THE Pakistani ecosystem finally seems to have grown accustomed to investment rounds and venture capitalists (VCs) pouring in stacks of dollars. With big bucks come big risks, and sometimes exits.
A glimpse of that came in last November at a startup conference when FindMyAdventure announced its acquisition of a fellow hospitality startup, KTown Rooms.
Barely three months down the line, both parties confirmed to Dawn the deal has been called off.
But before getting into the why, let’s first talk about what KTown is.
A Karachi-based (shocking!) startup, Ktownrooms.com lets you discover and book hotel rooms online. Just go to the website, choose your dates and the city, and start searching. You can also sort by price or filter according to categories (budget, elite, premium and flagship) and proceed to the checkout if it looks good. The payment can be either made in cash at the time of check-in or online via Easypaisa or bank transfers.
However, limiting the company to just an aggregation and booking platform would be wrong.
Inspired by India’s Oyo — which changed the landscape of domestic (at first) hospitality industry by bringing online budget hotels, marketing them under its own brand and eventually switching to franchising model — and a couple more startups, KTown applies a similar approach in Pakistan, using a mix of managing leased properties and franchises.
There is also a standardisation of some basic services. At the bare minimum, they promise to offer: WiFi, hygienic bedding, clean bathroom, AC, cable television and free breakfast.
But the idea of an Oyo-style local startup would have seemed lucrative maybe two months ago. Today, it’s marred by a bunch of questions on whether that model is even sustainable. The Indian giant, rightly credited with disrupting the industry, did at a huge cost, thanks to billions of dollars poured in by SoftBank which allowed it to offer good discounts and scale rapidly.
But after a troublesome 2019 for the Japanese investor, owing in no ordinary part to WeWork which, it was forced to reassess a bit and finally give some regard to profitability as well. As a result, Oyo was also asked to pursue the same goal by mid-2020, which has resulted in massive layoffs and scale backs.
Sure, KTown is nowhere close (either in its discounts or expansionist dreams) but these questions on a business model’s sustainability do shake the trust in general. How does Khizer Ahmed, the CEO of KTown, see this?
“I think the issue with was when they tried to replicate successes in India and China to more developed countries in Europe and elsewhere, where the industry was already mature and that same problem didn’t exist. In that rapid scale-up, they lost track of the operational efficiency. We, on the other hand, are focused on the local market and solving its challenges rather than becoming the biggest hotel chain in the world,” he says.
Unlike Airbnb and Booking.com or even Ghumo.pk among the local ones, which largely have roles limited to providing an online marketplace, KTown has to manage things operationally as well. That obviously comes at a price tag, making any scale-up costlier as compared to other players.
The startup was founded in 2018 by Ahmed who was introduced to the hospitality industry during his stint at the Sind Club. Later the same year, the founder secured a six-figure round (dollar) from a Dubai-based investor.
So now what’s the deal about the ‘deal that didn’t work out’?
“After raising money, we were scaling but the growth numbers weren’t what the investor wanted as we found human resources a challenge. Plus, there was some misalignment of vision too. I wanted to enter into other verticals while the investor wasn’t ready for that. So the board got into negotiations with FindMyAdventure, who announced the acquisition before its close,” Ahmed tells Dawn, adding “But later on, I managed to bring the board on the same page and thus continue KTown.”
Having convinced the board, Ahmed and team are soon launching three other verticals: Stayflix, a new brand for short-term and monthly rentals, ACless Hotels for, well, exactly that, and TripsBazaar, an aggregator of tour platforms.
That, however, begs one question: how wise is it to expand your wings further when scaling up has previously been a challenge? “We have three target markets; corporate, where we have done fairly well; but leisure and tourist have been hard to get since many customers still rely on traditional travel agents and tour operators, so entering other ventures would help us scale,” says the CEO.
Published in Dawn, January 19th, 2020