Abstract
This case focuses on initiatives taken by the Indian travel tech company MiStay during the COVID-19 pandemic and describes the unique strategies that forced its presence into the accommodation industry of India. The travel tech company acts as a liaison between hotels and travellers. With its online booking system, travellers can book rooms on an hourly basis. This discussion is based on the various hiccups the company has faced along with how the new idea of flexible room booking systems benefit all relevant parties. Here, the focus is on the change of the century-old hotel booking system, resulting in the creation of a new era for accommodation businesses. The changing perception caused by this paradigm shift in hotel booking systems is going to impact the hospitality industry as MiStay may face many potential competitors in the future.
Introduction
India, the second most populated country of the world with a population of 1.027 billion, is a country of opportunities. It has been denoted as one of the world’s major industrial nations, yet has been trying to overcome the characteristics of a developing country. Consisting of 28 states and eight union territories, covering up to 3.287 square kilometres, the nation has vastly different geographical regions, including the Himalayan Mountains, northern plains, deserts, peninsular plateau coastal plains and islands (Hussain, 2017). Often known for its rich and vibrant culture and diversified population that speaks over 22 scheduled languages, 1 this country is a wonder for the rest of the world.
The world’s largest democratic nation, which Kitchen and Yechury (2012) point out is often called the next superpower, is a potential hub for international businesses in addition to the education, healthcare, political and tourism industries. India attracts not only domestic travellers but also a huge number of international travellers. In addition to natural aesthetics, the country also hosts various international events which bring many tourists from different countries every year.
India has promoted its tourism industry by naming itself ‘Incredible India’ to focus on all the different experiences the country offers to its tourists. According to the World Travel and Tourism Council (WTTC), tourism generated $194 billion, or 6.8% of India’s gross domestic product (GDP), in 2019 and supported 39.80 million jobs, which is 8% of the country’s total employment.
There has been a paradigm shift in the perception of domestic tourism over the last decade due to the growing Indian middle-class and their disposable incomes. As of 2016, approximately 121 million households in India belonged to the middle-income category, making a gross annual income between $7700 and $15,400. This figure is anticipated to increase to 140 million households by 2025, making India’s middle class a large portion of the total population in relation to wealth and standard of living. Indians are exploring their country beyond pilgrim sites and local attractions. In addition, the appearance of low-cost domestic airlines has led to an increasing number of travellers choosing to fly within the country and the government plans to inaugurate new airports in upcoming years. Railways are also an economical alternative for long-distance travelling within the nation as India has one of the most extended railway networks in the world. According to Statista (2021), domestic travellers spent $200 billion on internal tourism in India. This number was around $186 billion in 2017. By 2028, this expenditure is projected to double the number of 2018, indicating a high demand for accommodation services, which are typically hotels and resorts.
Hotel and web-based accommodation services in India
Due to the influx of domestic and international travellers in India, there has been an increasing number of hotels and resorts providing accommodation services across the country. International hotel chains are expanding their presence in the country and aim to account for a 50% share in the tourism and hospitality sector by 2022. Various international hotel chains currently operate in India, such as the French hotel group ACCOR; Best Western International; Carlson Rezidor; the Canadian-based Four Seasons Hotels; the American chains, Hilton Hotels and Resorts, HYATT, Marriott international; British multinational hotel company, Inter Continental; Hong Kong-based company SHANGRI LA hotels and resorts and many others. Apart from the famous international hotel chains, there are also domestic ones operating in the country, namely, Club Mahindra hotels and Sarovar hotels. According to the India Brand Equity Foundation (2021), 39 million jobs, or 8% of the country’s total employment, were created in India’s tourism sector in 2020 amid the global COVID-19 pandemic, showing the immense opportunities for the country’s tourism sector. Hence, the government has taken several measures to strengthen India’s tourism industry in the future. India is best known for being the most digitally advanced nation for travellers as it is highly advanced in digital planning, with bookings available through various online platforms. Some of the most commonly used online platform used in the country are Airbnb, MakeMyTrip, Booking.com, OYO Rooms, Expedia, Yatra, Gobibo, Agoda, Hotels.com and Cleartrip.com. The common web-based platforms are both international and Indian; each of them trying to compete with their own unique business strategies. Most of these platforms offer the opportunity to book hotel rooms, rent cars, book tickets to flights and internal or domestic tickets for railways and so on. The duration for hotel bookings typically ranges from a minimum of one night to a maximum of 30 nights worldwide. This is the norm both for hotels booked through online third-party websites and directly through a hotel’s own booking system. The usual check-in time for hotels and resorts start from (Pobyt, 2021) 12:00 to 2:00 p.m. On the other hand, the check-out time typically varies from 10:00 a.m. to 12:00 p.m. This cycle only benefits customers if they can check in at the right time and check out accordingly. However, as travellers’ check-in times depend on their travel itinerary, it is obvious that travellers all over the world are unable to check in within the standard time range. This means that many end up paying for the whole day even if they use the room for only a few hours.
