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news. Oyo Rooms is the oldest startup in the space which was
started as Oravel in 2011 by the then 18-year-old Ritesh
Agarwal. After graduating from the Peter Thiel Fellowhip
program, Oravel pivoted to Oyo Rooms a chain of branded
budget hotels across several cities in India. Most recently, Oyo
Rooms raised a massive $25 million round from Sequoia,
Lightspeed and others.
From starting Oravel to changing it to to OYO and getting
Softbank on board, Ritesh Agarwaljust had one dream: making
budget travel and stay easy for the Indian traveller.
There was a time when we booked a hotel room and
didnt expect much. Today the world is different, and I
would like to believe we have contributed to it in some
way, says Ritesh. He and Abhinav Sinha, COO, OYO
Rooms, gamely took part in a candid conversation with
YourStory on customer complaints and challenges of
scale.
From 72 to 4,200 in a year
It has been a fast growth for OYO, which began operations in
2014 from one city Guragaon. Today it claims to partner
4,200 hotels in over 170 cities, booking close to a million room
nights a month. Quarterly cohort analysis puts the repeat rates
at 20 to 25 per cent. The year the team stayed in Gurgaon, it
ensured that hotel occupancies, reviews and repeat rates
increased.
After the market validation in Gurgaon, the team decided to
scale up and from January 2015, began to expand to other
cities, starting with Bengaluru, Mumbai and Delhi. By March
2015, OYO had already raised three rounds of investment
-- from Lightspeed Ventures, Sequoia Capital and Greenoaks
Capital -- and by August 2015, raised another $100 million
from Softbank. These investments went a long way in helping it
scale rapidly across the country and even look at the Southeast
Asian markets.
By December 2015, OYO had touched 150 cities. The number
of hotel tie-ups, a mere 72 that January, rose to 4,200 by the
end of the year. The bookings saw a growth of close to 110x.
But such overwhelming scale and pace brought their own
challenges and OYO began face problems and rising customer
complaints.
Competition snapping at the heels
Simultaneously, from being one of the earliest players in the
market, today it has stiff competition from other brands like Zip
Rooms, Treebo Hotels, Stayzilla and even from Paytm, which is
now entering the last-minute hotel booking space. These
players are not only giving OYO a run for its money but are also
making biggies like MakeMyTrip and Goibibo sit up and take
notice.
With rising competition, many players are now realising the
need to go that extra mile to impress customers with value and
service. Zip Rooms, for example invested considerably in
training and monitoring hotel staff and management.
Treebo Hotels has a Friends of Treebo system, a crowdsourced quality audit program which includes students,
travellers, corporates, and even freelancers, who can conduct
a mystery audit on any of its properties and give the feedback
to the team. MakeMyTrip has gone that extra mile by creating a
dedicated Value+ category to go head-to-head with these newage brands. All the more reason for OYO to focus on customer
service.
The curious case of room shifts
One of the common complaints was shifting of rooms. Customers
would say when they went to the hotel they did not get the room
they were promised, admits Ritesh. The team saw that close to 3.8
per cent of the total customer base had been shifted to another
room, or had got one that wasnt standardised as per OYOs
requirements.
is removed from the system. There are different deltas for each
issue. Like, say, unclean rooms get between 3.5 and 4
crosses. With this 3C audit process in place, OYO Rooms
today has shut out close to 200 hotels across the
country.
Technology and data to the aid
With the aid of technology, the team does a root-cause
analysis and educates hotel owners how mistakes can be
rectified. There is an auditor for every 40 hotels, and each
property goes through a strict audit every three to four days on
a 30-point checklist. Each auditor has a dedicated app
garnering intelligence from occupancy reports and customer
feedback and tells these auditors what to do on a day-to-day
basis. The auditor cannot file his/her report on the app until
and unless he/she is on the geo-fencing of the hotel. Audit
timings arent fixed.
Even as the fixes on the hotel and property side were being
made, the team realised that customer service challenges
needed to be addressed immediately. To ensure this, it began
to keep a closer watch on the hotels, checking the number of
calls made each day, the number of issues resolved and those
that werent and why.
