Can Capsule Hotels Fix What India's Budget Stays Got Wrong?

If you go the Korean way when it comes to beauty, and go à la mode American when you dress up, then why not live like a Japanese when you need to hit the sack for the night or for a few hours? Safety guaranteed, comfort assured, cost won’t burn a hole in your pocket.

Pod hotels were in vogue in Japan until Singapore took it home and then transported the idea across the seas. Also called capsule hotels, these facilities offer ultra-compact, space-efficient accommodations or private sleeping pods – much like a capsule – equipped with essential amenities, designed for solo travellers, transit passengers, or short-stay guests looking for affordability without compromising on cleanliness or comfort.

“I experienced a pod hotel at the Singapore airport. I felt such an option would be a great success back home, given the rising number of travellers who cannot justify a regular hotel accommodation – neither by cost, nor by time,” said Nitin Malhotra, who went on to set up NapTapGo in Gurugram with his friend Himanshu Shukla in 2023.

Catch some sleep, pay for it, and move on – they named the startup seamlessly with the way it functions. NapTapGo was one of the earliest entrants to the niche and emerging business in India that drifts from the segment ruled by the likes of OYO, FabHotels, Bloom, and Lemon Tree.

Travel is on a surge after the pandemic. Be it leisure trips or business errands, 85% Indians plan to raise their frequency of holidays and a significant number intend to boost their budgets by up to 50%. Budget hotels make up at least 65% of India’s $24.61 Bn hospitality sector, which is on course to reach $31.01 Bn by 2029.

Riding on this trend, NapTapGo has rolled out two facilities – one in Noida and another in Amritsar. It operates through its own website and WhatsApp channel, and is also present on online travel aggregators like Airbnb, MakeMyTrip, Cleartrip, and Agoda.

Globally, a $262.9 Mn booming market for capsule hotels is projected to reach $432.5 Mn by 2030, averaging an 8.8% growth rate, driven by their affordability, convenience, and an increasing preference among the 18-24-year-olds. This gives players like NapTapGo a wider growth prospect in a country of 1.4 Bn people with a median age of 28 years and 40% of the population aged below 25.

NapTapGo offers AI-powered, ultra-compact capsule stays that are private, hygienic, and affordable, with prices starting at just INR 500 for hourly stays, customised stays and even long-term stays. Designed for budget travellers, transit passengers, and short-stay users, especially near airports, railway stations, hospitals, and religious hubs, the brand claims to have merged the Japanese pod design with its own proprietary tech to bring a fresh and scalable approach to India’s budget hospitality space.

An early validation from the industry came in the form of INR 2 Cr raised in a pre-seed round in May, led by Inflection Point Ventures (IPV). It went on to raise INR 5.6 Cr so far from investors like T9L Qube, Balmer Lawrie and a clutch of angels.

The company plans to use the funds to drive growth across key areas such as franchise development, marketing, and technology upgrade.

Spotting The Dark Zones In Budget Hotels

Seasoned in tech-driven disruption in the B2B services space, Malhotra revived his early-year dream career in hospitality management when he thought of bringing home the pod hotel concept.

During his stint at 247around, Malhotra had built and led a full-stack home appliance services platform in partnership with brands like LG, Panasonic, Toshiba, and Amazon. The company had a presence across 800 franchise locations in 19,000 pin codes and was acquired by Servify in 2022. Malhotra also spent nearly 15 years in the semiconductor industry before joining 247around and worked with large multinationals like Texas Instruments and STMicroelectronics.

“I had my first realisation of sky-high hotel costs when I began my entrepreneurial journey. I was thinking of the need for short-stay options at affordable costs when I had the opportunity to use a pod hotel at Changi Airport in 2023,” Malhotra shared, narrating the story of the making of NapTapGo.

He started his research around 2021, when he had to make frequent trips to smaller cities and stay in budget hotels. He noticed glaring inadequacies in terms of basic hygiene and consistency in the budget hotel segment.

“While players like OYO were offering budget-friendly stays, the control over guest experience was often fragmented as they operated on a COCO (company owned, company operated) model. On the other hand, brands like Treebo and FabHotels operated in the budget segment but typically fell in the INR 2,500–INR 6,000 price range. This made us realise the need for truly affordable, flexible stay options,” Malhotra said.

He spotted the biggest deficiency in the budget stay segment in infrastructure and standardisation. “A typical budget hotel is built like a multi-storey building with 20–30 rooms spread across floors, demanding heavy maintenance and investment. This made both upkeep and standardisation incredibly difficult.”

Bringing An Idea To Life With Capex In Mind

Malhotra, however, didn’t have a clear answer until he stumbled upon the capsule hotels in Singapore in 2023. “These hotels were absolutely clean, cozy, compact spaces with a surprisingly high sense of privacy and hygiene. More importantly, they could be set up in extremely limited spaces.”

That first experience itself enthused him to bring the concept to India. Shukla, a friend from childhood who had worked with brands like Taj Hotels and Jaypee, had similar views.

