Expanding Into a 'Fab' Space

IT WAS in the summer of July 2013, Vaibhav Aggarwal was travelling to Pune for a friend’s wedding when he realised there was a major gap in the low-budget segment hotels in the price bracket of INR 1000–2500. Having booked a room for INR 3,500 a night online, he was extremely disappointed with its actual state. Already thinking of opening up something of his own his experience pushed him to finally do it, entering the hotel space.

“After six month of rigorous market research, I realised this space has a very large market size. Also, this was a proven business model across the globe,” Aggarwal claimed. Thus was born FabHotels, founded in 2014, and currently spread over 35 cities and has more than 10,000 rooms. In its expansion plans, FabHotels now aims to spread its business to 15 more cities, ultimately reaching 1000 hotels, by the end of this fiscal year itself. Locations earmarked for this remarkable growth story, include Kanpur, Ludhiana, Allahabad, Rajkot, Surat, Aurangabad, Ajmer, Ranchi, Raipur and Jamshedpur, among others. 

FabHotels operates in the value-for-money, 3-star hotel segment usually located near a business hub, airport or railway station. Under its asset-light, franchise model, FabHotels partners with smaller hotels, which have 20- 25 rooms on average, to provide standardised services to budget travellers. In the complete process, utmost importance is given to the auditors of the company checking with the standards that are required to take up the franchise. The company then charges a fee of around 20 to 35 percent of the partner hotel’s monthly revenue. Aggarwal still cherishes the memories of the first FabHotel in Gurugram which is opposite their current corporate office. 

“We still have a very strong bond with them. The hotel earlier used to have 20 percent occupancies, when we came in, within two months, we were able to get this property with 80 to 85 percent of occupancy rate which is at present enjoying the 100 percent occupancy,” he said proudly. Aggarwal feels that this is a sunrise moment for the industry. Almost 90 percent of the supply in Indian hotels are in the budget segment and there is still room for everybody to tap in. Throwing some light on the recent trends he is noticing in the segment, he said, “From the hotel owner’s perspective, there is a growing realisation that you cannot take customers for granted. The quality of supply has changed a lot in years. Even independent hoteliers are evaluating the quality of their property. 

Speaking from the consumer’s side, we are now seeing more of millennial business travellers travelling. Consumers now are demanding the experience which is share-worthy. Not to forget about the growing demand for a more tech-friendly seamless experience,” he said. FabHotels is focusing on the millennial travellers to build the brand. “We recently launched our commercial campaign, #RechargeRefresh typically for the business travellers,” Aggarwal informed. The campaign was conceptualised from inputs gotten out of insights that business travel is a roller-coaster ride of highs and lows, a bit like living in a boxing ring. While constant travel, back to back meetings, presentations and negotiations, it takes a mental and physical toll on business travellers. The payoff is equally exciting - new deals, new connections leading to business and personal growth. Every day they travel, business travellers need to relax, refresh and re-charge for the next day’s battle. 

Aggarwal in his vision forward plans to expand the company’s reach to Tier II cities in India. 90 percent of the locations target business hubs. Since, 75 percent of FabHotels customers are millennials, who consume a huge amount of internet, the company have paid special attention to the technology side of things. “A majority of our spends are towards technology development, as well as skilling and reskilling people in hospitality to ensure quality control and staff training,” Aggarwal told us.

In 2016 FabHotels, raised USD 8 million from Accel Partners, RB Investments, Mohandas Pai’s Aarin Capital and Qualcomm Ventures. In 2017, the company received a funding of USD 25 million in its second round from Goldman Sachs. To make a strong skilled team, Aggarwal makes sure that he is not left behind in matching the perfect skill set. Forty percent of employees come from a hospitality background, from leading hospitality institutes and also brands like Taj, Oberoi, ITC and Lemon Tree. Aggarwal himself is an alumnus of IIT Guwahati and co-founded the furniture retail brand FabFurnish.com. He had also worked for coupon website GroupOn and the global managing consulting firm Bain & Company. Aggarwal is all aggressive towards the robust growth of the company and to make FabHotels most loved hotel chain among business traveller.