Matrix And Nexus-Backed Online Homestay Startup Stayzilla Suspends Operations

Online homestay aggregator Stayzilla has suspended operations citing its inability to expand in a cost-effective manner, Yogendra Vasupal, co-founder of Stayzilla said in an official blog post on Thursday.

The founders are, however, "looking to reboot it with a different business model”, he added.

The Bengaluru-based startup, backed by the likes of Matrix Partners and Nexus Ventures, had raised $34 million since it was founded in 2007, according to data cited by Crunchbase, which aggregates information on startups.

Stayzilla started by offering budget hotel accommodation but shifted its focus to homestays last year. The startup has a network of 55,000 properties, including homestays, small hotels, and other properties across 4,500 towns in India, as per information on the company’s website.

It has now suspended new bookings on its website and app.

“Bookings with check-in dates on or before 28th February 2017 will be honoured. Any booking with check-in after that date will be cancelled and the guests will receive 100 percent refund,” the blog post said.

What Went Wrong?

Elaborating on the reasons for the shutdown, Vasupal said the market in India for homestays is at a nascent stage and the firm had to invest heavily to create awareness.

“We can’t really take a focused city-by-city approach in terms of matching supply and demand. The demand and supply for homestays was non-existent 18 months back, excluding a few small pockets. As a result, we had to invest extensively in both sides of the marketplace, creating homestays as well as guests who would choose a homestay across the country,” he said.

This was exacerbated by the discount-based growth rampant in the travel industry since 2015.