But, this wasn’t just about following a global trend. For Malhotra, it was a strategic business decision. “I didn’t want to spend INR 30–35 Cr like any other hotel chain. I wanted a model that made sense from a capex standpoint.”

It’s been two years since NapTapGo tapped into an uncharted territory. Today, the startup runs a 25-pod facility on just 3,000 Sq Ft – roughly the size of a 3BHK flat – in Noida, built at a cost of less than INR 1 Cr.

“The lower capital cost became a key enabler of scale. If the unit economics work and the returns are solid, franchise investors are willing to come in. That’s how with this FOCO (franchise owned, company operated) model, we can scale across India and even beyond,” said the founder.

NapTapGo was also not just about cost or space optimisation. Malhotra wanted to introduce flexibility – something he believed was critically missing in India’s budget hospitality segment.

Guests can choose exactly how many hours they want to stay at NapTapGo, and even customise their check-in times. Whether someone needs a full night’s rest or just a four-hour freshen-up between trains and meetings, the offering is tailored to fit in. In a market where most hotels still operate on rigid 12 PM check-in cycles, the brand has come to be known for its high level of customer-centricity.

NapTapGo is focussed on four verticals where it can deliver maximum value. The first is business travel, where professionals often arrive late and leave early but still pay for a full day. The second is transit hubs like railway stations, airports, and bus stops, where short rest stays are needed. The third is medical travel, where families of patients require affordable, flexible stays near hospitals. The fourth is religious tourism to destinations like Katra, Ayodhya, Amritsar, and Shirdi, where pilgrims, mostly families, typically arrive, visit the shrine, and leave the same day.

The scattered pieces of the jigsaw didn’t fall into place overnight. Before launching in each vertical, Malhotra’s team conducted extensive on-ground research. They visited 20 to 30 hotels in every shortlisted area and spoke with 30 to 40 travellers and various hotel chains to assess the real-world needs. In places like Amritsar and Katra, there was no option of hourly stays or flexible check-ins.

The study provided the founders with more insight into the market’s inadequacies.

Building A Virtual Watchdog For Real-Life Worries

Hygiene and cleanliness have been the top priority for NapTapGo since its inception. The startup has developed and deployed an AI-powered supervisor to maintain the quality standards. Its in-house housekeeping app, integrated with a proprietary AI-based hygiene audit system, takes care of this.

In most of its facilities, the washrooms are fitted with a latch sensor. After a washroom is vacated, it triggers an alert to the housekeeping staff through the app. Once cleaned, the housekeeper needs to upload five photos of the cleaned space. The app is designed to spot a pre-saved image and the staff are required to take fresh photos every time. These images are then processed by an AI engine trained to detect two parameters – cleanliness and standardisation.

It is designed to detect even minor flaws, such as water droplets, hair strands, stains, or improperly polished chrome fixtures. If the photos show any lack in any of the parameters, the cleaning task is rejected. The system also checks for standard placement of items such as foot mats or shower curtains, rejecting tickets where these are even slightly misaligned.

The AI model is continuously upgraded with data from real-time hotel operations, with hundreds of images uploaded daily.

“It operates at an accuracy level of 80–85% and is improving over time. This virtual supervision eliminates the need for costly manual checks and reduces the variability introduced by human oversight. Our central tech team monitors all inputs in real time. If a cleaning task takes longer than expected, the system immediately flags it for intervention and retraining,” the founder said.

To ensure safety and security at its premises, the startup has installed CCTV cameras in common areas and provides electronically secure luggage lockers and shoe lockers to the guests. There are security guards at the entrance and 24×7 front office staff at work. There are also smoke alarms and fire-fighting installations.

Going The Pod Way Into The Future

NapTapGo reached the break-even point in the first four months only, according to the founder, while it ended the first year of business with a revenue of INR 20 Lakh. It raked in INR 70 Lakh of business a year later in FY25.

The company records a monthly burn of INR 5–6 Lakh on central admin costs and salaries. “Our traveller footfall has scaled from just 10–15 a month to more than 500, with a repeat ratio consistently at 35%,” Malhotra said.

Around 70% of bookings come from direct channels like the website and WhatsApp. The brand generates its revenue through hourly and nightly pod bookings, along with shower-only and lounge access plans offered at a fraction of standard stay prices.

In FY26, NapTapGo looks to expand into 5–8 more cities, including Bengaluru, Mumbai, Katra, Varanasi, and Udaipur. The bigger vision is to scale to 100 properties across India by FY27, creating a nationwide network of compact, tech-enabled, and highly efficient pod hotels.

While it’s been just two years since launch, the concept has begun gaining traction, with a host of players like UrbanPod, Qubestays, UrbanNaps exploring the capsule-style accommodations. “Use of technology enables us to do flexible check-ins, hourly stays and bookings through online aggregators simultaneously,” the founder claimed to describe how NapTapGo has gone the extra mile to secure an edge over rivals.

[Edited By Kumar Chatterjee]

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