Tipping the domino
After mapping every room and a 100 percent re-audit, the
team has marked rooms that arent standardised, ensuring
theyre not made available to guests. So now on the mobile
app, people have an option of various different rooms while
these black rooms cannot be chosen.
Explaining this experience, Ritesh says that if the hotel has
agreed to a green room 104 but gives the guest a black room
105, within 10 minutes the guest gets an SMS that states, OYO
is happy to host you in room 104 and we hope youve checked
into your room. If not, please give us a missed call on the
number. If the guest gives a missed call, the hotel is marked
and crosses given under the audit. The auditor nearest
responds immediately and helps the guest check into the right
room.
Challenges of scale
OYO is Indias largest branded network of hotels founded by Ritesh Agarwal, Indias first graduate
of the Thiel Fellowship, a program started by Paypal founder, Peter Thiel. OYO currently operates
in India & Malaysia with over 200+ locations including Delhi, Gurgaon, Mumbai, Bangalore,
Hyderabad, Goa, Chennai, Kolkata and Kuala Lumpur. OYOs presence includes major metros,
regional hubs, top leisure destinations, as well as pilgrimage towns. The companys vision is to
become the most preferred and trusted hotel brand for both customers as well as partner owners
and is backed by the worlds leading investors including the SoftBank Group, Greenoaks Capital,
Sequoia Capital and Lightspeed India. OYO promises comfortable premium delightful stays with
features such as an air conditioned room, complimentary breakfast, and Wi-Fi with 24x7
customer service support. Guests can use the OYO app (over 5 MILLION downloads) for booking
rooms as well as order beverages and request room service along with booking a cab and
searching nearby restaurants. Hotel owners who partner with OYO see a significant increase in
occupancy levels, get access to the worlds first tablet based property management apps and
become part of a brand that is recognized and most loved by travelers nationwide. OYO has
received several national and international accolades including Business World Young
Entrepreneur Award, TiE Lumis Business Excellence Awards, India International Travel Mart
Award, Startup of the Year- Express IT Award and Lufthansa ET Now Runway to Success Award.
Specialties
Budget Hotels, Long Stays, Suites, Premium Hotels, Elite Hotels, Women Exclusive Hotels
Website
http://www.oyorooms.com
Industry
Hospitality
Type
Privately Held
Headquarters
325, Spaze i Tech Park, Tower II,Sohna Road Gurgaon, Delhi122002 India
Company Size
1001-5000 employees
Founded
2013
We are India's largest branded network of hotels spread across 223 cities with
6500+ hotels offering standardized stay experiences at an unmatched price.
Standardized
OYO Rooms promises to provide the same amenities and the same awesome experience
across all its rooms.
Affordable
OYO offers rooms at prices that no other player in the budget segment offers today.
Technology Driven
OYO uses technology to link all its functions and provide the customer a seamless awesome
experience.
OYO Rooms is an Indian brand started with the goal to change the way people stay away
from home. The company was founded by Ritesh Agarwal,the first Indian to win the Thiel
Fellowship. At present, OYO Rooms is Indias largest branded network of hotels spread
across 175 cities with 5000+ hotels offering standardised stay experiences at an unmatched
price.
single
hotel
in
May
2013
to
over
5000+ hotels at present, OYO Rooms have reached several milestones. OYO Rooms
started with 1 city and 1 hotel (OYO Rooms Huda City Centre) in Gurgaon in May 2013 and
has seen a tremendous growth. The company as of April 2016 has 5,000+ hotels (more than
100,000 rooms) in 175 cities of India. OYO Rooms has been named Indias largest budget
hotel chain. Recently, OYO launched in Malaysia.
BUSINESS MODEL
OYO Rooms makes a partnership with hotels aiming standard facilities to be provided in the
hotels. Standard facilities like WiFi, Television, Comfy bed, Proper sanitation of room and
lavatories, meals and other facilities are strictly taken care of when OYO Rooms partners
with the hotels. The standards are audited every few days so that the customers are assured
of quality experience at an affordable price ranging between INR 999 to INR 12,000.