The case: MiStay
The rise of unfulfilled demand has created an opportunity for a start-up travel tech company called MiStay, which allows users to book a hotel room in a pack of hours with a flexible check-in and check-out system. The uniqueness of this system allows travellers to stay at convenient times, within their preferred budget and in their desired accommodation. This is an entirely new outlook for accommodation services and is believed to be meeting the demands of the travellers of the younger generation (Generation Z).
Inception
Pranav Prabhakar, an IIT (Indian Institute of Technology) Madras graduate and one of the co-founders of MiStay, identified the problem of the rigid check-in and check-out times during a trip. In 2016, with a vision to change the century-old hotel booking system, he and his college mate, Sandeep Jaiswal, established the very first platform in which hotels bookings could be made for three available slots, morning, day and night. The company raised its first seed capital in late 2017. Initially, they started their business with hotel bookings made for corporate use only, focusing on the B2B (business-to-business) sector as many travellers required flexible booking hours due to their official duties. Later on, the company turned from its initial focus on the B2B corporate market to the consumer market in mid-2018 when travellers were given the option of using this system for private use. MiStay, which is an abbreviation of micro stay, presently operates in 100 cities with approximately 1500 hotel partners all over India. The partner hotels of the company include both premium and mid-scale hotel and resort brands, giving customers a wide range of options. Brands like The Park, Radisson and Holiday Inn, as well as brands like Lemon Tree, Mango Hotels and Mint Hotels, are also listed on their website. According to Pranav Prabhakar, the co-founder and chief technology officer (CTO) of MiStay, the company’s unique model is a tool for revenue optimization for the hotel companies and, at the same time, meets the unfulfilled needs of the travellers. In an interview with YourStory (2019), he mentioned, ‘[w]e are building the entire ecosystem ground up to enable the flexible hotel stay and be the leader in this market’.
The business model
The traditional booking methods for hotel rooms requires standard check-in times and a minimum 1-day stay. Because of this, hotel brands were unable to attract a profitable segment of customers. However, MiStay, with its unique business model, has been able to attract this ‘untapped’ segment of customers to increase occupancy in hotel rooms. As much as the business model of MiStay seems the ‘perfect’ deal for customers, there are many potential customers still wondering if this is the kind of service they would like to use during their stay. One of the main reasons for this hesitancy from customers is the taboo associated with hourly hotel room bookings, which has the reputation of illicit dealings. In a culturally conservative country like India, travellers asking for rooms on an hourly basis challenge the usual norms for accommodation services and might lead to awkwardness for travellers making these bookings. However, MiStay CEO Sanjeev Jaiswal challenges the norms and finds ways to meet the needs of travellers based on their demands. This cultural norm and taboo is bound to disappear over time with the domination of traveller demands in the market.
Customer interface with the app
The typical booking system of MiStay starts when a customer searches for their requirements for a short stay in any of the participating cities in India. It is possible to make a booking through the MiStay app on a phone or through their website (Shown in Figure 1). Once the customer is in the app or on the webpage, they need to select the city where they are looking for the room, followed by selecting the check-in time from the three available slots on the app. The next step involves selecting the check-out time from the available slots along with the number of guests. The page then displays all the hotel rooms available for those preferences in the selected area. Then, the customer selects their preferred hotel room and everything is finalized through a digital payment system. After the payment is made, a confirmation e-mail will be sent to the customer and the booking is confirmed.
