 rooms nights everyday and “I would say that we are number two or three all over India and yet not faced as many problems in terms of customer dissatisfaction,” he says.
Yogi, 30, dropped out of college when he was in the fourth year of engineering. He says he was doing freelancing work of developing Web sites even while in college and was earning a handsome sum. He registered the company in August 2005 and started working on the platform, technology and other aspects. Once the company was in place and functional, his friends from college – Sachit Singhi and Rupal Surana – joined him.
But why hotel bookings? That too for the smaller towns? This is a fragmented market, explains Yogi. No one can choke you out of such a market, he reasons. You could sell anything from a room in a guest house to one 3-star hotel in this market.
For two years, Yogi and his team travelled to more than 250 cities, talking to hotels and understanding their requirements. StayZilla went live in 2007 and has since covered nearly 4,800 hotels across almost 650 towns and cities. It deals with hotels that are three-star in ranking and below, and where the average room rent is about Rs 800 a night.
As StayZilla developed, its services have also evolved. It now has a live chat facility where customers ask all kinds of details about the hotels they want to book rooms in. This chat facility alone has been able to double the conversion rate – number of enquiries that get converted into actual room bookings.
From about four employees when it started, StayZilla has just over 30 now. One qualification they insist on while hiring staff – they should know one other language apart from English and Tamil.
After all, the company deals with hotels in different parts of the country and knowing the local language always helps.
StayZilla recently got the first round of funding of Rs 2.5 crore from the Indian Angel Network, led by Ravindra Krishnappa. A bulk of the money will be used for marketing activities, both online and offline.
The accommodation sector, Yogi reckons, will be around Rs 30,000 crore and he hopes StayZilla can comfortably get Rs 30 crore of that. “But there is so much space to grow and this is the right time,” he says.
The company will need more funds as it scales up. Last year, StayZilla earned an income of Rs 30 lakh, which means it booked rooms totalling Rs 3 crore. This year, it is looking to increase revenues 10 times.
How does it get its revenues? A commission on each room booked.
There is at least a 10 per cent margin that StayZilla has on each booking.
Despite this, says Yogi, the rate a customer will get on StayZilla will be lower than if he or she were to approach the hotel directly. “That is because we give them the volumes,” says Sachit.
Both Yogi and Sachit are confident that StayZilla will holds its own against competition, especially from the bigger online players who sell flight tickets, hotel rooms and what not. As Yogi says, StayZilla sells information, whose shelf life may vary from city to city, and season to season. This is where technology came in handy for the start-up.
“We have built a prediction engine that predicts which hotels are going to get booked, to 95 per cent accuracy. That helps us manage the stock of information that we have,” says Yogi. And, this, he adds is StayZilla’s operational barrier to entry. “Online travel agents cannot scale to 670 cities without having this information.”