Goldman Sachs leads $25 mn round in budget hotel aggregator FabHotels

Gurgaon-based Casa2 Stays Pvt. Ltd, which operates budget hotel aggregator FabHotels, has raised $25 million (Rs 161 crore) in a Series B round led by Goldman Sachs Investment Partners. Existing investor Accel Partners also participated in the round.

FabHotels will deploy the funds to accelerate its nationwide expansion, the company said in a statement.

Last year, FabHotels had secured $8 million in a Series A round from a clutch of investors, including existing investors Accel Partners and Qualcomm Ventures. Accel and Qualcomm had infused another $2.23 million in an earlier round in July 2015.

FabHotels was founded in 2014 by Vaibhav Aggarwal and Adarsh Manpuria. Aggarwal had previously co-founded Rocket Internet-backed online furniture e-tailer FabFurnish. He also had stints in Groupon and Bain & Company. Manpuria had served as venture development associate at Rocket Internet Ventures and had closely worked with many of its portfolio companies, including FabFurnish, FoodPanda and Jabong.

The company works on an asset-light model, wherein it uses the technology platform to promote its partner hotels with capacities of 20-40 rooms, and provides standardised services to budget travellers. It also operates a professional training academy for the hotel staff and quality control teams.

“We have built our technology framework and operations with three core objectives – delivering superior return on investments to our franchise partners, providing consistent high-quality experiences for hotel guests, and building a strong sustainable business for everyone involved,” said Aggarwal.

FabHotels operates over 5,000 rooms across 225 franchise hotels in over 20 major Indian cities, including Mumbai, Delhi-NCR, and Bengaluru.

“We see significant growth potential in the budget lodging market in India and believe it is ripe for disruption,” said Shweta Bhatia, the head of Asia investments at Goldman Sachs’ venture capital and growth equity team.

In April, FabHotels rival OYO Rooms had secured $250 million in a round led by existing investor SoftBank Group. However, only a handful of budget hotel aggregators had managed to raise funding in 2016, while a few had to shut shop.

In July 2016, Bengaluru-based Ruptub Solutions Pvt. Ltd, which operates Treebo Hotels, had raised Rs 112 crore in a Series B round led by Bertelsmann India Investments.

In May 2016, Matrix Partners and Nexus Ventures had invested $13.5 million in Chennai-based budget hotel and homestays aggregator Stayzilla. The startup, however, had to shut shop at the beginning of this year.

Wudstay Travels Pvt. Ltd, too, had to exit the budget hotel aggregation space in December last year, most likely because of a funding crunch.

In March 2016, Room On Call had raised $2 million in a round led by on-vehicle advertising company CASHurDRIVE Marketing Pvt. Ltd.

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