The hotel sector used to function regionally, restricting its operations to specified regions. Individuals frequently depended on travel agents to find accommodation when traveling or only learned about accommodations after arriving at their location. Unknowns were brought about by this industry's lack of a brand; these were later resolved and changed during the internet and technology development.
During this revolutionary time, many players developed, like FabHotels and Airbnb, but OYO stood out the most. OYO's quick rise to popularity and broad appeal were essential in rebranding and reforming our nation's sector. Unexpectedly, as of June 2019, OYO has grown to become the third-biggest hotel chain worldwide.
Understanding OYO
OYO, which runs by the names OYO Hotels and OYO Rooms, is a global platform for tourism that provides affordable hotel choices worldwide. The company lists both licensed and rented hotels on its marketplace, giving customers the choice to select the rooms and living areas that best suit their needs at a reasonable price.
Its outstanding success can be explained by OYO's adaptable expansion plans and effective marketing strategies. At the age of 19, Ritesh Agarwal founded OYO, which is based in Gurgaon, Haryana, and was founded in 2012. Since its establishment, the company has expanded significantly and now operates in multiple cities and countries.
In place of offering traditional hotel rooms, OYO offers a wide range of services, helping customers find homes, vacations, long- and short-term rentals, and fulfilling other business or corporate travel needs. OYO has been identified as an adaptable player in the global tourism sector.
OYO- Industry
According to a Statista research analysis, the hotel sector is expected to have significant growth, with expected revenue of US $9.13 billion by 2024. The findings indicate a robust growth path with a 5.41% projected annual growth rate (CAGR 2024–2028).
If current developments continue, the market volume is expected to increase even more, reaching an estimated US $11.27 billion by 2028. Based on extensive research conducted by Statista, these projections present a positive picture for the hotel industry, showing ongoing expansion and changing expansion patterns.
Founder of OYO
The group CEO and co-founder of the internet hotel chain OYO is Ritesh Agarwal. His birthplace was Odisha. In his early teens, he developed an interest in business. In 2013, Ritesh left college early and was granted admission to the Thiel Foundation. OYO was founded as a result of his stay at the Thiel Foundation and the previous year. As the youngest shark, he has joined the Shark Tank India Season 3 panel.
OYO Startup Story
In 2013, while living in California, Ritesh Agarwal founded OYO to operate an Indian hotel via Oravel Stays. The Gurgaon hotel, which was later renamed OYO, had a significant boost in availability rates in just its first month, increasing from 19% to 90%, as a result of its internet targeting of budget travelers.
Agarwal came up with the idea for OYO because he wanted to satisfy both owners and visitors. Its main priorities are flexible rates, simplified services, and intelligent updates. OYO's approach, which was focused on the tastes of its visitors and small details like gentle white light, improved ratings, and ensured profitability, represented the company's growth from a single location to a global network of hospitality establishments.
Mission and Vision of OYO
Mission: As stated on the company website, OYO is a global platform that "provides full-stack technology that increases earnings and reduces operations, allowing entrepreneurs and small businesses with hotels and homes." Providing dependable, reasonably priced hotels that visitors can reserve right away."
OYO's mission is to enable small business owners and entrepreneurs operating hotels and residences to boost profits and manage operations.
OYO’s Business Model
OYO is the only hotel chain with OTA-like distribution capabilities integrated into its business model. Compared to traditional methods, OYO addresses real-world problems and lets brand development happen organically rather than as the primary objective.
Operating as a redesigned hybrid form, it successfully combines technology and tourism to optimize customer happiness, make the most of available space, and foster overall business success.
OYO's commitment to customer satisfaction is demonstrated by its initial acceptance requirements and its advanced investment in renovating each hotel just before its inclusion in the OYO network.
OYO's main competitive advantage is its capacity to continuously put its consumers' needs first.
The company's business strategy has been designed to maximize the customer experience, making good use of technology and accommodation to boost productivity and space usage.
Revenue Sources of OYO
To maintain its operations, OYO has a complex income strategy that includes multiple important streams:
1. Commissions:
OYO operates on a commission basis, with hotel partners paying it a cut of roughly 22% for each reservation made through its website. The percentage may vary based on factors including the type of property, geography, and other factors.
2. Franchise Fee:
OYO has a franchise model in which it charges fees to its partners in exchange for the use of its brand, technology, and operational support. A significant amount of OYO's earnings originate from this income stream, which might be one-time or continuous payments.
3. Margin of room rates:
OYO makes money by keeping the difference between the selling and reduced rates, which it receives by selling rooms to guests at a price higher than it initially agreed upon with partner properties.
4. OYO Wizard membership:
OYO's premium memberships, Wizard Blue, Wizard Silver, and Wizard Gold, are a profitable source of income.
5. Promotions, Partnerships, and Sponsorships:
OYO generates revenue from its platform through partnerships, brand promotions, and adverts on its website and app. Businesses pay OYO fees for the display of their advertisements improves overall revenue.
6. Revenue from Supplementary Services:
OYO expands its revenue sources by raising prices for high-end offline offerings and benefits. Breakfast, washing, transportation, and other services boost OYO's revenue stream while providing customers with something extra.
