Indian hostel chains aim for global expansion amid rise of digital nomadism

The Hosteller recently raised $4 million in its Series A funding to expand its base of hostels, marketing, and other general purposes

The rise in digital nomads has ushered in a surfeit of opportunities for India’s hostel companies who are now expanding their footprint into international markets.

Zostel, a branded hostel chain, with presence in India and Nepal, and The Hostellers, another backpacker hostel chain with 60 properties in India, told Business Standard they plan to expand operations, not just in Indian regions but in international locations. 

“The US is a strong area of focus for future expansion and along with that we have seen strong growth interest in Southeast Asian markets to bring the brand presence more global,” said Dharamveer Singh Chouhan, co-founder of Zostel and CEO, Zo World.

“We’ll be adding around 1,000 beds in the global market within the next 2 years,” he added. 

The Hostellers, on the other hand, recently raised $4 million in their series A funding to expand its base of hostels, marketing, and other general purposes. 

“We are right now focused on Southeast Asia for their international expansion. By the end of next year, we plan to be in at least 3 countries in Southeast Asia as well as in countries like Nepal and Sri Lanka,” said Pranav Dangi, founder and CEO of The Hosteller.  

“Southeast Asia is a more affordable continent compared to Europe, Latin and North America,” Dangi explained.

“The ecosystem in Southeast Asia for a backpacker hostel is quite strong and the people there know what backpacker hostels are. So expanding would be easier than expanding to any other region in the world,” Dangi added.  

On the domestic side, hostel chains would like to expand their reach in the Northeast. For Zostel, Rajasthan always had a higher demand compared to other regions. 

The coming quarter is expected to experience higher demand across regions, with Goa, Gokarna, Kerala, and Karnataka seeing approximately 95 per cent occupancy rates.

“The festival season further accelerates demand across Rajasthan, Maharashtra, and Northern India, all the way till the New Year,” said Chouhan.

Zostel also plans to tap into the potential market in Tier-II, Tier-III and Tier-IV cities and add around 15,000 beds in the Indian market by December 2025.

The Hosteller has demand from northern states and currently has 25 properties in the pipeline. 

“The plan for the next 24 months is to open around 125-130 properties, pan-India. We want to become a 200-property-strong company,” Dangi added. 

Dangi envisions the company to be at an IPO stage in the next 5 years.

“I think we need another 2-3 (funding) rounds. The idea is to reach anywhere close to Rs 2,000-2,500 crore would be the top line and then go for an IPO.” 

“We have three revenue streams, with home sales contributing 80 per cent, food and beverage contributing 15 per cent, and ancillary services, which are concierge services, events, and activities, contributing 5 per cent to the business,” Dangi added. 

The Indian hostel chains are also banking on technology-driven expansion, with several facilities having contactless check-in systems. For The Hostellers, Dangi claims that technology has played a role in sales maximisation.

“Zostel, part of Zo World, is a tech-led real estate company rather than just a hostel chain,” Chauhan said.

“We are building the IRL real estate for the new generation who will be building and consuming the digital world in the era of a more open, accessible, and decentralised internet economy,” he added. 

Off the beaten path
 

International expansion
 

Zostel: Adding 1,000 beds in the USA and Southeast Asia within 2 years

The Hosteller: Expanding to 3 Southeast Asian countries, Nepal, and Sri Lanka by next year.
 

Domestic growth

Zostel: Adding 15,000 beds in Tier-II, -III, -IV cities by 2025
 

The Hosteller: Opening 125-130 new properties across India, aiming for 200 properties in 24 months
 

Global hostels market
 

$6 bn estimated value in 2023; expected to reach $11.69 bn by 2030 
 

Indian hostel market
 

$4.6 bn estimated value in 2023; expected to reach $12.1 bn by 2033
 

Source: Virtue Market Research, 

Future Market Insights