FUNDING
OYO Rooms got its first round of funding from Venture Nursery in December 2012. Then
another round of funding came from Lightspeed Ventures in February 2014. In March 2015,
OYO Rooms raised $25 million from Lightspeed, Sequoia and others. After that in July 2015,
OYO Rooms raised $100 million from SoftBank. Again in April 2016, OYO Rooms raised
100$ million from SoftBank, thus making its valuation at more than 225$ million, hence
ranking it in one of the top 5 startups in India.
OYO Rooms started working on their mobile app in March 2015 and the first version of it was
launched on April 22,2015 on the Android Play Store. The iOS version went live on 1st May,
2015 on the App Store. Later, they kept on adding more features and have grown to over 2
million downloads in less than 7 months of its launch and a significant share of their business
now comes through it. The OYO app allows you to make a booking in just 3 taps.
OLA Cabs: This partnership between the two emerging companies may be called
as The Partnership of the Year. Ritesh Agarwal, Founder and CEO of OYO Rooms,
says, This partnership will transform the hospitality industry by making it mobile. We
wanted to solve a real problem the problem of booking rooms while on the go.
Customers can now seamlessly get the services of Ola Rooms supported by the
cutting-edge technology of the OYO App. This association, between OYO and Ola,
is being touted as the most innovative and game-changing partnership of 2016 by
the experts.
Biotique: After a long search for a brand which matches their promise of quality,
they have partnered with Biotique. Now every OYO room is equipped with Biotique
toiletries perfect for a contemporary, quality conscious traveller. Biotique products are
Ayurvedic i.e. they are made with 100% natural ingredients with no chemicals, no
preservatives, and no animal testing.
Transparency: With tools like the specially designed owner portal and by providing
Property Manager tabs to hotels the company makes sure that the partners are
aware of everything no matter which part of the world they are in.
Assistance: The moment a hotel gets on board with OYO Rooms they assist in
upgrading the property to match the OYO standard.
Timely Payments: The company pays their partners on a weekly basis and ensure
that no capital of the hotel gets stuck.
A MoU between OYO Rooms and Tourism and Hospitality Skill Council (THSC),
Government of India, was signed to train three lakhs workers across 150+ cities in
the next three years at the 4th National Conference on Skill Development 2015 on
27th November 2015.
The commpany has also associated with 7 state governments under various
initiatives to strengthen our objective to ensure that people employed in unorganised
segments can access growth opportunities through up-skilling/re-skilling and
recognition of prior learning.
OYO Rooms has been accredited by THSC under the aegis of National Skill and
Development Council, Govt. of India, as an official training partner in
hospitality. #OYOforSkillIndia, an initiative from OYO Rooms, is a small contribution
in transforming India through innovation.
TO THE COMPANY:
TO THE FOUNDER:
Named as one of the 8 Hottest Teenage Start-Up Founders in the World in 2013 by
Business Insider
the freedom to contribute," said Somaia, adding that experienced founders also struggle with this.
The full form of OYO is said to be On Your Own which the founder
thought attractive
, 10 MAY 2016
margins.
"As the market matures, hotel partners will look for more support from a single partner they work with. The
intent is not to become an ecommerce company but to become a preferred supplier for our partners," said
Ritesh Agarwal, chief executive of OYO Rooms.
The idea behind the online marketplace is to help retain hotel partners and enable long-term value, he said.
The company wants to leverage bulk sourcing capabilities and bargaining power to provide inventory to
hotels at prices that are 20-25% cheaper than market rates while generating 20-25% margins for itself in the
process.
It has a network of more than 5,500 hotel partners and its margins range between 15-20% per hotel partner.
"Our margins are healthy ..
enough to hit profitability but to continue to grow and maintain our partnerships with hotels, we need to
expand our services," Agarwal said.
About 10 vendors have signed agreements with OYO Bazar for providing hotel supplies in a certain price
range, maintain quality standards and deliver products to hotels on time. OYO Rooms' preferred logistics
partners or the vendors themselves will take care of the logistics, executives said.
The company is also planning to expand to other businesses such as providing loans to hotel partners, for
which it is in talks with financial services providers.
oyo Bazar was launched in March with 180 stock keeping units or SKUs in three product categories - linen,
maintenance services and LED lights - and was initially piloted in Delhi and Gurgaon.
