While making their travel plans, a growing number of millennials and GenZ travellers are seeking offbeat locations. A meal in rustic environs from locally foraged produce scores higher points in their wishlist than a luxurious one in a city hotel.
Since March 2020, India’s travel and hospitality sector has emerged as a domestic-demand driven economy. As young travellers, who are a big part of the travel and hospitality sector, increasingly shift from mainstream travel destinations to offbeat locations, there is an ever-growing need to boost the basic infrastructure in these places.
Pranav Dangi, Founder of Hosteller, a chain of backpacker hostels suited for this clientele, stated that this should include a dedicated water supply channel. Other steps could comprise increasing the sanctioned electrical load of the town or village, creating a waste collection process and garbage disposal centres around these travel hubs, etc. He hoped that the upcoming Union Budget 2022 would have announcements that will preserve nature and the location’s surroundings, which will give eco- and rural tourism a fillip.
How can the government provide economic support to startups like Hosteller to ensure further sustainable pickup in domestic travel demand and encourage more startups to enter this sector?
Since early 2020, the travel and hospitality sector has seen a lot of ups and downs from demand per se. Hence, many young startups have gone through a working capital crunch given the industry’s high OpEx nature.
Also, high GST rates of 12% and 18% have been another pain point when demand is already low. The GoI should look into easing norms for working capital loans and ease the process for startups especially. Also, as per the industry’s recommendations, a revision in the GST rate slab is needed.
What investment is needed to boost the tourism infrastructure and ensure proper connectivity and amenities for domestic tourist locations, especially smaller towns?
We see a lot of investment needs in Tier 2 and Tier 3 cities from the government’s end already. Take the case of the transportation infrastructure – all three modes of transportation call for further infrastructure development.
For e.g. there are hardly any functional airports in states like Himachal Pradesh or Uttarakhand. Road connectivity is also not at all times, with limited options for travellers. With a high influx of travellers in many states, the GoI must improve commuting facilities.
What gives you the confidence that the GoI will create travel-friendly aura?
The travel and tourism industry contributes to roughly 10% of India’s GDP and employs one out of nine people in the country. The GoI should promote this sector through its central campaigns given the industry’s high employability nature.
It should also boost investment for maintaining various national heritage sites and monuments. Moreover, there is a need to create avenues to drive employment for locals and promote local skills and produce.
Is the highly capital intensive nature of the hospitality industry a major hurdle for startups like Hosteller?
Yes, this is a significant hurdle for our company. We need high capital for the development of a new project with a payback period ranging from 10 to 15 years.
It is further amplified as we plan to launch multiple locations in the next three years, and servicing these high-interest costs is always our top priority. However, we are also working on numerous asset leasing models to reduce investment requirements into asset development.
What kind of targeted credit support can the Finance Minister extend to companies in the hostel accommodation sector in her Budget announcements?
The finance ministry can definitely look into rolling out credit schemes to loss-making startups, further ease the process and time taken from application to disbursal of loans, provide long-term working capital loans, ease ESI/PF norms, etc.
The Hosteller plans to add over 30 destinations in 2022 across multiple states in India. In fact, we raised a pre-Series A round of $1 million in Q3 2021. We now hope to raise Series A round by mid of 2022.
A budget supportive of MSMEs will go a long way in our growth plans. Easing other compliances such as GST, corporate taxation, etc., shall help companies accelerate growth.
