To take on the likes of Oyo Rooms, FabHotels has raised $8 million in Series A round. The funding comes from Accel Partners and RB Investments.
Apart from them, Mohandas Pai’s Aarin Capital and Qualcomm Ventures have also participated in this round. The start-up plans to use the funds for brand building and to expand its network.
FabHotels was formed in 2014 by Vaibhav Aggarwal and Adarsh Manpuria. While operating in the same space as of Oyo Rooms, Vaibhav Agarwal, co-founder of FabHotels claims his model to be different.
He claims that they are building a pure tech-driven franchise model . Oyo, on the other hand, takes partial inventory in a hotel and brands them as Oyo Rooms.
The company’s business typically works on an asset-light model. In this model, it partners with smaller hotels with the aim of providing standardized services to budget travellers. On the other hand, hotels benefits in the form of increased occupancy and more optimized revenues.
It currently has about 65 hotels in its portfolio, spread across more than 15 cities. It is now looking to reach 100 hotels by September. Its hotels usually have a capacity of 25-30 rooms.
FabHotels enters into franchisee pacts where it gets involved in operations of the hotel. It also gets the exclusive distribution rights. This model gives it better control over two critical parameters—customer satisfaction and revenue.
It is currently seeing a revenue run-rate of $1 million a month. The startup charges hotel owners a franchisee fee of around 20% of the monthly revenue.
Another startup which follows the same model as FabHotels is Treebo Hotels. It has more than 50 hotels under its portfolio and is currently looking to raise funding. Last year, it raised $6 million from Matrix Partners and SAIF Partners.
However, the biggest competitor for FabHotels in the budget hotel aggregation space is Oyo Rooms. In total, Oyo has raised more than $125 million funding, latest being $100 million from Sequoia and SoftBank.