The company plans to expand the online marketplace to 500 SKUs in the next two months with more
products such as cleaning supplies, crockery, bathroom wares and room and kitchen appliances.
You can cancel your booking using our website or mobile app. You can
also call us on +91-9313931393 to cancel your booking. The applicable
refund amount will be credited to you within 4 working days. However, it
may take an additional 3-14 working days to reflect in your account,
depending on the processing time taken by your bank.
What documents do I need to carry to the hotel to ensure a quick
check-in?
You need to carry the confirmation e-mail/ booking ID sent to you at the
time of booking and any of your ID proofs that should have your address
and photograph. These include your passport, Aadhaar card, driving
license and voter's ID card. Please note that PAN card does not qualify
as an acceptable ID proof.
I intend to stay at OYO Rooms for a long period. Am I eligible for
any special discounts?
You could be eligible for a special discount based on the duration of
your stay. Please send an e-mail to bookings@oyorooms.com or call 93
13 93 13 93 for details.
Conditions
1. MEMBERSHIP ELIGIBILITY
In a consolidation of business in the hotel aggregation segment, OYO Rooms has acquired its rival Delhibased ZO rooms. There is no official statement, but OYO's investor Softbank has confirmed in an earning
presentation earlier today that the deal is through.
Earlier in the day the ZO Rooms website and app had stopped functioning, sparking rumors that the deal
has gone been clinched. At the moment both the site and the app is functioning normally.
In August 2015, SoftB .. SoftBank, Sequoia Capital, Lightspeed Ventures and Green Oaks capital, invested
$ 100 million in OYO Rooms, that catapulted it to the big league. Tiger-backed ZO rooms has raised about $
47 million and had struggled recently to raise another round.
Besides the new funding, OYO Rooms has bought back shares worth Rs 60 crore from its early . Rs 60
crore from its early angel investors led by VentureNursery. The Mumbai-based accelerator had invested
about Rs 25 lakh in the company in 2012, and has made about 250 times returns from its early bet, one of
the angels involved in the deal told ET on condition of anonymity.
ET had reported on April 13 that Venture-Nursery, a Mumbai-based accelerator which was the first investor
in OYO Rooms, was looking for an exit and that differences had emerged due to it. OYO Rooms, founded
..
by 21-year-old Ritesh Agarwal, had raised $100 million in the previous round of funding in August 2015 led
by SoftBank. The company was then valued at $400 million post-money while the new round of the
company has been raised at $400 million pre-money. The financing round reflects sobering sentiment
around thge high valuation of Indian internet companies.
Unmarried couples can book Oyo Rooms now
By Shalina Pillai & Digbijay Mishra, TNN | Aug 27,
OYO Rooms is an online aggregator of budget hotels. OYO Rooms partners with
hotels with the aim of standardization on various measures in each room including
free wifi and breakfast, flatscreen TVs, spotless white bed linen of a certain thread
count, branded toiletries, 6-inch shower heads, a beverage tray and so on. The
standards are audited every few days so that the customers are assured a quality
experience. OYOs budget stays range from 999 ($16) to 4,000 rupees ($66). OYO
provides property owners with support such as quality standardized supplies and
service training. OYO boasts of a 24x7 in-house customer service center.However
recently OYO has changed its policy and allow you to spend only 25% of your hard
earned referral money when you book a hotel, the rest must be paid by the guest
from his pocket, a complete "U-turn" from their initial model.
OYO Rooms is an online aggregator of hotels. It does not own the hotels but lists
them under its name. It has created a brand value for itself by assuring minimum
standards to the customers. It has also created a market place for itself via various
channels like- app, call centre, Online travel agencies, sales team, Travel agents etc.
Its both a win win situation for hotel owners,customers and OYO. Hotel owners get a
brand name, marketing, sales etc. Customers get a standardised stay and OYO is able
to multiply hotels into its platform in a lightning pace.
Its different from other portals as it provides a standarised stay and owns the
experience of the customer rather than owning the inventory. Its similar to OLA and
Uber in many ways.
In long run OYO will have a pricing model as OLA, owners have to pay commission
for OYO's brand. Prices are controlled by OYO, hence they can increase the prices
after customer and hotel acquisition.
