Perspectives (Fireside Chat Edition #7) with Sidharth Gupta, Co-Founder, Treebo Hotels

Treebo is a top-rated hotel chain in India with 600+ hotels under its belt. It is a new age budget hotel brand that believes in the utmost quality. Sidharth Gupta is one of the three co-founders at Treebo. Graduated from the Indian Institute of Management, Bangalore, and Indian Institute of Technology, Roorkee, Sidharth has worked for renowned companies like Myntra and McKinsey & Company. The key takeaways from the discussion with Sidharth are summarized below:

1) The Treebo Philosophy and Journey: The brand name Treebo has become synonymous with quality accommodation at affordable prices in India. It derives its name from the Bo Tree, the fig tree under which Gautam Buddha attained enlightenment. Much like budget hotels today, trees were used to provide shelter to rich and poor alike. Also, Treebo aspires to emulate the vast reach of the banyan tree. They are present across 100+ cities with a determination to provide quality guest experience to all. The company has been in existence for five years now and faced many challenges. The early years in 2015-16 focused on establishing the foundations of the business and gaining the trust of asset partners. After that, it was the fallout with big OTAs' in 2017. The rising competitiveness in 2018-19 followed it. Currently, it is witnessing the global COVID-19 crisis that has put the entire industry at a standstill in 2020. The overcoming of these challenges are major milestones for Treebo in the last five years. 

2) The Playground of Treebo Hotels: People tend to bracket everything under a price point as budget accommodation. However, there are many sub segments in this category. Treebo operates in the INR 1000 - 3000 category with competitors above and below it. It stands as a premier offering within this segment. They focus on guest and asset owner experience as opposed to rapid scaling. It establishes a sustainable foundation for the future. Now more than ever, customers will turn to brand value and customer reviews to make decisions where Treebo has already made a significant mark. 

 3) Lessons for budding Entrepreneurs: There is a rigorous process of learning in entrepreneurship like no other despite the hurdles that one faces. The first learning is the importance of focus on long term goals. In this age of instant gratification and results, it is indeed hard to remain locked in on the long term play. One has to realize not to get too swayed away with medium-term developments. The popular belief of becoming an overnight success in the realm of startups is a farce. It is necessary to maintain peace during the hard times and stay humble during good times. Taking the example of Flipkart, the success we are aware of today was over 11 years in the making while they still face challenges to break-even even today. The renowned Taj Hotel Chain took 100 years to establish a brand that people can trust. The second learning is to spend energy, time, and resources on activities that pay dividends in the near term. Investing time in fostering a culture that enables your people to grow and provides a great customer experience is what is truly beneficial for brand identity and longevity. 

4) Cash Flow Initiatives for Tackling the COVID-19 Crisis: There were early red flags in January and February as COVID-19 spread its wings in China. The moment of awakening was around mid-March when the situation started to creep into the Indian market as well. Some of the early tell-tale signs were the spike in cancellations, cooperates falling out of bulk bookings, public concerns about employee safety, and others. The first reaction at Treebo was to look into alternate sources of revenue and start preparing to curtail expenses. Treebo tested out pricing actions to see if lowered prices will help, but it was unsuccessful. After ideation, Treebo introduced new initiatives with a priority on cash maintenance. It launched the Treebo Magic Vouchers for INR 999 that were redeemable in the next 6-9 months. The key to introducing this was to make the offer extremely attractive as customers ad pile upon cash. 

5) Mantra to Prepare for the Future: The industry hit rock bottom in April 2020, with things picking up in May and steadily improving in June. Unfortunately, the industry will not get back to a state of normalcy in the next 6-9 months. The importance of working objectively with a clear assessment and realization about the intensity and depth of the situation should be kept in mind. Quoting the X-Men franchise, Sidharth says, "True focus lies somewhere between rage and serenity". He explains that rage is how we look at alternative sources of revenue and try to bring in demand. It includes food delivery services, giving out hotel spaces for parking, giving hotel kitchens as cloud kitchen spaces, and others. Here is where you refuse to give in to the crisis and go after every possibility. Serenity is the part that comes with the acceptance of the situation and the fact that it will stay. It is not the lock-down that is inhibiting hotels, but it’s the lack of customer confidence. It is critical to step back and look at the feasibility on an 18-24 month horizon as the situation will linger. 

6) Staying in Business: 10-20% of hotels will close down after this crisis. The sustenance of business depends on the staying power of asset owners. It is advisable to keep a bullish approach in the long term. After a troubling period of about two years, travel will rise. As an asset owner, one should stick through this if they have the resources. A blockbuster revival in a matter of 6-9 months is highly improbable. One in this industry must proceed with caution, particularly if an asset has a lot of debt or not enough liquidity. 

7) Pricing Strategy: When it comes to pricing, two forces are acting against each other. One is the inelastic demand that continues to appear during this time despite the existing hurdles. There should not be any pressure to slash prices as this demand is bound to stay. The opposite force that will inevitably overpower the first is the massive race to the bottom where everyone is desperate to sell. There will be price erosion. Prices will fall, and long term costs will go up eventually.

8) Distribution Strategy: A hotelier should not over-index on one particular channel over another. One should maintain a portfolio of diversified distribution channels. In the current scenario, one room night from a foreign OTA or a small travel agent, with whom you may not be doing bulk business, is still very much valuable. Treebo will continue with its multi-channel distribution engine. 30-35% of reservation comes from the brand website or app of Treebo. Another 30% comes from corporate clients. Nonetheless, the mix is going to change, and Treebo will sell wherever possible. Selling should be the key focus, and distribution should be broader.  

9) Heath and Safety Protocols : Treebo has launched the Treebo Hygiene Shield based on WHO guidelines. It includes precautionary measures from screening guests, sanitation of luggage, masked and gloved staff, contact-less check-in and out, and other health and hygiene activities. Treebo conducts audit clearances to ensure the correct implementation of guidelines and meeting of quality standards. Treebo rates each property as silver, gold, or platinum basis the outcome of the audit that customers can consider for visiting.

10) Internal Stakeholder Management: Upholding the employee morale is crucial even though it is neglected by many. It ensures the productivity and the overall smooth functioning of a company in times like these. Different people have different needs, and COVID-19 has jolted the Maslow's Hierarchy of Needs of individuals. While the needs of self-actualization and esteem are tough to tackle in these times, however, the need to belong and connect can be addressed very well. Treebo has introduced initiatives to join with all its employees who are present all over the country. The founders conduct a talk show with the entire organization named Reflections of the Week with topics focusing on current relevance and not the business. Treebo also organizes a weekly learning course called Treebo Kakshya related to the business of Treebo to enhance cross-skilling. It also carries out Treebo Olympics, where the entire organization is grouped into 10-12 to participate in cooking competitions, fitness challenges, and other fun activities.  

11) Institutionalizing Innovation and Invention: Innovation is at the core of the DNA of Treebo and it takes a first-principles approach to it. It prioritizes a solution-oriented mindset and innovation amongst all its employees. Employees are enabled and encouraged to try even if they fail. Thinking or attitude that one can fail is necessary to innovate. The introduction of programs like Hotel Superhero helps in building solutions that are intuitive, simple, and affordable.