India is a growing economy with a lot of aspirational and pumped-up young people. The startup culture here is very prominent and is still at an early stage. Back in 2013, when the ‘startup’ as a buzzword was still very new, it raced the hearts of seven college friends who shared a passion for traveling. 

What began as a small idea among friends has grown into a $240M empire, revolutionizing travel for budget-conscious explorers. Over the last decade, Zostel has expanded to 80+ locations, hosting over 2 million travelers and setting the standard for backpacker accommodations in India.

We are excited to narrate this passionate tale of Dharmveer Singh Chouhan, Akhil Malik, and 5 other co-founders who came together and built this unique idea which, even after 12 years, is still fresh in the country. 

Travel Diaries to Business Ideas

Do you recall any experience you had traveling or otherwise that just stayed with you so much that you brought it home, nurtured it, kept it within, and let it grow? Dharamveer Singh Chouhan indulged in a similar experience in an exhausting yet exhilarating trekking trip. 

And he couldn’t stop thinking…rather dreaming about what if he could build a career around this? A fresh graduate from the Delhi College of Engineering, working a corporate job, was struck by the idea of being surrounded by mountains, adventure, and new experiences.

A few years later, as he pursued his MBA at IIM Kolkata, the caterpillar idea started growing into a butterfly. During an exchange program, he and his friends experienced backpacker hostels in Europe and realized that India lacked the same social and immersive accommodations for travelers. The seed was planted - why not introduce this concept back home?

Building the first Zostel

Dharamveer, by coincidence or as the stars had written, came from a family with a background in hospitality. They had a property in a city called Jodhpur, which is at the heart of tourism in India. 

By 2013, they launched their first Zostel in Jodhpur, a four-room property funded by their savings and support from family and friends. The goal was simple: test the waters, and see if Indian travelers would embrace the idea of backpacker hostels. 

The challenge? Most Indians didn’t even know what “backpacking” was. Many confused it with "bag-packing." So of course there was a sword hanging around the co-founders’ necks whether this would work or not.

However, under all that anxiety and pressure, something unexpected happened! They started receiving bookings from foreigners who came to Jodhpur. Sooner the younger millennial crowd also started embracing the culture. 

Within months, Zostel Jodhpur was ranked #1 on TripAdvisor, drawing backpackers from all over. The response was overwhelming. They had proof that their idea had potential. Their MVP worked! 

The Classic Battle: Startup Dream v/s a ‘Secure’ Job

But with success came the biggest decision of Dharmveer’s life. The placement season at IIM Kolkata arrived, and like his peers, he had a secure, well-paying job offer. Now, in India, an MBA placement, especially at IIM (the most aspired business school in the country) is the dream - a means for the middle class to secure that ‘good’ life! 

However, Zostel was already gaining traction. Should he take the leap into full-time entrepreneurship or stick to the conventional path? Unlike some of his co-founders, Dharmveer came from a middle-class background, with student loans and financial responsibilities. Choosing the uncertain road meant letting go of security with no guarantees of success.

After many sleepless nights, he made his decision - he opted out of placements, turned down the job offer, and committed fully to Zostel. 

The journey ahead was anything but easy. The founders were not just entrepreneurs; they were their own housekeeping staff, receptionists, marketers, and problem-solvers. They had no external funding, no industry experience…just a bold idea and relentless determination!

Scaling Up: The Rise of Zostel

With growing popularity, Zostel expanded rapidly:

• 2014: 12 hostels across India
• 2015: Entered key tourist destinations like Delhi, Jaipur, and Mumbai
• 2018: 40+ hostels in India
• Today: 110+ properties across India and Nepal

Their hostels are now found in some of the most picturesque and offbeat locations, including Alleppey, Aurangabad, Barot, Bir, Mussoorie, Ooty, and McLeodganj.

Zostel’s Secret Sauce: What Startups Can Learn About Market Gaps

Every successful business starts with a simple question: What’s missing? or What Problem Are We Solving? For Zostel, the answer wasn’t just about creating another hotel. 

In early 2010s, hotels in India were expensive and isolating, while cheap guesthouses lacked energy and community. The concept of “backpacking culture” barely existed in India.

Zostel's founders realized that travel wasn’t just about places; it was about people. The social aspect of travel, meeting fellow explorers, sharing stories, and forming connections. That’s what was missing from Indian accommodations.

