To study the development of budget hotels and low cost carriers in the past ten years Essay

To study the development of Budget Hotels and Low Cost Carriers in the past Ten years

Tourism is a very wide concept. It comprises of activities regarding business or leisure and stay for not more than one consecutive year. It is one of the biggest industries in the world and one of the main contributors to the country’s income. Tourism in India is a major part of India’s economy and is growing rapidly. It earns a big chunk of the country’s revenue. It attracts tourists from all parts of the world and is a booming industry. India is a major tourist destination because of the presence of various cultural sites like Ellora Caves, Bodh Gaya and Dilwara Temple and archaeological marvels like Taj Mahal, Ashoka Pillar.

Budget Hotels are nothing but those hotels where a guest can stay at a low cost. It is considered to be pocket friendly hotels because of the low cost. They are an alternative for people looking for hotels at low costs along with good services. All budget hotels nowadays come with complimentary WiFi, a service which is greatly appreciated by the guests. In the past few years budget hotels have grown because when a person visits new places he or she is majority of the time outside the hotel and is in the hotel only for stay which makes them spend less on hotels and more on travel as it saves their money. In fact the total hospitality market in India is worth around ten to twenty billion dollars out of which seventy percent comes from budget hotels. Global budget hotel industry grew in the year 2015 because of an increasing demand for affordable accommodation. The United States ranked number 1 in the word in terms of room supplies in a budget hotel. But when it comes to occupancy Asia is in the lead with Hong Kong at the top, followed by Japan and Singapore. In India hotels like Treebo and OYO rooms have benefitted a lot from this which has led them to aggressively increase their business. Online Travel Agencies (OTAs) like Make My Trip, Go Ibibo, Yatra and many more such agencies have also expanded their business in this sector. Budget hotels have increased international and domestic tourism from three percent to twelve percent. Budget hotels not only provide economic growth but has also provided employment opportunities to various unemployed people in the country. Budget hotels also provide several benefits including affordability, accessibility, and easy availability which makes them a preferred choice of the people. According to Google India the queries for branded budget hotel queries in India are growing at 179% year-on-year in comparison to just 36% in generic budget hotel queries. Treebo hotels launched in 2015 in a market dominated by giants like OYO and FabHotels which is backed by Goldman-Sachs. It started as treebo select with only a few hotels under it. It aimed at procuring 500 properties under it in a year. It currently has a little over 400 properies operating under it the craze of 5 star hotels has dwindled because of the emerging market in budget hotels. According to Ritesh Agarwal, “Budget hotels cater to one of the biggest traveller segments in India. And the market opportunity is tremendous.” Not only in India but worldwide the craze for budget hotels has increased. The RevPAR for budget hotels in the United Kingdom shot up seventeen percent benefiting from the ashes test and rugby tournaments in 2017. The budget hotels are popular among guests looking for leisure and among corporate guests as they receive good quality services, a decent bed and low prices.

Low Cost Carriers focus on business models. That implies utilizing optional air terminals (with lower charges), offering no nonsense on the flight and charging for administrations like seat reservation and checked-in baggage. When it comes to low cost carriers India has also progressed majorly in the sector. It is the world’s second largest low cost carrier country in the world. Almost fifteen years ago there was not one low cost carrier in India but today LCCs have a sixty nine percent market shares in India, which is a great feat for the country which does not have a low cost terminal or airport. The market shares for Low Cost Carriers increased from twenty five to sixty five percent in the past decade while the market share for Full-Service Carriers (FSCs) were slashed in half from seventy to thirty five percent The Indian aviation industry’s long-term growth is pegged to be the world’s highest, at 8.9 percent, according to Boeing. Air Asia is currently one of the leading Low Cost Carrier in the world catering service to twenty five countries headquartered at Malaysia. As domestic aviation has been slowly liberalised in many countries, Low Cost Carriers have seized this opportunity to provide their services to the people. In 2015 a study showed that the global aviation network carried almost 3.5 billion passengers worldwide, a figure which is expected to be doubled by the year 2030. When comparing the numbers to those of 2014, it showed a ten percent increase, which shows an increased growth rate of one and a half times the rate of the world total average passenger growth.

Oyo was started in 2013 which was earlier branded as Oravel Stays by Ritesh Agarwal at the age of eighteen. He started the company as a bed and breakfast homes provider. It was able to raise money from several investors like Lightspeed Venture Partners, Sequoia Capital, Greenoaks Capital and DSG Consumer Partners. It has been a major game changer for the market and it has set a new mark in the sector. OYO is also India’s largest hospitality company. The business strategy of OYO hotels is aimed at bringing common procedures to the small budget hotels. It took nearly two years to establish the first OYO model. In a matter of two years OYO Rooms went from room inventory of one thousand hotel rooms to room inventory of nearly one hundred thousand hotel rooms under it. Upon entry into the Chinese market the room inventory went up to one hundred and twenty nine thousand. Currently it has over two hundred thousand room inventories worldwide. In 2018 OYO was able to raise around one billion dollars for international growth. The majority of the funding — $800 million, to be exact — was led by SoftBank’s Vision Fund with participation from Lightspeed, Sequoia and Greenoaks Capital. It claims to have more than ten thousand diversified or rented inns in its system, which it says ranges 350 urban communities crosswise over five nations. The organization reported an extension past India into China, Nepal, UAE, Indonesia and Malaysia. OYO Rooms currently holds an estimated valuation of around five billion dollars. Revenue for the year of 2017 was around nineteen million dollars with a growth rate of one hundred and thirty percent. OYO Homes was launched by the company which is similar like AirBnB. The secret to the success of OYO is that it does not go head to head against global hotel giants like Marriot. The company has brought a completely new model for running. It is currently looking at growth opportunities in South East Asia and Europe. With a few ups and downs in the past few years regarding the company’s growth OYO has been able to prove itself in the hospitality sector with limited resources and few restrictions.

Overall Budget hotels could be the future of the hospitality industry. This can only be possible if the budget hotels continue to improve their growth rate. If not then it could be the fall of this sector which would be a shame. Hotels like Treebo, Lemon Tree, OYO Rooms are working hard towards becoming the best in the hospitality sector. Low cost carriers could be the future of the aviation industry. As studies show the demand and queries for low cost carriers have gone up with times due to the low prices and good quality services. It is the biggest competition faced by the Full-Service Carriers (FSCs).


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