Accor SA, which runs the second-largest chain of hotels globally, is in talks to invest up to $50 million in budget hotels brand Treebo Hotels, said two people aware of the development.
Treebo was founded in March 2015 by Indian Institute of Technology-Roorkee alumni Rahul Chaudhary, Sidharth Gupta, and Kadam Jeet Jain. Chaudhary and Gupta had previously worked with fashion website Myntra, while Jain had worked with travel portal MakeMyTrip.
“Accor has put a term sheet for an investment of up to $50 million to pick up a significant minority stake in Treebo. The talks between the two parties are at an advanced stage,” said one of the persons cited above, requesting anonymity as the talks are private.
Accor’s investment, if it goes through, will also give the hotel chain the right to acquire a majority stake in Treebo at a later date, he said.
Accor operates across various price categories with brands such as Sofitel, Ibis, Raffles, Novotel, and Mercure.
Treebo last raised capital in 2017, when Hong Kong-based investment firms Ward Ferry Management and Karst Peak Capital led a $34 million investment, which also saw participation from its existing investors Bertelsmann India Investments, Matrix Partners, and SAIF Partners. Treebo has so far raised more than $55 million.
Accor declined to comment. Sidharth Gupta, co-founder of Treebo declined to comment.
The funding from Accor will be primarily used to scale up the hotel chain’s network.
“They have been growing at a fast clip. At the time of the last fundraising in 2017, they had over 70 hotels under the Treebo network. Now they have grown to around 500 hotels,” said the second person cited above, on the condition of anonymity.
Last year Treebo expanded its suite of offerings by launching three sub-brands, Trip, Trend and Tryst, with different price points to attract various kinds of budget travellers. The Trip sub-brand offers the lowest prices, while the Tryst sub-brand is the top of the range offering from Treebo.
Treebo competes with Softbank backed OYO and FabHotels, which is backed by Accel Partners, Aarin Capital, Goldman Sachs and Qualcomm Ventures. FabHotels has so far raised a total of $35 million.
In October, Mint reported that Treebo and FabHotels had initiated merger talks, with an eye on competing with the heavily funded hospitality startup OYO.
OYO raised $1 billion in September, in a round led by Softbank, which valued the company at around $5 billion.