As the clock struck 6:30 p.m, the hustle & bustle in the Zostel Office at Indiranagar, Bangalore slowed down. Employees and staff got ready to leave, some were finishing off their snacks in the cafeteria, while some others were chatting around the spacious lobby as the workday came to an end.
It seemed like a normal day at the Zostel Office, only, it was not. The date was March 24, 2020. COVID-19, which, until 2 months back seemed like a far-off event unfolding in a far-off country. But suddenly, it became a national concern. India had already reported 500 infection cases and 12 casualties from the virus. Schools and colleges were shutting down one by one, wearing a mask became a mandatory practice, offices were switching to work from home, and the sale of hand sanitizers and their prices started skyrocketing.
There was growing talk of the Prime Minister declaring a complete lockdown in the country in a televised address scheduled at 8 p.m, and the employees at Zostel Office were in a hurry to leave office premises before any such event unfolded.
The apprehensions and discussions were true. Prime Minister Narendra Modi in the nationwide address declared complete lockdown in the country for 21 days until April 14, 2020. While the citizens hoped and wished the situation will normalise by then, global trends showed otherwise. As the Zostel website witnessed a flurry of pre-booking cancellations and all the Zostel branches were asked to shut down with immediate effect, co-founders Dharamveer Singh Chouhan and Chetan Chouhan had tough questions to ponder.
With people not likely to travel anytime soon, how was Zostel to stay relevant in its customers’ minds? How will it maintain the connection it had strived so hard to build? Zostel is not a stay where backpackers only bond over mutual travel experiences, they exchange books, share songs, design canvases, and write poems together. Was there any way to shift that experience to digital? More importantly, once the lockdown was lifted, how would Zostel position itself to attract the travellers again? Travel pattern was going to undergo a permanent change and to stay contemporary, it had to address both the concerns of the travellers as well as provide something unique.
As the following months would show, Zostel did rise above the rubble of inactivity during the pandemic and set a benchmark for customer engagement through their activities. But before talking about that, let first take a look at the industry Zostel operates in
The total global market size for youth travel stood at $194 billion in 2012 and was estimated to grow to $320 billion in 2020. While the backpacker accommodation market is very well developed in Europe & Oceania, Asia is also catching up slowly. The most promising trend in this market is that in spite of more spending power of the backpackers, they are choosing hostel as their most preferred stay option.
India, being a vast, diverse and fast developing country, with young, upwardly mobile demographics, holds tremendous tourism potential which is yet to be realized.
However, recently, tourism has taken off quite well with the current decade being touted as a game-changing decade for Indian Tourism by various analysts tracking this space. At double the world’s average Foreign Tourist Arrival growth rate, India is the fastest-growing tourism market. However, there is virtually no market for backpacker stays or hostel accommodation.
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The Idea of Zostel India
Seven friends- Dharamveer Singh Chouhan, Paavan Nanda, Akhil Malik, Tarun Tiwari, Chetan Singh Chauhan, Abhishek Bhutra and Siddharth Janghu- disappointed by the lack of travel stay options in India for budget travellers and millennial backpackers, started a hostel chain on Independence Day 2013. They named it Zostel, the name probably as a fun mix of Gen Z and hostels. Their aim was to encourage people in India to travel more frequently. However, they ended up doing much more than that. Based on a concept that was waiting to be explored in India, Zostel became an instant hit, establishing and shaping the entire backpacker hostel market in India and Nepal.
The concept of Zostel was brewed when these co-founders travelled abroad as part of the International exchange programs of the premier B-Schools they were part of. In the course of their travel, they stayed in economical backpacking hostels, which provided not only accommodation but exposed them to a new culture in itself. Returning back to India they noticed a lack of hygienic, fun, safe and affordable options for backpackers and millennial travellers who so far had only two options to choose from- either expensive five-star hotels with a formal environment or unhygienic, dingy guesthouses.
They started with an initial capital of 50 lakhs, raising the money through bootstrapping at first and later through participating in corporate competitions. They participated in 14 such B-School competitions, including the ones conducted by the Richard Ivey School of Business, Canada, and the Wharton India Economic Forum B-Plan contest—and won each one of them. Besides the accumulated prize money of 40 lakhs, the competitions also brought in their first investor- Malaysia-based angel investor Presha Paragash which pitched in another ₹ 5 crores.
The first choice of location for Zostel was Jodhpur. It was primarily because one of the co-founder Dharamveer Singh Chouhan’s family was already in the hospitality business and was based out of the city. So it was easier for them to run the operations. Soon they found out that most tourists were coming to Jodhpur via Jaipur and thus the second outlet was opened there.
Zostel operates on a franchise model. They bring in local micro-entrepreneurs of a location and educate them about the hostel concept before working with them to redesign and furnish the rented properties Zostel will operate out of. This approach helps Zostel effectively combine the local flavour while at the same time maintain a standard operating procedure and a benchmark of quality & hospitality. It also helps Zostel being viewed as a cooperative over a company, which is not invasive to the local community and empowers them to generate employment.
