BACKPACKER’S

HOSTEL
PRESENTED BY:-
URVASHI KOUL
VANSHIKA SHARMA
VIJAY GUPTA
YOUVIKA SHARMA
QUESTION:-1
What should the CEO of Zostel do to sustain the advantage gained by the Zostel?
ANSWER:-1
The CEO of Zostel should “exploit the Gap in the Market” to sustain the advantage gained by
Zostel.
According to a survey consulting firm Princewaterhouse Coopers in 2012, India’s hospitality
service Industry was short of 150,000 rooms. It was seen in market studies that there was a
massive shortage of short terms rooms for under Rs. 2,000 a night in India. Rooms below Rs.
1000 enjoyed an abnormally high occupancy of 85%. Thus there existed a gap in budget options
for leisure travellers.
So, Zostel exploited this Gap. Zostel not only endeavour to ensure their hostels meet the basic
international standards of affordability, security and cleanliness but they’re also welcoming, well
maintained and comfortable for their guests to stay in.
So, Zostel is completely non-existent domain of Backpacker’s Hostels, aiming to structure a
largly unorganised market and become market makers and market leaders.
Another move by Zostel is to provide not just an accommodation but a holistic experience in
itself. The atmosphere is to lure the young, adventurous and the crazy.
QUESTION:-2
Should Zostel enter into joint venture or acquisition?
ANSWER:-2
According to me, Zostel should enter into joint venture because Zostel need more capital for their
expansion plans. They are trying to expand their operations in domestic as well as in international
market. Zostel had been constantly expanding across India. Zostel had now expanded into Delhi,
Varanasi, Agra and Goa. Even now, 65% of Zostel’s occupancy comes from foreign travellers. So
in order to expand domestically, they should have joint merger with the other domestic
organisations who already are in profitable terms.
Moreover, they are planning to launch more international properties, including in Nepal and Sri
Lanka. By the end of the year, they will launch three unique properties in each location taking the
total number of hostels to 40 across national and international destinations.
Property scouting is another area where Zostel is facing problems. They need to find a right
property at a right location and convert it into Zostel by providing it all the necessary facilities
that can make a person’s stay comfortable. So, in order to remove this problem, they should
engage in joint venture with property dealing organisations.
QUESTION:-3
Why has Zostel been successful and what are the aspects for future success?
ANSWER:-3
Zostel worked on establishing a brand across all major tourist hubs to reap the benefits of a cross-
selling opportunity. Their rooms were affordable and at the same time hygienic and secure thus
intruding into the market of Lodges and Government hostels. The creation of a youthful ambience
and exciting engagement activities, basic amenities like WiFi and a brand name made it possible
for them to penetrate the backpackers market.
Right at the outset when it was conceived, Zostel faced the challenge of coming up with new
properties. This was where they took their baby steps in the world of creativity. Instead of coming
up with their own properties, they consolidated a previously segregated market by taking over
several hostels across India to bring them under one banner of Zostel.
They started operating these hostels at lower operating margins than before by giving better
amenities. Zostel could not have hoped to compete with YHAI’s insanely low prices, not by any
strch of imagination. Therefore, just being cheap would not do this trick. What Zostel did in order
to solve this problem, it what drives the company even today.
Insead of just being extremely cheap, Zostel decided to tap into the minds of these travellers and
see where their demands could possibly be expanded.
CONTT…
Zostel discovered that most of the backpackers traveling would love to get a feel of the cities they
stay in. Therefore, Zostel decided to get this feel to the backpackers inside the hostel itself. They
themed the ambience on the city they were in, thus greatly enhancing the experience of these
backpackers.
Another discovery was of the fact that travellers love to interact with other travellers and Zostel
gives travellers just that! With an array of common areas to hang out in the hostel and with
periodically arranged recreational activities, Zostel gives the travellers opportunities to interact
with fellow travellers. A fun yet cheap place to live where you can interact with fellow travellers
in common areas and enjoy periodically arranged recreational activities.
INNOVATIVE TECHNIQUES OF ZOSTEL TO BE SUCCESSFUL:-
1. Youthful Portrayal of the Company:- A major part of satisfying the youth was to portray
that the company as being youthful. If we visit the website of the company, we will find a
plethora of youthful bright colours, vibrant text designs complete with a mascot, all factors
that greatly benefit the company’s portrayal as a youthful brand.
2. Partnerships:- All the marketing oriented partnerships of the company were with youth
centric organisations and college festivals. All of this, apart from fetching direct youth
visibility for the company, also helped in its youthful portrayal. It had also partnered with
brands like MTV and Red Bull, both seen as youthful brands.
CONTT…
3. Zostel Internships:- Yet another creative marketing exercise that the company undertook
was the concept of Zostel internships. There were 50 days’ all expenses paid for young adults
across India with stipend of Rs. 50,000, disguised under the name of internships. The
company banked on the people doing the internship and talking to their peers, thus
organically marketing Zostel. The company and its core managers remained committed to
unconventional creative ways to do what needed to be done.
ASPECTS FOR FUTURE SUCCESS:-
Zostel is trying to expand its operations in domestic as well in international market. Zostel has
also been constantly expanding across India. Having started in three cities across Rajasthan-
Jodhpur, Jaipur and Udaipur- Zostel has now expanded into Delhi, Varanasi, Agra, and Goa. The
company has also gone international with its launch of its overseas hotel in Dalat, Vietnam. They
are planning to launch more international properties, including Nepal and Sri Lanka. By the end
of the year, they will launch three unique properties in each location, taking the total number of
hostels to 40 across national and international destinations.
QUESTION:-4
Analyse the competitive scenario of Zostel?
ANSWER:-4
COMPETITIVE SCENARIO OF ZOSTEL:-
Zostel faced competition from various market players like OYO rooms, Treebo, Zip, Zen, Stay
Zilla etc. All these players tried to capture the market by providing better amenities at the best
rate possible. All these players had very huge potential to slash Zostel market share and
profitability.
OYO rooms were established in 2013 and was the biggest competition of Zostel. The standard
rooms provided by OYO rooms used to have all the basic features like AC rooms, complimentary
breakfast, 24*7 WiFi facility and customer support services. OYO rooms had raised series B
funding of $100 m and backed up by investors like Sequoia, Light Speed Venture partners and
green oaks capital investment. Facebook and Twitter followers for OYO rooms were also
increasing day by day.
If we look at low-cost affordable accommodations, the main competition prior to Zostel’s entry
were lodges and guesthouses, 1 to 3 star hotels, Government YHAI hostels and standalone small
hostels.