Stayzilla Closes Indian Alternative Lodging Business Despite Raising $34 Million

Stayzilla, a Chennai, India-based consumer startup for booking homestays, alternative lodging, and budget hotels, has suspended bookings on its website and mobile app. Chief executive and co-founder Yogendra Vasupal said in a Medium post on Thursday that his team was unable to expand while breaking even.

Stayzilla had raised $34 million since it was founded in 2007, with investors including Nexus Venture Partners, Matrix Partners, and Indian Angel Network. Its most recent funding was a $13.5 million Series C round last May.

It began as a reservations platform for budget hotels, but in the past year it put a heavy emphasis on peer-to-peer lodging.

Vasupal’s gracious and seemingly straightforward analysis of what went wrong mentions several factors but a key one was not figuring out how to handle rampant discounting in the lodging industry since 2015, led in part by (much-better-funded) online travel agency MakeMyTrip.

In short, Stayzilla was not generating the revenue needed to cover costs. In 2016, its revenues tripled while its losses quadrupled.

Stayzilla said it had an inventory of 55,000 properties and had served processed more than one million reservations. The chief executive’s honest accounting may be a warning to other startup founders: “In the last 3 to 4 years, though, I can honestly state that somewhere I lost my path. I started treasuring GMV (gross merchandise value), room-nights, and other ‘vanity’ metrics instead of the fundamentals of cash flow and working capital.”

Looking ahead, Vasupal writes that he hopes to pivot. “I see Stayzilla becoming a hassle-free distribution channel” that works closely “with both online and offline travel partners, to offer the best of Indian homestays to their valued customers.”

In the meantime, layoffs are expected.