Grow a homestay network around Shillong
Before the decision
Visitors already book one night and ask hosts what to do the next morning. Hosts know which guests ask about a second night but have no shared way to record the requests. The network wants to see whether unmet demand is for rooms or for activities.
The problem
Should the team choose More properties or Longer itineraries for the next 12 months?
Decision owner: The business unit lead.
More listings can increase choice without increasing repeat demand.
Option economics
Scroll the table to see all figures.
| Option | Volume (room-nights) | ₹ per unit | Fixed cost | Net contribution |
|---|---|---|---|---|
| More properties | 26,500 | 540 | ₹90 lakh | ₹53.1 lakh |
| Longer itineraries | 20,900 | 680 | ₹65 lakh | ₹77.12 lakh |
Make the call
- Calculate net contribution for More properties and Longer itineraries. Which assumption makes the comparison most fragile?
- If the leading option delivers 10% fewer room-nights, does your recommendation change?
- What evidence would you ask for before the team makes an irreversible commitment?
Reveal the worked solution
Start by validating Longer itineraries. It contributes ₹77.12 lakh after fixed costs and leads by ₹24.02 lakh. Treat that gap as the amount of unmodelled cost or lost contribution the option can absorb before the ranking reverses.
- Frame the decision
Separate sales that are incremental from sales shifted out of an existing channel. Include the support and fulfilment needed to keep new customers.
- Calculate both options
More properties: 26,500 room-nights × ₹540 less ₹90 lakh in fixed costs gives ₹53.1 lakh. Longer itineraries: 20,900 room-nights × ₹680 less ₹65 lakh in fixed costs gives ₹77.12 lakh.
- Stress-test the forecast
Longer itineraries leads by ₹24.02 lakh in the base case. If Longer itineraries delivers 10% fewer room-nights (18,810) at the same margin and fixed cost, it contributes ₹62.91 lakh. Holding the other option constant, the stressed result still leads. This isolates volume risk. Check whether both options would respond to the same change in demand.
- Set a decision threshold
Holding the other option’s result fixed, Longer itineraries needs at least 17,368 room-nights to match or beat it under the model. Use itinerary conversion and host availability on the same dates.
More listings can increase choice without increasing repeat demand. Compare the cost of a limited test with the loss the business would face if the full commitment failed. Ask the team to agree the decision criterion before collecting more evidence.
What if the whole market moves?
The worked solution tests a change to one option at a time. Here, both options gain or lose the same percentage of volume. Unit contribution and fixed costs stay constant.
| Volume scenario | More properties | Longer itineraries | Higher contribution |
|---|---|---|---|
| Both lose 10% of volume | ₹38.79 lakh | ₹62.91 lakh | Longer itineraries |
| Base assumptions | ₹53.1 lakh | ₹77.12 lakh | Longer itineraries |
| Both gain 10% of volume | ₹67.41 lakh | ₹91.33 lakh | Longer itineraries |
Explain which option you would take forward. Check whether capacity, price or customer mix would also change as the market moves.