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Case Code: LDEN127
Case Length: 15 Pages 
Period: 2005-2017    
Pub Date: 2018
Teaching Note: Available
Price: Rs.400
Organization : Stayzilla
Industry : Hotel Aggregator
Countries : India
Case Studies  
Business Strategy
Human Resource Management
IT and Systems
Leadership & Entrepreneurship

Yogendra Vasupal – The Rise and Fall of Stayzilla

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Lack of adequate homework, inefficient coordination, and the absence of proper Management Information Systems were evident in the initial days of Inasra’s operations. In one instance, a customer had made a prior online booking in Manali via Inasra, only to reach the hotel and hear that no rooms were available. Several other cases of co-ordination and communication systems failing followed, leaving customers disappointed and eroding the brand name.

Vasupal was compelled to do a rethink about the business model and the modus operandi. He was in a dilemma on whether or not to move ahead in the sector, as it was getting tough grappling with customer issues. He carried out a series of deliberations with his team over the issues. Vasupal conducted an in-depth analysis of the situation to take stock of various critical aspects like their readiness to conduct operations, the appropriateness of the business model, and the information systems. Toward the middle of 2007, he decided to shut down Inasra temporarily. ..

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Competition in the Online Travel Advisory (OTA) segment grew along with Inasra and reached its peak in 2008. With the likes of MakeMyTrip and in the race, the going was far from easy for Inasra. Its business model depended essentially on a bunch of online travel agents to acquire customers. The team decided that it was again time to work on refining its processes. Some significant strategic changes were essential in Inasra’s structure, functioning, and model. .


Though Inasra was doing reasonably well, there were several challenges that prevented it from achieving the desired traction in the hospitality sector. One of the major challenges was the brand identity of the firm. Brand Inasra did not have recall value. The name just did not ring a bell in customers’ minds and the perceived value of the brand among customers was poor. The market was already crowded with popular names like MakeMyTrip, etc. Brand Inasra was not easily identifiable with the service it offered. It quickly faded from consumers' memory. Moreover, due to the disappointing experiences consumers had had with Inasra in the past, the perceived quality of the brand was not good. Lack of consumer awareness and attention from consumers prevented the company from performing in the segment. There was no compelling reason for customers to bypass other service providers and reach out to Inasra. Brand Inasra lacked the competitive advantage it needed to survive in the segment.


Despite its teething troubles, Vasupal was confident that Stayzilla would stay ahead of the curve. He wanted to secure the barriers to entry to stay ahead of competitors in the segment. Vasupal had a clear understanding about creating barriers to entry with regard to several competitive aspects like economies of scale, cost structure, product differentiation, switching costs, customer loyalty, and brand image. Stayzilla had developed the advantage of reaching out to the hinterlands. ..


The year 2013 was the year of inflexion for Stayzilla. Vasupal had visioned further growth. He eyed 40 per cent of hotel bookings in India in the subsequent five years. By 2013, Stayzilla boasted a network of about 6,000 hotels in more than 750 cities. Such plans needed further funds. In 2013, Stayzilla had raised an undisclosed amount in its maiden round of equity funding. The funding was led by Matrix Partners India. Vasupal had ambitious plans for the funds raised – they were to be used to expand the team, increasing partner networks to over 15,000 hotels and enhancing customer services...


Vasupal had an ambitious goal to get around 500,000 rooms on board the Stayzilla platform in the subsequent three years. The stay-market in India was large and fragmented. As per Stayzilla’s research in 2015, the travel sector had witnessed a surge, as a result of which there was a shortage of more than 1 million rooms in India. There was a significant demand-supply gap in the stay segment. There appeared to be little scope for further expansion in structured (branded hotel chains) and unstructured (three-star hotels and lodges) stay options in India. This trend indicated room for growth in alternative stay avenues. Stayzilla focused on strengthening its presence in the less-explored alternative stay segment such as home stay. ..


The demand and supply dynamics in the hospitality sector were highly complicated as there was no homogeneity in the sector across the country. Metros, towns, and smaller towns all had different and incomparable demand-supply dynamics. In the wake of expansion, Stayzilla kept investing extensively in both sides of the marketplace – creating homestays as well as guests. With 8000 homestays in over 900 towns Vasupal was successful at this. However, the investment with less of a focus on profitability stretched Stayzilla thin...


In the wake of expanding the number of stay places and its customer-base, Stayzilla kept burning cash. The burn-rate was on more than $ 0.5 million a month. The periodic fund raising and customer base expansion did not go well for Stayzilla. By 2016, it had raised a total of $26 million from investors. Stayzilla decided to put a halt on its fundraising and focus on doubling its existing margins and turning the EBITA positive...


A March 15, 2017, email from Singhi to Stayzilla’s investors shook the start-up fraternity. The email read “Yogi (Vasupal) is missing! and he was last seen at the office of the commissioner of police in Chennai. We need immediate help. Not sure what’s happening with Yogi” .


Vasupal’s experience took the start-up fraternity by surprise. They had reason to worry. The start-up peers of Stayzilla felt that what had happened was not correct and it defeated the course of law. The start-up bosses were of the opinion that for start-ups to kick-start and flourish in India, a protective regime should apply a legal framework different from what held good for regular companies. They felt that the stakeholders participating in a start-up should be prepared for any consequences. ..


In light of Vasupal’s arrest and the support that poured in for him from all over, there were also contrarian views, on the plea for differential treatment for the startups. ‘While risk element was common in any format of business, why should start-ups be given a special treatment’ was also a view that came up. In the real world with real problems, the struggle for existence and survival of the fittest held good for everyone. When the challenges were the same for everybody, why should the treatment be different?’ was a view that popped up in various circles ...


Exhibit I: Stayzilla’s Deals for Customers
Exhibit II: Stayzilla’s Funding Rounds
Exhibit III: How did you find the Hotel?
Exhibit IV: OTA Systems used by Hotels
Exhibit V: MakeMyTrip’s Acquisitions and Investments
Exhibit VI: GoIbibo’s Match Winning Features
Exhibit VII: Open Letter From Founders on Stayzilla Issue