Once a property has been finalised, it is furnished with beds and other furniture, and the decor is tweaked to reflect the kind of relaxed and chilled-out atmosphere that would appeal to young travellers.
Depending on the capacity and location, the setting up cost may range from a few lakhs to a crore. Each outlet has air-conditioned dormitories, both mixed and female-only, where beds can be rented for as little as ₹ 500 per night. Lodgers have access to private lockers, free Wi-Fi, and a common room where they can interact with one another. They can also avail themselves a complimentary breakfast and laundry services. While aiming to keep the ambience fun and cool, the founders have paid attention to issues of safety and comfort.
Zostel focuses on going beyond a place of stay. Inmates are encouraged to assemble in the common rooms that have PlayStations, board games etc. There are bonfires, ‘open mics’, music arranged in evenings. The Zostel staff also helps travellers with book-guided tours or local guides, plan their itineraries and book tickets for sight-seeing.
The Doom for the Travel and hospitality Industry: COVID-19
After the announcement of the complete lockdown, the travel & hospitality sector plunged into deep uncertainty. Historically, March & April usually are the peak travelling seasons in India. Hence, most of the bookings are done early to avail the best offers. Cancellation of those bookings along with the ban on international travel is estimated to cause a loss of more than Rs 8500 crores.
Further, per the research report by industry chamber CII and hospitality consulting firm Hotelivate showed, in case of an extended travel ban the entire Indian travel & tourism industry and the value chain that is associated with it, is likely to lose $65.57 billion in a year.
Owing to the emergency and dynamic nature of the pandemic, these figures were highly volatile. However, for travel & hospitality players the more worrying factor was the shift in consumer behaviour. Moving into the list of non-essential items, they risk going out of the mind of consumers as consumers also moved into a more frugal state of existence.
It was like the entire industry had come to a stand-still, with no light about the future.
Rising above the rubble of inactivity
As the lockdown and quarantine period started, different brands, especially in the travel & hospitality sector came up with innovative ideas to stay relevant as well as utilise their resources. One of the prominent examples is Oyo Rooms, which partnered with Apollo Hospitals to offer rooms for highly sanitized pay per use quarantine arrangements. Food delivery service ‘Swiggy’ launched a hyper-local service ‘Genie’ to deliver groceries and household essentials in over 125 cities to deal with the closure of restaurants and drop in take-out orders.
To stay relevant in the midst of this transformation and maintain customer engagement, Zostel decided to shift its unique ‘common room culture’ online. Zostel common rooms are famous not only for the cozy, warm sitting arrangements, bright colours, multiple board games, play stations; they are also the melting pot where travellers from around the world share and create art, music, experiences. To recreate this culture in the midst of lockdown and quarantine, Zostel roped in micro-influencers: experts of different creative fields like poetry, doodling, music, and even memes for short engaging sessions where they discussed their work, life, journey and more.
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These sessions were live-streamed on Zostels’ Instagram page- in form of stories. Zostel used to release the schedule for the week beforehand, making it easier for users to pick and participate in whichever session they were interested in. Zostel named this series ‘#COMMONROOM’ as a throwback to and recalling days of happier times. The most engaging part of this campaign was that the content ideas and recommendations were user-generated. Zostel encouraged Instagram followers to comment and share on which topic they would like to have a live session and accordingly brought in influencers.
As the travel ban started easing up, Zostel focused on inspiring travellers to travel again through throwback posts, gorgeous images of the different Zostels and laying down clear guidelines for post-COVID-19 safety measures.
However, it was the launching of the ‘Staycation’ and ‘Workcation’ packages that set Zostel apart from what other competitors were doing at this time. The concept of workcation, which involves people working remotely from a holiday destination or a homestay in a picturesque location, was becoming slowly popular in India as more and more millennials opted for freelancing, work from home, part-time jobs over 9-5 traditional desk jobs.
Zostel was planning to launch such an alternative way before COVID 19 struck. However, this unfortunate situation gave them the perfect launchpad. COVID-19 made frequent travels risky and troublesome. And because of the pandemic, most offices shifted to work from home setup. Staycation packages offered both: a break from the quarantined, lock-in-home lifestyle as well the chance to work remotely from a stunning location and stay there as long as the user wishes. To take care of social distancing and hygiene concerns, Zostel announced private rooms, 50% filled dormitories, as well as the flexibility to cook one’s own food depending upon the Zostel facilities.
Like its disruptive business idea, Zostel started a trend with the ‘Staycation’ package concept. Soon every hotel chain, resorts and other hostels picked up the idea and now we have an abundance of a staycation, workcation package offers flooding our emails. However, it is the dynamism to bring fore this idea that sets Zostel apart, along with their breath-taking places of stay and the charm of a common room where two travellers from two different nation bond over Pink Floyd’s ‘Shine on You Crazy Diamond’ and delicious thukpas!
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The Author of this story is Sreeja Sengupta, a student of IIM Trichy. The story was independently researched and written by her. We appreciate the efforts that were put in on this one. You will hear more from her! If you liked the story, go ahead and share it on WhatsApp.