Challenges Faced by OYO
OYO has already faced many issues that are common to many startups. The company experienced major layoffs, disputes with hotel partners, and challenges arising from contract disputes. While being successful in attracting customers, the highly competitive pricing strategy raised concerns about profitability and attracted legal examination, particularly due to charges of unfair pricing.
The credibility of OYO's platform was also questioned due to charges of listings that were either inactive or unknown. These challenges were compounded by the COVID-19 epidemic, which made it necessary for OYO to navigate a difficult climate and address governance issues to guarantee a secure future. These are the same kinds of challenges that newcomers often face in the competitive hotel industry.
OYO’s Growth
As of June 2019, OYO had grown from a small platform targeting local customers and companies to become the third-largest multinational hotel chain in the world. In its first year of business, OYO launched its website and made its public appearance in 2012 with sponsorship backing. By 2015, the company had grown to 100 cities with 10,000 rooms. In 2016, it left India and proceeded to expand into the UK, China, the US, Indonesia, Europe, and other countries.
During its period of expansion, OYO introduced several services, such as OYO Townhouse, OYO Workspaces, OYO Wizard, and OYO Life. The company gained recognition through occasional incidents such as the one with the "relationship mode" function. OYO's planned growth and continuous rollout of new features helped to strengthen the business's reputation globally.
Among OYO's growth highlights are:
1) As of January 2024, OYO Corporate Business Solution's website lists more than 4,000 luxury hotels.
2) As of January 2024, OYO Corporate Business Solution was present in over 230 cities and towns in 4 nations.
3) As of January 2024, OYO claimed approximately 174,000 hotels and residences across the country.
4) At the beginning of 2024, it was present in more than 35 nations.
5) In 2021, OYO achieved the significant milestone of 100 million downloads.
6) As of May 2022, the company is expected to be valued at $7 million.
OYO - Launch of Programs and Features
- Outstanding OYO project
OYO launched the Super OYO program in December 2022. Customers were able to discover hotels that provide the best and most dependable customer care thanks to this campaign.
- Program for OYO Accelerators
OYO announced the start of the Accelerator Program in March 2023, and as part of the project, it intends to expand its portfolio by over 200 properties in important Indian cities.
- OYO Clean Stay Program
The Clean Stay Program was launched by OYO in July 2023 as one of their planned efforts. The program was created to improve hotel and room decorations while enforcing new cleanliness and sanitary standards.
- Feature: Stay Now, Pay Later
In June 2023, OYO will launch its Stay Now, Pay Later feature. This feature is in line with the growing trend of buy now, pay later (BNPL) agreements for online and in-store purchases of consumer electronics.
- OYO New Brand Color Scheme
OYO maintained that as part of experiment decisions, it has opened 10 Palette resorts in cities like Jaipur, Hyderabad, Digha, Mumbai, Chennai, Manesar, and Bengaluru. It intends to raise that number to 40 by Q2 FY24, according to multiple press reports from July 2023.
OYO - Partnerships
Several well-known partnerships that OYO has:
1) Lemon Tree
OYO and Lemon Tree agreed on cooperation in March 2023. The partnership sought to increase the number of people using the banquet and event spaces at Lemon Tree Hotels in more than 40 cities throughout the country, including Mumbai, Pune, Delhi NCR, Jaipur, Kolkata, Lucknow, and Bhubaneswar.
2) SoftBank
SoftBank and Oravel, the parent company of OYO, partnered in September 2023. They forged a partnership with SoftBank Japan and launched the luxury hotel brand Sunday in India as a result of this partnership.
Competitors of OYO
The following are some competitors of OYO:
1. Airbnb
One of the company's well-known and well-liked rivals is AirBnB. It was founded in 2007 and is regarded as OYO's ancestor and leader. Thanks to its great accommodation and reasonable costs, Airbnb is a well-known brand throughout the world.
2. Treebo Housing
In India, Treebo is a rapidly expanding hotel brand with operations in more than 113 locations. This business is involved in the high-budget area. Located in Bangalore, Karnataka, India, is Treebo Hotels.
3. FabHotels
2014 marked the founding of FabHotels by two former students from "The Wharton School of the University of Pennsylvania." Under its brand, it offers 3-star hotel rentals at a reasonable price. As of November 2022, FabHotels had over 900 hotels in India and operated in over 66 cities.
Future Plans of OYO
OYO was planning to go public in 2022, but the company strategically delayed its IPO to an unknown future date out of concern for the impact of the global market slowdown on the company's valuation. The fear of a lower value was the reason for this delay.
The Indian hotel booking company, backed by SoftBank Group Corp., appears to be in discussions with Khazanah to organize a $400 million fundraising to fund expansion and debt reduction. This is according to a January 2024 news article. It's important to keep in mind that this information is still preliminary.
Also, a different news source from January 16, 2024 states that OYO plans to add 400 new hotels to its portfolio, with a focus on religious tourism.
Conclusion
OYO's rise from a single low-cost hotel in India to a major player in the international hotel sector stands as proof of its creativity, determination, and strategic planning. OYO has transformed the tourism industry by utilizing technology and a customer-focused strategy to make high-quality accommodations easily accessible and reasonably priced for people all over the world.
The company's desire and dedication to improving the travel experience can be seen in its swift expansion and extensive influence. As OYO keeps growing and innovating, it serves as a motivational example of how a daring concept may achieve extraordinary success when carried out properly.
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