You can now easily find couple-friendly OYO hotels in a particular city by
applying the filter on the app or website, and also by turning on the
relationship mode feature in your OYO account. This ensures that you do
not face pesky interrogation or needless hassle when you arrive at your
hotel. All you need is a local ID to check-in (via).
The USP of Oyo Rooms, the online hotel aggregator led by 23-year-old
Ritesh Agarwal, has been its low tariff. That however was also a hurdle for
the company, backed by marquee investors such as Softbank, Sequoia,
Lightspeed Venture Partners, Greenoaks Capital and others, in turning in
profits. Analysts have maintained that Oyo must raise the tariff to become a
unicorn and also profitable. Agarwal has heard them, and is now trying to
strike a balance.
So far, Oyo hard-sold a list of musts in the hotel rooms booked through its
platform. These included clean washrooms, Wi-Fi, air-conditioned rooms,
and complimentary breakfast, the tariff for which was capped at Rs 2,500.
Among others, many hotels with which Oyo has partnered argue that this
tariff is fine during the lean season but not when tourists show up in large
numbers during holidays.
FACT FILE
It started operations in 2013
The room aggregator is in the market to raise $400 million, but may have to
make do with less
Source: Company, Crunchbase
This is where Oyo's premium services fit in. The country's largest hotel
The new category is called Oyo Flagship and will be targeted at those who
are willing to stretch their budget for more than just the basic comforts of
clean sheets and a hot shower. Oyo plans to take some of these properties
on lease and some on a revenue-share model.
In three years since its launch in 2013, Oyo has grown to become the
largest branded hotel aggregator in India, operating through a network of
5,500 hotels in over 170 Indian cities. With an inventory of over 63,000
rooms, Oyo has recorded a million check-ins over the past year.
Currently, Oyo provides basic rooms under the Oyo Rooms brand and a
slightly higher category through Oyo Premier. That's not enough, Oyo
realises.
The new business will serve people who are increasingly drawn to Oyo but
whose needs currently are not met by the services provided by it. "The
brand looked good and a very different set of people started using Oyo and
they expected more from us," says Agarwal.
Rising competition
Operating in this segment, however, will not be without challenges. Unlike
the mass market category which is largely unorganised, many wellentrenched hotel chains are keen to grow their three- and four-star
networks. In addition, several large chains that traditionally operated fivestar hotels too are keen on expanding in the economy or budget category.
French hospitality major Accor, for instance, is expanding its low-cost
budget hotel chain Formule1. Similarly, Intercontinental Hotel Group is
expanding the Holiday Inn Express, its budget arm.
For customers in this segment, there are plenty of options to choose from.
Also, given the nature of the hospitality industry, Oyo will have to be extra
careful in ensuring a uniform level of service across its hotel rooms. In the
past, as it expanded its business rapidly, its quality did get compromised,
resulting in several unsatisfied customers. The company has delisted 51
hotels this year from its network. Another 123 hotels from where
complaints had come were put on one month's notice during which they
were not allowed to take fresh Oyo bookings but only serve the earlier
bookings.
"Based on their performance and servic we are allowing them to restart the
bookings. We now have stricter clauses for them. If more than a couple of
bad experiences come from a hotel, we will take them off our network,"
says Agarwal.
Going slow
So far Oyo has been moving carefully in its new business. It has launched
Oyo Flagship on a pilot basis in a few markets, including Delhi, Noida and
Gurgaon. "We are not looking to scale up the Flagship segment
immediately. It is a pilot. I am personally going to stay at almost every
Flagship to ensure the quality," says Agarwal.
Oyo Flagship has a different business model than Oyo Rooms or Oyo
Premier. At present, it blocks a certain percentage of rooms with a hotel
and offers them under the Oyo platform. In the new business, the hotels
will cater exclusively to Oyo.Another key difference will be the extent of
control that Oyo will have on the hotels under its Flagship brand. Since
such properties will cater exclusively to Oyo, the company can work
towards ensuring a uniform experience across such properties. "These
properties will have better interiors and staff. There will be investments to
ensure that the infrastructure is good and staff is well-trained. There will be
a fixed cost that we will bear but there will be greater control over the
quality it will offer," he says.