The process of online booking from the customer’s standpoint.
Backend app mechanism
MiStay receives orders from customers from their app or webpage which is followed by a payment mode. They then need to notify the respective hotel of the booking (shown in Figure 2). Next, MiStay keeps their portion of the profit and pays the hotel theirs. After which, the hotel deals with the relevant booking information and the customers.
The process of booking from the viewpoint of MiStay.
As the rooms have double or, sometimes, triple occupancy in 24 h time, travellers might question the hygiene and cleanliness of participating properties. During peak seasons, when the occupancy rate is very high, travellers might not feel comfortable using a room which was used just a few hours before unless thorough cleaning has been done. Therefore, hotel authorities need to be extremely vigilant at hygiene maintenance.
Furthermore, the cultural view that friends and families visiting from other cities have an ‘invisible’ requirement to stay with locally based relations is also shifting. Although India is well known for its hospitable culture, times are changing, as more and more Indian households are shifting and are now more commonly consist of nuclear family members as opposed to joined families. The population of working women has increased significantly, making it difficult for out-of-town guests to be taken care of at all times. Thus, friends and families visiting the city for work or leisure purposes find staying in hotels much more comfortable and relaxing than staying with friends or family.
Pranav Prabhakar mentioned in YourStory (2019) that the company helps hotels realize their full revenue potential by unlocking the value in hotel inventory management during the hours it remains unutilised. With this business model, hotels are able to run at more than 100% occupancy. The CTO also added that the average hotel occupancy rate in India stands at around 65%. Hence, the unsold hotel rooms constitute around $6 billion of missed revenue for hotels. Hotels opting for MiStay’s services expect double or triple occupancies, which aids in revenue optimization. Consequently, the revenue per available room increases for the hotel, increasing their overall profits. Table 1 illustrates the situation where there is an overall increase in revenue and the probability of potential revenue.
Revenue optimization of hourly based hotels.
Source: Company website, 2021.
Table 1 shows the case of rooms booked on an hourly basis, for which the probability of occupancy is greater than daily room bookings and the chance for zero occupancy decreases. MiStay offers three different slots of hourly based rooms, 4, 8 and 12 h, enabling flexibility for customers and higher revenue for hotels when compared with daily-based rates. On the contrary, hotels offer a lot of other facilities to their guests apart from the room itself. Such facilities include swimming pools, saunas and indoor and outdoor sports. These amenities are regularly maintained by hotel staff, which are a part of hotels’ variable costs. Therefore, in the case of low or no usage, variable costs decrease. For short-term occupancies, guests are typically interested to rest and refresh themselves rather than using other hotel amenities. This illustrates an interesting find, which is that even though the revenue per room increases running at more than 100% occupancy, the additional maintenance costs other than the room itself significantly drop – giving a rise in the overall profits.
On the contrary, when the rooms are used in the three available slots, the room requires more frequent cleaning (e.g. 3 times in 24 h) than once a day. This would also raise variable costs only if the cleaning staff are hired in an hourly basis instead of given a monthly salary. In addition to lowering costs, there are also other ways the hotels make money from these short-stay customers. Most of these hotels have their own restaurant and in-room dining services. As mentioned before, these customers are willing to save time and look for hassle-free solutions, so it is likely to say they order food from their hotel instead of looking elsewhere when they are hungry. This keeps the kitchen running and will increase both revenue and profits in the long run. It is evident that partnering with MiStay is a strong and profitable solution for hotels and accommodation services.
Customers’ profile
There are always travellers looking out for accommodation services that suit their needs. The co-founder of MiStay, Sandeep Jaiswal, mentioned to The Better India (2016), the advantages that different types of travellers look for while booking accommodation(s). Here, he discussed the wide range of customers he aims to target through the online booking platform:
Travellers in transit: With India being a geographically vast country, there are a large number of travellers who look out for a short period of stay before a connecting flight or train. Long hours of travelling make these travellers exhausted and worn out; therefore, freshening up, taking a quick shower or simply taking a comfortable nap before continuing their journey is an accomplishment for many of these travellers. This is one of the primary target client groups for MiStay.
