Homestay aggregator Stayzilla on Thursday announced that it was halting its operations and would reboot itself with a different business model. In a blog post, company co-founder Yogendra Vasupal said the decision was “was one of the toughest decisions that I have taken so far but it is the right thing to do”.

Vasupal said the company was not able to sustain its current model for several reasons, including the overall cost of doing business in India. “India does not have a lot of public goods, often taken for granted in mature markets like logistics, tech savvy suppliers and online user demand,” he said, adding that the concept of a homestay was not a familiar one and that a marketplace had to invest in concept and internet education. “The costs, both financial and opportunity costs, creep up on you over a period of time and gets rationalised as cost of doing business in India,” he said.

The co-founder also cited the lack of “local network effects” in the country, saying that Stayzilla was not able to take a “focussed city-by-city approach in terms of matching supply and demand”. The need to create homestays as well as guests who would choose such an accommodation across the country “stretched us thin”, Vasupal said. “Forced to match prices, we could not even recoup what we put in, necessitating very large capital requirement simply to sustain growth.”

Vasupal said he envisioned Stayzilla becoming a “hassle-free distribution channel” in the future. “We will look to work closely with both online and offline travel among players is going to be the most certain way in which we can create value for all stakeholders involved,” he said.

Stayzilla’s operations halt comes just three days after reports said Snapdeal founders Kunal Bahl and Rohit Bansal said that they would take a 100% salary cut and sack several employees in an attempt to increase profits. Media reports quoted unidentified officials who said that around 600 employees would be sacked across Snapdeal, Vulcan (logistics) and Freecharge (a digital payments business) as part of the drive. The decisions by both companies is likely to raise investor concerns about the long-term viability of internet-based marketplaces and aggregators.