Backpacker hostel chain goSTOPS to raise US$15 million in Series A by July 2022
Pallavi Agarwal, Founder and CEO of goSTOPS shares her perspective on the deployment scenario of hostel segment in India.
goSTOPS, a chain of backpacker hostels, plans to raise $15 million in a Series A by July 2022 which will be used to expand its footprint as the company aims to have 20,000 beds across the country in by March 2024. goSTOPS also plans to foray into Southeast Asian countries, including Sri Lanka and Nepal.
How do you see the scenario for the backpacker segment unfolding?
Backpacker hostels are a relatively new concept in India. It was not until 2008-2009 that the first hostels sprang up in the country, largely inspired by the European hostel culture that fit right in with the social friendly accommodation options that young Indian travelers were looking for. Would Indians warm to the idea of shared living was a question on every entrepreneur’s mind. The last decade has put an end to these worries.
We have seen the rapid emergence of the concept of shared living in the country with the availability of options such as co-working, co-living and shared travel. Therefore, we decided to expand our presence in non-foreign backpacker destinations at the start of our trip. Until 2018, 70% of the occupancy depended on foreigners, but in 2019 the scenario reversed with 85% of hostels occupied by Indians.
The trend has massively spread to Gen Z and Millennials, who have turned to hostels like fish to water. The young backpacker community is expected to multiply in the coming years as hostels evolve to meet the aspiring needs of young wanderers.
What is the market size of the backpacker segment globally and in India? What is the expected growth potential of the segment in the coming years?
The “backpacker segment” is constantly innovating to meet the changing needs of travelers in the context of a dynamic travel climate. While the segment is nascent, it is experiencing phenomenal growth thanks to the growing popularity of affordable social accommodation options among young people, especially hostels.
Last year, the travel industry contributed $121.9 billion to India’s GDP and is expected to reach $512 billion by 2028. $8 billion by 2023.
For the segment to grow, India’s hostel players need to focus on the changing needs of contemporary young travelers who seek unique travel experiences. Encompassing the largest youth population in the world, India’s youth travel accommodation segment represents a $5 billion opportunity for entrepreneurs and investors.
In the current pandemic scenario where safety and hygiene are of the utmost importance, do you think travelers take the risk of staying in a hostel?
The experiences of the last two pandemic waves have had a profound impact on travelers and the industry. As an ecosystem, we have become much more resilient to the situation and are equipped to deal with the challenges that come with the territory. Awareness of safety precautions and traveler mindfulness, complemented by measures adopted by hostels, has built confidence in responsible travel. Young people have now learned to travel in times of pandemic.
Few players have made a foray into this segment but couldn’t hold on. How are you going to sustain your business model?
All performance parameters in the backpack segment indicate the opposite. Gamers who entered space eight years ago not only survived, but thrived. If these last two years have been difficult, our concept and our size give us a great appetite for agility. We were able to reinvent ourselves very quickly to adapt to the evolution of the public. As the category has grown over the past year, many players, including us, have raised additional capital to meet the burgeoning business needs.
Young people make up 33% of India’s population and account for 60% of domestic travel. It’s a great base by any parameter. The untapped potential of the hostel segment is huge and is being tapped with the expanding network that stretches across the country. Overcoming reliance on foreign travellers, the segment is riding the wave of notoriety among young Indian travellers.
What are your plans in terms of expansion, investment and marketing & promotional strategy?
In terms of investment, goSTOPS plans to raise $15 million in a Series A by July 2022. The funding will be used to expand our footprint as we aim to have 20,000 beds across the country by March 2024 .
We also plan to set up outposts in Southeast Asian countries, including Sri Lanka and Nepal.
The new funds will be used to create a product that lives up to the ever-evolving expectations of the first generation of digital natives and smartphones. Through advanced technological solutions, we hope to nurture and interact with our community of travelers in real time.
By introducing more hostels and making them accessible, we hope to make young people more aware of the emerging backpacker culture. We hope to revive the transformative power of travel. Through our hostels, we strive to give them the opportunity to meet like-minded souls, connect with their true selves and experience a different culture.
How can hostel chains change the face of the travel and tourism industry to become one of the hottest things to watch in the next 5 years?
The future of the travel and tourism industry is our youth. Traveling is a crucial part of their life as it offers them an escape from everyday life and helps them experience different cultures. However, there are limited options that currently meet the expectations of the massive and growing youth segment. This is where hostel brands come in, as they provide a destination of choice for young people by offering safe and social accommodation options and state-of-the-art facilities within an affordable budget. This enables young people to travel more frequently and explore the world, making hostels a crucial part of their lives and driving the overall growth of the industry.
Additionally, the pandemic has spawned the rapid acceptance of hybrid work options and trends such as work and stay. Hostels offer dedicated workspaces during the day that turn into hangout areas to vibrate with like-minded people after hours, which has led to their growing popularity.