Travellers for business purposes: Early discussions about this progressing nation poised the potential of India soon being a superpower, which means that there are a lot of economic and financial improvements from new ventures and business investments within its borders. This gives rise to a lot of business travellers moving in and out of the country and also within its borders. These business travellers attend meetings, conferences or other events that require them to stay in a hotel for a short time period. MiStay ensures that the requirements for these travellers are always met at all costs.
Travellers for medical purposes: The country has been advancing in its medical facilities (Yatra, 2021) and many skilled doctors are available to provide affordable treatments to people from various countries. Most medical tourists in India are from Southeast Asia, the Middle East, Africa and the SAARC region (Mabiyan, 2019). In addition to modern medical facilities, the country also has a reputation for spiritual and ayurvedic treatment facilities such as yoga and meditation. These types of travellers also need flexible hotel hours, which MiStay promises to provide.
Leisure travellers and/or backpackers: Travelling is a dream to many but affordable to few (Gobibo, 2021). MiStay targets the group of travellers for whom affordable accommodation was an issue. These travellers typically spend their days travelling around the city as backpackers and look for an affordable place to sleep in the nights. MiStay made affordable accommodation possible for them by giving them the option to rent the room only at night.
Religious travellers: According to World Population Review (2021), about 95% of the world’s Hindu population lives in India, making it the home of Hindu pilgrims. There are famous holy places, fairs and temples, such as Varanasi, Dwaraka temple, Tirupati temple, Haridwar-Rishikesh and many others throughout the country. These places are visited by devotees for religious purposes. Oftentimes these pilgrims travel far away from their homes (Bhardwaj, 1983). MiStay aims to capture this target market and make the travellers stay as comfortable and flexible as needed.
Education or Academic travellers: India holds a significant place in the global education industry having one of the largest networks of higher education institutions in the world (India Brand Equity Foundation, 2021). Having a top-class reputation for IT graduates all over the world, the country provides quality education and training to both nationals and foreigners. This gives rise to a demand for academic travellers, or education- and training-related travellers, who intend to look for flexible hotel booking hours. MiStay aims to target this group of professional clients, who attend trainings in different cities and, thus, are looking for short-stay accommodation services.
Competition and challenges
There are a number of international and local online travel and accommodation sites already operating in the Indian market. Among them, the key players are MakeMyTrip, Gobibo and OYO Rooms. With many players already in the market, the team at MiStay initially doubted the practicability of their idea. To get a deeper understanding of the hospitality industry, especially the accommodation sector, they invested a lot of time researching the hotel industry and speaking to hotel owners and guests.
To start with, they were aware that entering and expanding in this sector would be difficult as there were already many big players in the market. The team decided to use unique yet inexpensive marketing techniques to set them apart from the rest of the competitors. To reach their targeted audiences, they used search engine optimization (SEO). They aimed to target the lower ranking 70% of keywords rather than bidding for the 30% highest ranking keywords, which were intrinsically more competitive (Head Start, 2021). A team of IIT graduates then bundled these keywords and used them as content baits. Because of their technical expertise, they could automate content creation for keywords. These strategies proved to play a vital role in achieving the rapid growth that the company has experienced. Although this may sound like a small feat, the team believed that they would not likely survive in a market with big players like MakeMyTrip and Gobibo without a competitive advantage. Although MiStay remains the pioneer in the market of short-stay accommodation providers, there are other big players in the market providing similar services. Table 2 displays the competitors of MiStay and the variety of services they offer to the Indian market.
The competitors of MiStay and the variety of their services in Indian market.
Source: Different company websites, 2021.
