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Ritesh Agarwal, founder and CEO of Oravel Stays Pvt, owner and operator of Oyo Hotels & Homes, speaks during an interview in New Delhi, India, in July 2016. (Photo: Prashanth Vishwanathan/Bloomberg)
Flush with nearly $1 billion in cash, Oyo Hotels & Homes is on a tear to expand across China and Indonesia. The Gurgaon company has said that it's committing $600 million to grow its business in the Chinese market and another $100 million for further development in Indonesia.
“China offers a tremendous opportunity both in terms of the market size and travelers,” says Oyo’s 24-year-old founder Ritesh Agarwal, who started the company in 2013, when he was only 19.“It’s also a fragmented market. We’ll be catering to the needs of the mid-income traveler looking for quality-assured accommodation at an affordable price point.”
Oyo, which recently reached a valuation of $5 billion, has grown rapidly to become South Asia’s largest chain of hotels, homes and living spaces. The company ventured into the China market last year and is said to have already become one of the country's top five players. It counts China as its largest market in terms of the number of rooms, 180,000 out of 330,000 in total, as well as manpower, 5,000 people of the company’s 10,000-strong work force. India is Oyo's second-largest market with 164,000 rooms spread across 180 cities.
“We believe that Oyo has just scratched the surface in China,” says Agarwal. “It’s still Day 0 for us.”
With properties spread across 285 Chinese cities, including Hangzhou, Xian, Nanjing, Guangzhou, Chengdu, Shenzhen, Xiamen, and Kunming, Oyo will be deepening its presence in the world's second-largest economy and says it has the ability to add 35,000 rooms a month.
“Our secret to success in China is the way we’ve built our business in the country,” says Agarwal. “We didn’t approach the market like an Indian start-up setting shop in China, but like a Chinese player building and localizing the Oyo business model to make it work in the Chinese market.
Meanwhile, Oyo is a more recent entrant to the Indonesian market having just started operating there in October, with 30 properties and 1,000 rooms across the cities of Jakarta, Surabaya and Palembang. Over the next 15 months, Agarwal says they're planning to expand across 35 cities, including Yogyakarta, Bandung and Bali.
An Oyo property in the Chinese city of Chengdu. The Indian hospitality company has committed $600 million to expanding in the Chinese market. (Source: Oyo)Oyo
Oyo is well capitalized for its expansion into Asia, thanks to its recent fundraising efforts that managed to reach $1 billion in commitments. It took in $800 million in September in a round led by Japan’s SoftBank (an existing investor) which also included Lightspeed Venture Partners, Sequoia, Greenoaks Capital as well as China Lodging Group. Another $100 million investment came from Singapore's ride-hailing company Grab in early December, and the remaining $100 million Oyo says it will receive soon.
Oyo’s model focuses on availability, affordability and predictability. It partners with hotel owners who agree to standardize their rooms to Oyo’s specs –ranging from bedrooms with six-inch mattresses and a door latch to bathrooms with a western commode along with a health faucet.
Oyo offers its branding to these hotels once it is satisfied and drives business to these hitherto undiscovered and ignored hotels by promoting them. It promises predictability to guests by ensuring that they can expect certain minimums standards when they check into an Oyo property.
“We work towards empowering hotel owners to become better hospitality players, while ensuring an end-to-end controlled experience for our guests,” says Agarwal.
The company, which had $19.3 million in revenue for fiscal 2017, says it’s on the path to profitability. The figures for fiscal 2018 still have yet to be announced.
India remains an important market for Oyo, and it accounts for 50% of its total rooms, but the company has also been the subject of recent protests by the Federation of Hotel and Restaurant Associations of India. The 65-year-old trade group has alleged in two letters to Agarwal that Oyo is breaching contracts; putting customers at risk and charging exorbitant commissions. It has also raised similar issues in letters sent to online travel companies Makemytrip.com and Goibibo.com. The federation is calling upon the companies to amicably resolve these issues through meetings. But if that doesn't happen, the group is threatening to organize nationwide protests.
The letters stated that Oyo is endorsing illegal and unlicensed properties such as bed and breakfast outfits and apartments in residential and commercial buildings as hotels. It also said that members running budget and mid-market hotels had complained that Oyo was “distorting market dynamics” through “predatory pricing” and “deep discounting.” The group alleges that Oyo was charging commissions ranging from 20% to 40% and constantly revising contracts with property owners.
"More than 40 percent of the rooms operated by Oyo do not have valid licences or they are not properly certified," alleges Gurbaxish Singh Kohli, vice president of the trade body. "It's a huge security threat for customers."
Oyo, for its part, has clarified in a statement released last week that the trade body’s claims are “misguided and misplaced, and based on incorrect allegations made by small groups of people (not necessarily by franchisees and lessors associated with Oyo Hotels) with vested interests.” Oyo also clarified in the release that it has never charged more than 25% franchise fees – unless it invests in the upgrade of the property.
“OYO, like all other branded hotel chains, follows strict compliance procedures, and is fully compliant as a franchiser or lessee operating in India," Oyo said in its release. “We can deliver predictable and affordable tariffs to our customers because we can reduce our cost of operations significantly when compared to traditional hotel companies, through the use of technology, superior talent and scale.”