Another challenge before Oyo is the steep discounting that has prevailed in
the online travel booking space for a while. Flush with funds, travel portals
like MakeMyTrip and Ibibo are offering discounts of up to 90 per cent on
hotel bookings. In effect, you may end up getting a room priced at Rs 3,500
to Rs 4,000 for as low as Rs 1,500, including the taxes.
Agarwal is unhappy but is not worried. "There should not be such steep
discounting. We can choose to discount our rooms in specific hotels or
cities where aggression is required. We will deliver a better experience at
attractive price points."
The Ritesh Agarwal-led hotel aggregator major Oyo Rooms may soon close
a merger with Zo Rooms after months of delay.
The deal, announced earlier this year, is pending for want of funds. This
will change after Japans SoftBank recently pumped $61 million into Oyo
Rooms.
Sources said the sixth round of funding was divided in two tranches with
$29 million coming in as a mix of equity and debt. Oyo Rooms declined to
comment on the matter.
This is among SoftBanks first major funding rounds in its Indian portfolio
after Nikesh Aroras exit from the company where he served as president.
Before stepping down, Arora had named Oyo Rooms as among SoftBanks
good investments.
Oyo Rooms will now aim at being the biggest hotel aggregator in India
and compete with companies like MakeMyTrip. Next year, Oyo Rooms may
go in for a bigger funding round, said a source close to the company.
Oyo Rooms has been in the market for funds for a few months but
investors have been playing it cool after a rush of funding rounds last year.
Sources said Oyo Rooms valuation after the latest round of funding was
$650-$700 million.
The company had last year raised $100 million from SoftBank, Lightspeed
Venture Partners, Sequoia Capital India and Greenoaks Capital. In April this
year, Oyo Rooms raised another $100 million from SoftBank, Sequoia
Capital, Lightspeed Venture Partners, Greenoaks Capital, DSG Consumer
Partners and Venture Nursery.
Our team delivered 15x year-on- year growth with 2.3 million booked
room-night transactions in January-March 2016 while our gross
merchandise value continues to grow aggressively every month. The cities
driving profitability include Gurgaon, Delhi, Hyderabad and Kolkata,
Agarwal had said then.
Oyo Rooms has 5,855 hotels in its network with an inventory of 68,300
rooms. It aims to triple this inventory by December.
he red logo of Oyo Rooms, the hotel aggregator led by 23-year-old Ritesh Agarwal, shows up almost
anywhere you go in the country, across neon-lit high streets as well as in little-known nooks and corners of
more than 170 cities, from Delhi, Mumbai and Bengaluru to Mirik, Baddi, Coonoor and beyond. Oyo,
described as On Your Own in online dictionaries, calls itself the largest branded network of hotels, though its
Agarwal, a college dropout who started Oravel Stays, which owns Oyo, at age 17, insists such feedback is
not more than a trickle. In a recent interview, he pointed out that Oyo got high ratings on sites such as Trip
Advisor. Also, he claimed that more than 50 per cent of Oyo subscribers in Gurgaon were repeat customers.
Oyo had blacklisted a few hotels over quality slippages, he said.
But that's the least of the string of worries Agarwal faces: there is talk that Oyo's valuation has slid amid a
global meltdown, its proposed acquisition of rival Zo Rooms may have tuned cold, and some of its partner
hotels are ready to jump ship. Also, popular travel portals like Makemytrip, Yatra and Ibibo have struck Oyo
off their listings as they prepare to enter the segment on their own.
Though it is backed by marquee investors such as Softbank, Sequoia, Lightspeed Venture Partners,
Greenoaks Capital and others, the buzz in the market is that Oyo will get much lower than the $400 million it
had set out for not too long ago in its next round of funding. It was eyeing valuation of at least $600 million
during the new fund-raising round, but that may have been ambitious.
Valuation concerns
This comes after Morgan Stanley marked down the value of its investment in Flipkart, the homegrown poster
boy of e-commerce, by 27 per cent to $58.9 million between June and December. According to a recent
survey of private equity and venture capital funds done by VCCircle, 92 per cent of VCs believe that
valuations of start-ups going in for Series B, C or D rounds of funding will drop, which will make exits more
difficult.
