FabHotels, a budget hotel chain startup, has raised around Rs 161 crore ($25 million) in its Series B round of funding. The round was led by Goldman Sachs, along with the participation of its existing investors Accel Partners.
Vaibhav Aggarwal, co-founder and chief executive officer, FabHotels, said,
The focus in past 12 months has been on investing in technology. In the next 12 months, we want to triple our technology team and double the number of rooms from the 5,000 that we have today.
Prior to this funding round, in July 2016, the start-up had raised $8 million in a series A round from Accel Partners, RB Investments, Mohandas Pai’s Aarin Capital and Qualcomm Ventures.
FabHotels was started in 2014 by Vaibhav Aggarwal and Adarsh Manpuria. The company works on an asset-light model, partnering small hotels under a franchise model to provide standardized services.
FabHotels has more than 225 franchise hotels in over 20 cities, including Mumbai, the National Capital Region (NCR) and Bengaluru. The firm typically partners with budget hotels having 20-40 rooms.
While the company is looking to double the number of hotel rooms under its platform, it will look to focus on select cities, which are business hubs and avoid leisure destinations. Commenting on this, Vaibhav Aggarwal said,
We have grown four times in a year, but we have not added too many cities. We have focused on key metros and on cities which are regional business hubs. While there is no aversion to expanding to tourist cities, as a young company, we took the call on focusing on business hotel destinations. We do have a presence in Goa though. Our focus would be on not going beyond top 30 cities.
He further adds that the company’s occupancy rate is more than 85 percent and the average daily rate (ADR) is over Rs 2,000, which he claims is the highest within this segment.
One of the major competitor to FabHotels is Treebo Hotels, founded by Rahul Chaudhary and Sidharth Gupta, which also follows similar model. It has a portfolio of around 50 hotels, and has raised $25 million earlier this year.