Pallavi Agarwal, Founder & CEO, goSTOPS shares her perspective on the unfolding scenario of the backpacker hostel segment in India.
goSTOPS, a chain of backpacker hostels, plans to raise a $15 million in a series A round by July 2022 that will be utilized to expand its footprint as the company aims to have 20,000 beds across the country by March 2024. goSTOPS also plans to foray into Southeast Asian countries including Sri Lanka and Nepal.
How do you see the unfolding scenario of the backpacker segment?
Backpacker hostels are a relatively new concept in India. It wasn’t until 2008 -09 that the first hostels sprung up in the country, largely inspired by the European hostel culture that fits perfectly into pocket-friendly social accommodation options that Indian youth travelers were seeking. Will Indians warm up to the idea of shared living was a question on every entrepreneur’s mind. The past decade has set to rest these worries.
We saw the rapid emergence of the shared living concept in the country with availability of options such as co-working, co-living, and shared traveling. Hence, we decided to expand our presence into non-foreign backpacker destinations early on in our journey. Untill 2018, 70% of occupancy dependence was on foreigners, however, by 2019, the scenario saw a reversal with 85% of the hostels being occupied by Indians.
The trend has, overwhelmingly, spread across Gen Z and millennials, who have taken to the traveler hostels like fish to water. The young backpacking community is expected to grow multifold in the coming years, as hostels are evolving to cater to the aspiring needs of the young wanderers.
What is the market size of the backpacker segment globally and in India? What is the expected growth potential of the segment in the coming years?
The ‘backpacker segment’ is constantly innovating to meet the evolving needs of the travelers in the backdrop of a dynamic travel climate. While the segment is nascent, it is witnessing tremendous growth on the back of growing popularity of pocket-friendly social accommodation options among the youth, particularly hostels.
Last year, the travel industry contributed USD 121.9 billion to India’s GDP, and is expected to reach USD 512 billion by 2028. Despite being characterized as unorganized and fragmented, the global hostel industry generated USD 6 billion revenue in 2018 and is expected to grow to USD 8 billion by 2023.
For the segment to expand, Indian hostel players must focus on the evolving needs of the contemporary young travelers who are seeking unique travel experiences. Encompassing the world’s largest youth population, India’s youth travel accommodation segment is a USD 5 billion opportunity for entrepreneurs and investors.
Under the current pandemic scenario when safety and hygiene are of utmost importance, do you think travelers take the risk to stay in a hostel?
The experiences from the past two pandemic waves have had a profound impact on travelers and the industry. As an ecosystem, we have become far more resilient to the situation, and are equipped to deal with the challenges that come with the territory. Awareness about safety precautions and mindfulness among travelers, complemented by measures adopted by hostels, has built confidence towards responsible travel. The youth have now learnt to travel in times of a pandemic.
Few players forayed into this segment but could not sustain. How are you going to sustain your business model?
All performance parameters in the backpacking segment point to the contrary. The players that entered the space eight years back have not just survived but thrived. While the past two years have been difficult, our concept and size give us great appetite for agility. We have been able to reinvent ourselves very quickly to suit the evolving audience. As the category has grown, in the past year itself, many players including us, have raised additional capital to meet burgeoning business needs.
Youth constitutes 33% of India’s population and accounts for 60% of domestic travel. That’s a large base by any parameter. The untapped potential for the backpacking hostel segment is huge and is being tapped into with the widening network spanning across the country. Overcoming the dependence on foreign travelers, the segment is truly riding the wave of awareness among youth travelers of India.
What are your plans in terms of expansion, investment and marketing & promotional strategy?
In terms of investment, goSTOPS plans to raise a $15 million in a series A round by July 2022. The funding will be utilized to expand our footprint as we aim to have 20,000 beds across the country by March 2024.
We also plan to set up outposts in south-east Asian countries including Sri Lanka and Nepal.
The fresh funds will be employed to build a product that lives up to the evolving expectations of the digitally native and smartphone first generation. Through advanced technology solutions, we hope to nurture and engage with our traveler community on a real time basis.
By introducing more hostels and making them accessible, we hope to build greater awareness among the youth about the emerging backpacking culture. We hope to bring alive the transformative power of travel. Through our hostels, we endeavor to give them an opportunity to meet like-minded souls, connect with their real selves, and experience different culture.
How can hostel chains change the face of the travel and tourism industry to become one of the trendiest things to follow in the next 5 years?
The future of the travel and tourism industry is our youth. Travel is a crucial part of their lives as it provides them an escape from the mundane and helps them experience different cultures. However, there are limited options that currently fulfill the expectations of the massive and growing youth segment. This is where hostel brands step in, as they provide a go-to destination to the youth by offering safe and social accommodation options and state-of-the-art facilities in a pocket-friendly budget. This is enabling the youth to travel more frequently and explore the world, making hostels a crucial part of their life and leading to the overall growth of the industry.
Moreover, the pandemic has given birth to the rapid acceptance of hybrid working options and trends like workations and staycations. Hostels provide dedicated working spaces during the day that transform into hangout zones to vibe with like-minded people post work hours, leading to their burgeoning popularity.