Apart from slowing down expansion, this, experts say, could hurt Oyo's plans to acquire rival Zo Rooms for a
stock swap of 7 per cent. One news report insists there is only 60 per cent chance of the deal getting
completed because Zo has downsized significantly, which has made the shareholders of Oyo to rethink their
decision.
Oyo COO Abhinav Sinha says, "Fundraising has never been a challenge for Oyo.In the near future, at an
apt time, we will actively engage in fund-raising.'' Dismissing any talk of valuation mark down, Sinha is
confident that even in tough market conditions, an original disruptor like Oyo will be valued highly.
On the Zo deal, Sinha is not so forthcoming. "At present, we have no comment to offer on this,'' he says.
Things have changed for sure after Oyo entered a deal some months ago to acquire Tiger Global-backed
hotel aggregator Zo, which had more than 10,000 rooms. That would have made Oyo stronger in the budget
space. But both sides have maintained a cryptic silence, though Oyo's lead investor Softbank made the
acquisition public in an investor presentation earlier this year.
Partnership problems
In addition, Oyo is getting blacklisted, going by a recent report. It said some 200 hotels terminated their
relationship with aggregators such as Oyo and Zo over issues like undercutting, unpaid dues and unmet
promises. Sinha, for his part, dismisses it as "completely baseless''. The churn rate at Oyo "is extremely
low'', Sinha says. "We have been expanding our network aggressively every month.''
Indeed, the partner network has grown at a fast clip. It now has tie-ups with more than 5,500 hotels, up from
2,500 hotels just six months ago. There are more than 50,000 rooms under the Oyo brand. It is this scale
that makes Oyo look larger than the largest hospitality chain of India, Taj Hotels, which has around 16,500
rooms around the globe, of which 13,000 are in India.
Sinha claims that Oyo's "partner hotels have witnessed increase in occupancy and quality of the property
itself". Siddharth, who owns Daichi, a 12-room hotel in Dehradun, of which nine have been assigned to Oyo,
says: "I have learnt a lot from this partnership.'' Gaurav Chhabra, who runs Regalia in Gurgaon and has
given out a third of the 18-room property to Oyo, says the partnership has helped his business.
The learnings are about basic hotel standards on everything from the thickness of mattress to quality of
linen, size of picture in the room to the level of lighting. Oyo has a checklist of 200 that every hotel partner
must adhere to. For instance, every Oyo room must have a runner over the bed to give it a premium touch,
24X7 free wi-fi is a must to make the deal attractive to a business traveller and complimentary breakfast has
to be weaved in to make it a wholesome package.
For tariff between Rs 999 and Rs 2,500, it may look like a steal to the guest, but hoteliers do feel the pinch.
The tie-up looks good during the lean season, but the tariff in the peak season must be increased to make it
a profitable business, point out both Sidhharth and Chhabra.
Oyo, which on an average keeps around 15 per cent of the tariff as commission (though it could go up or
down depending on a deal) while the remaining 85 per cent goes to the hotelier, is learnt to be open to the
idea of variable tariff in the times to come.
Oyo's turnover for 2014-15 was Rs 2.4 crore, up from Rs 51 lakh in the previous fiscal. To turn a unicorn and
also profitable, it must up the tariff, points out an analyst. Some hotels have in fact already had their way and
have breached the Oyo cap of Rs 2,500 to charge up to Rs 3,000 a night.
Dynamic pricing based on demand, a norm in the hospitality industry, may follow, but for now Oyo's most
attractive feature is its low price. It could keep the rates much lower than most others because the
investment on properties has been borne by the hotels, and also Oyo didn't face much trouble in raising
funds till now. But with the market turning tight, that could change in the future.
In another development, travel portals such as MakeMyTrip, Yatra and Ibibo dropped Oyo a few months
ago. Many of them are opening their own budget hotels and would like to promote those, rather than divert
traffic to Oyo or Zo. That's a loss for an aggressive player like Oyo, which is currently getting as much as 90
per cent bookings through its direct transaction on the web and the mobile phone.