The competitors’ list in the table shows an ever-increasing demand for hourly based hotel rates in India. It is apparent that apart from the traditional booked hours, there is an ongoing increase in the number of hourly based hotel bookings. Most of the leading operators are based in India. Young entrepreneurs with a desire to takeover an untapped market are starting up such ventures. Some of these companies have expanded their range of operations; they have added flight bookings, transportation rentals and many other services to their portfolios. Many of these travel tech companies also operate outside of India and handle international bookings. In fact, there are few established international travel tech companies, such as dayuse.com and daybreakhotels.com, who are not operating in the Indian market. This provides an opportunity for Indian start-ups to penetrate the market as there are no international competitors. Therefore, we can see that the hourly based hotel room service providers are almost all based in India.
The tourism industry was one of the industries most affected by the outbreak and spread of COVID-19. As countries continue to place travel restrictions and borders closures, cruise companies, hotels and hospitality service providers have been facing declining demand. Due to the COVID-19 pandemic, the travel and tourism industry’s employment loss is predicted to be 100.08 million globally (Statista, 2020).
India, too, witnessed a rise in the number of infected cases across the nation. On 24 March 2020, the Government of India ordered a nationwide lockdown for 21 days, limiting the movement of 1.38 billion citizens as a protective measure against the COVID-19 pandemic. To date, the country has over 25 million recorded cases and over 275,000 recorded deaths from COVID-19 (Worldometers, 2021). Although the statistics from 2020 to May 2021 showed a decreasing number of cases, the country currently has the greatest number of cases recorded, which is rising every day due to a second wave of infections. The implementation of certain mitigation measures and public health campaigns that include social distancing, community lockdowns, working from home, self- or mandatory-quarantining and curbs on crowding directly impacted the accommodation industry. Deep Kalra, the founder and CEO of MakeMyTrip, mentioned in an interview that ‘travel and tourism has been the worst hit sector[s] in this pandemic’ (Sengupta, 2020). On the contrary, the CEO of OYO India and South Asia, Rohit Kapoor, said, ‘the industry is adapting to the new norms and leisure travels are slowly picking up’ (Times Now, 2020). MiStay, along with its other competitors in the market, faced tremendous hit due to the global pandemic and hoped for government aid to sustain this pandemic situation along with its competitors. Hence, the company is currently promoting a new marketing strategy, named ‘Hometown Holidays’. As national and international borders have travel restrictions, MiStay encourages travellers to plan ‘staycations’, or holidays in the city where they dwell. Booking a hotel for a few hours, exploring their city with new eyes or simply taking a break from everyday chores at home, the ‘Hometown Holidays’ are a way of rejuvenating oneself while keeping safe during the global pandemic. While it may take a significant amount of time for the tourism industry to recover, initiatives introduced by MiStay, such as ‘Hometown Holidays’, would help to regain trust so that travellers can resume leisure travelling, albeit on a limited scale.
Moving ahead
Overcoming the initial hitches and glitches of a start-up company, MiStay was soon able to deliver a good experience to all its customers. Today, the company only deals with hotels that have a rating of 3.5 and above. They aim to sustain and develop this quality standard in the future (MiStay, 2021). From the hotels’ perspective, decreasing rates in times of recession or low business periods dilutes their standards and brings their quality into question. Therefore, partnering up with MiStay helps hotels build and maintain a consistent occupancy rate. By responding to the deep-rooted problem faced by travellers all over India, the company has pioneered a new era of accommodation in the field of tourism. Offering rooms on an hourly basis seems to be obviously a win–win proposition for every party involved. However, with this new approach to the accommodation business comes a lot of logistical challenges and operational difficulties. The founders of the company expect to face these challenges and combat them with evolving technology as they are highly skilled tech experts. With the goal of empowering people to achieve their travel goals, MiStay aims to ultimately drive innovation in every facet of the travel industry. They also intend to work on being the leader of the next generation of the travel industry. The company also received funding from Axilor venture, a new generation platform for supporting early-stage entrepreneurs. Their idea and business model have been validated by many industry experts and investors, which poses the question of their expansion in the future.
Footnotes
Declaration of conflicting interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The author(s) disclosed receipt of the following financial support for the research, authorship and/or publication of this article: The authors received financial support from InterResearch, Bangladesh.
