Money-Making Venture: 'Vedanta Wake Up' raising bar of budget hotels in the country

The fact that tourism in India is on an uptick is old news. What’s new is the interest in the no-frills segment. In the past couple of years, the hospitality business has finally woken up to the lucre in budget hotels not only due to the high-demand, low-supply situation, but also because they turn profitable faster than a four- or five-star hotel. In fact, a 2011 report by consulting and research firm HVS states that budget hotels are likely to grow at about 50% in the next four years.

It was these dynamics that persuaded Aadil Muscatwala and Rishabh Gupta to target budget travellers. The idea was sparked by a backpacking trip that the childhood friends took in 2009. They travelled through Australia for two months on a measly budget of $20 a night. “We were amazed at the comfort, cleanliness and amenities we got. The energy and the charged atmosphere at the hotels was addictive. It wasn’t so much the money but the ambience that made us choose this category,” says Muscatwala.

So Muscatwala quit his job in 2010 and teamed up with Gupta to focus on the new venture. Gupta and Muscatwala had graduated in 2006 from the Cornell University and Indiana University, in the US, respectively, and while Gupta worked with Deloitte Consulting, Muscatwala had a successful stint at Merrill Lynch in New York and Sydney.
They set up Blanket Hospitality Ventures in March 2011 and then launched Vedanta Wake Up! as a brand with their own savings and that from their families. Soon, they zeroed in on the first property, Fort Kochi, in Kerala. “We started with Kerala because of the aggressive promotion and rapid growth of its tourism industry,” says Gupta. It took them two months to ready the property and it was launched in July 2011. “The level of occupancy within the first week fuelled our conviction that our model was bang on,” adds Gupta.

During peak season—November-March and May-June—they charge Rs 1,000-1,500 per bed, per night. During off-season, the rate is Rs 700-800 per bed, per night. The peak season traffic is as high as 35 customers a day, with 90% of these coming through travel websites like Tripadvisor.com and their own site Vedantawakeup.com. The marketing, however, takes place on social networking sites like Facebook and Twitter.

Through Vedanta Wake Up!, the duo want to raise the bar for budget hotels in the country. “We have not only addressed the primary needs of budget travellers, but have created a safe and vibrant atmosphere to meet fellow travellers through group activities, such as movie nights, cultural outings, dinners and bar crawls,” says Gupta. They offer facilities like a fully equipped lounge with Wi-Fi connection, computers, movie DVDs and books. They also serve food at the hotel. According to the duo, the hotel has generated positive reviews and ratings by guests. In fact, they have managed to recover their initial investment in the first six months.

They currently employ five people at Kochi, besides an accountant and seven interns. Both Muscatwala and Gupta operate from their respective offices at Nariman Point and Hughes Road in Mumbai, from where they also run their family businesses. However, they frequently visit Kochi. They are already in the expansion mode, having earmarked six properties in Kerala and Goa, which are slated to be up and running by 2014. Meanwhile, venture capitalists are knocking at their door with valuations of $1.5-2 million to get a bite of their success, but the duo isn’t taking the bait, yet.