Zostel eyes global expansion, plans IPO in 3-4 years
What's the story
Zostel, the popular backpacker hostel chain, is gearing up for a major milestone with the launch of its 100th property this week. The company operates on a franchise-based model and has 29 more properties planned over the next six months as part of its aggressive expansion strategy in domestic and international markets. In an interview ith CNBC-TV18, CEO Aviral Gupta said Zostel is already profitable at scale and could consider an IPO in the next three to four years.
Global growth
First international hostel in Phuket
Gupta said, "We are pressing the accelerator on growth," noting that Zostel recently opened its first international hostel in Phuket. The company intends to expand further into global markets with new hostels planned in Bangkok, Bali, the Philippines, Tokyo, Dubai, Uzbekistan, Kazakhstan, Georgia, and Sri Lanka by 2027. Gupta added that "profitability is not a concern for us," despite heavy investments in building synergy brands like Zo House and Zo Trips.
Operational insights
Business model has been unit economics positive from day one
Founded in 2013, Zostel has grown organically and profitably without spending on marketing. Gupta said the company's business model has been "unit economics positive from day one," with hostels not needing external capital to grow at an organic pace. Nearly 80% of Zostel's customers are Indians while international travelers make up the remaining 20%. The chain maintains an annual average occupancy of 65-70%, with metros recording as high as 95% throughout the year.
Expansion strategy
Franchise program has received over 8,000 applications
Zostel's franchise program has attracted significant investor interest, with over 8,000 applications and investment commitments worth $500 million. However, the company has accepted less than 1% to maintain brand integrity. Gupta said they receive 25-30 new applications every day but their focus is on choosing the right partners who align with their identity. He also stressed that India's backpacking market is still 7-9 years behind Europe and Southeast Asia in maturity and contribution to GDP.
Strategic vision
Working with state governments to create new destinations
Zostel is working with state governments in Andhra Pradesh, Punjab, and the Northeast to create new destinations and homestay ecosystems. Beyond Southeast Asia, the company hopes to enter the US by 2027 with its first Brooklyn property. However, Gupta said this timeline could be affected by trade issues. He summed up their goal as making Zostel a global brand that shapes how young people travel profitably, sustainably, and with the right partners.