Lesson 1: Your Market Might Not Know It Needs You…Yet

Unlike traditional hotels, Zostel designed spaces that encouraged interaction: a lively common room, shared dorms, local experiences, and an unmistakable “vibe” that turned strangers into travel buddies.

At first, Indian travelers didn’t immediately embrace it. But international backpackers got it and started flocking to Zostel. Soon, young Indian travelers caught on. Word spread.

The lesson here? Sometimes, your market doesn’t know what it’s missing until you show them.

Lesson 2: Build a Brand That People Want to Come Back To

Why do travelers return to Zostel again and again? It’s not just about affordability; it’s also the familiarity. The moment you step into a Zostel, whether in Manali or Goa, there’s an energy you recognize.

Zostel carefully designed the vibe, from lighting at different hours to hiring unconventional property managers who didn’t come from hospitality backgrounds. They wanted hosts who understood the mindset of travelers, not just the mechanics of running a hotel.

This wasn’t just a business decision. It was brand-building at its core.

Startups, take note: The best brands aren’t just services, they’re experiences. And experiences create loyalty.

Lesson 3: Scaling? Find a Model That Works for Everyone

Growth isn’t just about opening more locations, but about doing it sustainably. Zostel cracked the code by shifting from ownership to a community-driven model.

Here’s how it works:

✅Travel enthusiasts who love the Zostel culture can start their own hostel in their hometown.

✅Zostel provides the brand, marketing, and tech infrastructure.

✅The community member invests in the property, handles operations, and shares revenue.

It’s a win-win: Zostel scales without heavy capital investment, and local entrepreneurs get to own a thriving business with an established brand.

The key takeaway? If you want to scale fast, find a way to turn your customers into your partners.

Zostel’s Business Playbook: How to Build a Hostel Empire Without Owning One

Zostel isn’t your regular hospitality chain. No billion-dollar hotels, no towering resorts, but just a brilliantly lean model that’s all about community, smart real estate moves, and a killer travel experience. 

The best part? They scale without actually owning properties.

1. Two Ways to Build a Zostel: Buy Land or Flip an Old Spot

Zostel properties come in two flavors:

• DIY from Scratch (Greenfield Projects) 🏗️

Got a plot of land in a cool location? Perfect. Zostel hands you the blueprint (literally). The cost? Around ₹1.2-1.5 crore ($150K-$200K) for a 40-bed hostel. You put up the cash, build it in 6-12 months, and they handle branding, marketing, and operations.

• Flip It Like a Pro (Brownfield Projects) 🔄

Got an old guesthouse or a building that’s begging for a glow-up? Zostel helps turn it into a backpacker hotspot—cheaper, faster, and with less risk.

Either way, Zostel doesn’t invest a single rupee, but you do. In exchange, they make sure you get your money back fast.

2. The Money Game: How a Zostel Turns a Profit

For a 40-bed hostel with an 80-90% occupancy rate, here’s the math:

💸 Revenue

• Beds: $18 per night x 40 beds = $720/day
• Food & Beverage (F&B): Adds another 30% in revenue
• Total monthly revenue: ~$25K-$27K

💰 Expenses & Profits

• Operating costs (staff, maintenance, utilities): 30% of revenue ($7K)
• Zostel’s cut (for branding, marketing, bookings): 21% of revenue ($5K)
• Owner’s monthly profit: $12K-$15K

🏡 Three Kinds of Zostels

• Classic Zostel: Affordable backpacker hostels
• Zostel Homes: Homestays for a local experience
• Zostel Plus: A little fancier, for those who want comfort and community

📉 Break-even period:

Most Zostel partners recover their investment within 10-20 months, which is way faster than traditional hotels.

The Hostel Boom: Why This Industry Is Just Getting Started

Hostels are no longer just for broke college students but are becoming the go-to for solo travelers, startup folks, and digital nomads. 50% of Zostel's guests are solo female travelers, which is sufficient proof that safe, social spaces are in demand.

Moreover, India’s hostel market is still under 5% of its full potential, leaving room for 100,000+ hostel beds, and Zostel is leading the charge.

So, in conclusion, unlike most hospitality businesses, this one is a service business and not a real estate business.

Final Thoughts

The Zostel story definitely is exciting and is all about creative problem-solving and risk-taking. This could be a great model for those entrepreneurs who don’t want to do a tech-centered business and are more passion-driven. 

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