Experience Economy of The New-Age Traveler and the Rise of Alternate Accommodation

by Dec 14, 2021Hotel Development

Experiences…meeting new people from varying backgrounds, collecting stories, and making memories define the very essence of tourism. ‘Experience Economy’ embodies the philosophy where consumers spend money on garnering experiences rather than collecting material possessions. One outcome of the COVID-19 pandemic, which yielded an increased reliance on technology, is that experiential travel has fast gained prominence, as travelers increasingly yearn for experiences as non-hotel, non-standard, meaningful ones that leave some form of a lasting impact on their lives. Experiential travelers today want the focus to not only be on sightseeing as a tourist but to also meaningfully engage with the history, people, culture, food, and ethos of their holiday destination.

Hotelivate research observes that the branded hotel supply in India forms a modest ~5% of the total lodging industry of ~3,000,000 plus rooms. While branded hotels & resorts have their own unique offering in the experiential travel space, their demand traditionally emanates from an aspirational appeal for most domestic travelers. Although branded supply does exist in several leisure destinations, offbeat and unexplored locations are not favoured by branded hotel developers because the ROI is usually both, higher and more certain in tier I and tier II cities owing to corporate travel and lesser seasonality. Further, the logistics of building in offbeat locations are tougher and sometimes more expensive. Additionally, getting operational supplies to such locations may not always be feasible or affordable.

This white space, therefore, is now being occupied by alternate accommodation options such as homestays, hostels, and guest houses which are owned by an assortment of individual, unbranded players. These alternate accommodations may have traditionally come with a tag of being ‘minimal’, but what travelers are increasingly realising now is that it needn’t be so. While these accommodations have existed for as long as lodging has, over the last decade some homestays and hostels have evolved to cater to travelers across all categories with diverse expectations and at various price points.

A few characteristics that are visible today in alternate accommodations include:

  • Unique looking properties, a vibe that marries the surroundings with the local culture
  • Hygiene, safety, local-style service, and comfort
  • Culinary experience of home-style cooking with kitchen facilities accessible to guests
  • Local staff with good knowledge of the location, activities, and experiences
  • Good internet connectivity, especially for the ‘workation’ traveler
  • Child and pet-friendly in most instances
  • Wellness indulgences, nature walks, and a plethora of activities

Many standalone experience providers have developed an appreciation for the importance of offering cleanliness, hygiene, decent quality linen, and maybe tea-coffee supplies in the room along with hot water, etc. at the very least. From a price point perspective, one can book a good quality homestay or a hostel in offbeat locations in India from as low as INR 1,800 a night all the way up to INR 25,000 a night, or even more. This will of course vary by location and branding.

Homestay and hostel brands are flocking to the Indian market now as this is a relatively unexplored opportunity although some early adopters are already reaping the gains. One of the most successful stories has been that of Airbnb’s growth over the past decade. Airbnb set out to aggregate unbranded homestays that promised a basic level of amenities and cleanliness under one umbrella that allowed for convenient booking, interaction, curating, and memorable stay experiences. A homegrown homestay brand, Saffron Stays, in its seven years of existence, has already onboarded 130+ homes. Another example is Vista Rooms which currently operates around 350+ properties over 50 destinations and markets itself with the promise of providing more than a typical hotel cookie-cutter stay. On the other hand, a hostel brand that deserves mention is Zostel. Founded in 2013, it already has a presence in over 44 cities in India and Nepal and one can secure a comfortable stay in locations as remote as the Spiti Valley on their platform. Zostel has gained popularity in the last few years with the millennial and Gen Z traveler for offering quality accommodations on a budget along with the opportunity to meet like-minded individuals. Homestays and hostels that attract all generations and are budget-friendly, such as The Blue Sheep Hostel in Tirthan or the Treehouse in Jibhi, Himachal Pradesh, have mushroomed in the last five-to-eight-year period. In the South of India, homestays such as the Varikatt Heritage in Trivandrum – a 150-year-old Indo-Gothic villa – or the Palkadavu Warium Villa – a restored building dating back to 1964 located in Wayanad – are available at price points varying from INR 3,000 to INR 6,000 for two people per night, making them favourable for a comfortable stay along with a ‘step-back-in-time’ experience.

It is important to note, however, that experiential travel is not limited to the budget or mid-market segments. Luxurious homestay options have also emerged as there is a demand which needs to be accommodated for discerning travelers with a higher propensity to pay and who look at options beyond typical hotels and resorts. Lohono stays, which also started out in 2013, provides luxury villas and homes for the traveler looking for a lavish experience. Similarly, hotel brands have also begun to appreciate the need for experiential accommodation. The Indian Hotels Company Limited (IHCL) launched Ama Stays & Trails which has 18 locations in India that it covers already and two more locations opening soon. In the boutique luxury space, The Postcard Hotels promises luxury intimate experiences with its contemporary design and high service standards. The Postcard Hotels today boast seven properties in India, Bhutan, and Sri Lanka combined with another seven in the pipeline. ITC’s Hotel Division is all set to launch its brand, ‘Storii’, which is also envisioned to offer small-inventory, boutique, lifestyle properties.

It is time for hospitality providers to realise that while there exists a market for hotels with their full-service offerings such as turn-down and silver service and elaborate design experiences at leisure destinations, there is a growing demand for more frill-free offerings, with open-to-sky cold water showers and breathtaking views in more intimate settings as well. It is time that hotel brands, homestay brands, and independent hostel and homestay providers become comfortable rubbing shoulders with each other and playing a fluid field where the same guest may use their facilities at different times depending on the experience that they are looking for, their length of stay and who they are traveling with. With the experiential traveler becoming increasingly comfortable with ride-share apps and alternate accommodations instead of traditional taxi services and hotels, there is space and flexibility in the market for new-age players and existing ones to co-exist.

While not enough data points exist to talk about homestay profitability yet and understanding that every home would function with a different dynamic and bottom line, Hotelivate does believe that homestays and hostels, alike, are profitable ventures that are here to stay. Further, we expect that while demand from hotels at leisure destinations will not get displaced per se to these new-age offerings, there will certainly be some amount of overlap in the demand segments in the days ahead.

For more information, please contact Sartaj Singh Sahota on [email protected]

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