SaffronStays targets 1,500 rooms by 2020

Targeting 500 private vacation homes/about 1,500 rooms under its SaffronStays premium homestay network by 2020, Saffron Studios Private Ltd plans to expand into overseas markets where Indians travel, a top company official said.

He said the company plans to raise private equity of about $20-30 million in two years time and is also in talks with public/private sector companies to manage their holiday homes.

Presently Saffron Studios has 100 homestays in 40 locations in Maharashtra, Goa, Rajasthan, Himachal Pradesh, Uttarakhand, Tamil Nadu, Karnataka and Kerala.

"Adding about 15 homes per month to our network now, we are opening our offices across the country which in turn would increase the number of homes added to our network. So, the target of 500 homes, with an average three rooms per property, by the end of this year is achievable. The total number of rooms/keys under SaffronStays will be about 1,500," Devendra Parulekar, Founder, Saffron Studios told IANS.

Hoteliers are of the view that the premium/luxury homestay segment is growing and is also lucrative.

"The average revenue per booking will be relatively high. Further, such travelers prefer to spend time with their family in an informal setup. In the case of star hotels rooms, the number of persons who can stay in a room is limited and there are restrictions like usage of swimming pool," a top official of a hospitality chain told IANS on the condition of anonymity.

In the case of SaffronStays, the average revenue per booking ranges between Rs 20,000-24,000 with 75 per cent accounted by room rent and the balance from food and beverages.

"Our current revenue run rate is about Rs 2 crore per month," Parulekar said.

On the occupancy rates, Parulekar said SaffronStays is largely a weekend product for the family and the occupancy ratio is about 75 per cent. During the week, the homes are used by corporates for their conferences.

Saffron Studios business model is similar to hotel industry where the property owner allows the hospitality company to manage the property under its brand for a fee.

"The property owners have to upgrade their property to our brand standards. The average investment per room will be about Rs 5-7 lakh. For the owners who are high networth individuals the revenue yield will be about 6 per cent," Parulekar added.

According to Parulekar, the property churn ratio is about 2-5 per cent.

He said the company was not interested in looking at managing palaces of erstwhile Maharajas, zamindars and others as the focus is on private homes which are within two to three hours of driving distance for guests.

Queried about overseas foray, Parulekar said it will happen in 2021 in destinations where to Indians travel in large numbers like Southeast Asian nations.

"Nowadays Indians have the money and it is an important segment. We will have our homes within four/five hours of flying time. Ours will be focused on Indian guests," Parulekar said.

Asked about need for additional funding, he said the company has raised $2 million private equity from Sixth Sense Ventures diluting significant minority stake and may raise about $20-30 million in two years time.