Undaunted by the recent controversy, Agarwal, who started with a single hotel in 2013, says he has his sights firmly set on making Oyo the most preferred chain of hotels, homes and living spaces by 2023.
Flush with nearly $1 billion in cash, Oyo Hotels & Homes is on a tear to expand across China and Indonesia. The Gurgaon company has said that it's committing $600 million to grow its business in the Chinese market and another $100 million for further development in Indonesia.
“China offers a tremendous opportunity both in terms of the market size and travelers,” says Oyo’s 24-year-old founder Ritesh Agarwal, who started the company in 2013, when he was only 19.“It’s also a fragmented market. We’ll be catering to the needs of the mid-income traveler looking for quality-assured accommodation at an affordable price point.”
Oyo, which recently reached a valuation of $5 billion, has grown rapidly to become South Asia’s largest chain of hotels, homes and living spaces. The company ventured into the China market last year and is said to have already become one of the country's top five players. It counts China as its largest market in terms of the number of rooms, 180,000 out of 330,000 in total, as well as manpower, 5,000 people of the company’s 10,000-strong work force. India is Oyo's second-largest market with 164,000 rooms spread across 180 cities.
“We believe that Oyo has just scratched the surface in China,” says Agarwal. “It’s still Day 0 for us.”
With properties spread across 285 Chinese cities, including Hangzhou, Xian, Nanjing, Guangzhou, Chengdu, Shenzhen, Xiamen, and Kunming, Oyo will be deepening its presence in the world's second-largest economy and says it has the ability to add 35,000 rooms a month.
“Our secret to success in China is the way we’ve built our business in the country,” says Agarwal. “We didn’t approach the market like an Indian start-up setting shop in China, but like a Chinese player building and localizing the Oyo business model to make it work in the Chinese market.
Meanwhile, Oyo is a more recent entrant to the Indonesian market having just started operating there in October, with 30 properties and 1,000 rooms across the cities of Jakarta, Surabaya and Palembang. Over the next 15 months, Agarwal says they're planning to expand across 35 cities, including Yogyakarta, Bandung and Bali.
An Oyo property in the Chinese city of Chengdu. The Indian hospitality company has committed $600 million to expanding in the Chinese market. (Source: Oyo)Oyo
Oyo is well capitalized for its expansion into Asia, thanks to its recent fundraising efforts that managed to reach $1 billion in commitments. It took in $800 million in September in a round led by Japan’s SoftBank (an existing investor) which also included Lightspeed Venture Partners, Sequoia, Greenoaks Capital as well as China Lodging Group. Another $100 million investment came from Singapore's ride-hailing company Grab in early December, and the remaining $100 million Oyo says it will receive soon.
Oyo’s model focuses on availability, affordability and predictability. It partners with hotel owners who agree to standardize their rooms to Oyo’s specs –ranging from bedrooms with six-inch mattresses and a door latch to bathrooms with a western commode along with a health faucet.
Oyo offers its branding to these hotels once it is satisfied and drives business to these hitherto undiscovered and ignored hotels by promoting them. It promises predictability to guests by ensuring that they can expect certain minimums standards when they check into an Oyo property.
“We work towards empowering hotel owners to become better hospitality players, while ensuring an end-to-end controlled experience for our guests,” says Agarwal.
The company, which had $19.3 million in revenue for fiscal 2017, says it’s on the path to profitability. The figures for fiscal 2018 still have yet to be announced.
India remains an important market for Oyo, and it accounts for 50% of its total rooms, but the company has also been the subject of recent protests by the Federation of Hotel and Restaurant Associations of India. The 65-year-old trade group has alleged in two letters to Agarwal that Oyo is breaching contracts; putting customers at risk and charging exorbitant commissions. It has also raised similar issues in letters sent to online travel companies Makemytrip.com and Goibibo.com. The federation is calling upon the companies to amicably resolve these issues through meetings. But if that doesn't happen, the group is threatening to organize nationwide protests.
The letters stated that Oyo is endorsing illegal and unlicensed properties such as bed and breakfast outfits and apartments in residential and commercial buildings as hotels. It also said that members running budget and mid-market hotels had complained that Oyo was “distorting market dynamics” through “predatory pricing” and “deep discounting.” The group alleges that Oyo was charging commissions ranging from 20% to 40% and constantly revising contracts with property owners.
"More than 40 percent of the rooms operated by Oyo do not have valid licences or they are not properly certified," alleges Gurbaxish Singh Kohli, vice president of the trade body. "It's a huge security threat for customers."
Oyo, for its part, has clarified in a statement released last week that the trade body’s claims are “misguided and misplaced, and based on incorrect allegations made by small groups of people (not necessarily by franchisees and lessors associated with Oyo Hotels) with vested interests.” Oyo also clarified in the release that it has never charged more than 25% franchise fees – unless it invests in the upgrade of the property.
“OYO, like all other branded hotel chains, follows strict compliance procedures, and is fully compliant as a franchiser or lessee operating in India," Oyo said in its release. “We can deliver predictable and affordable tariffs to our customers because we can reduce our cost of operations significantly when compared to traditional hotel companies, through the use of technology, superior talent and scale.”
Undaunted by the recent controversy, Agarwal, who started with a single hotel in 2013, says he has his sights firmly set on making Oyo the most preferred chain of hotels, homes and living spaces by 2023.
India's Oyo Hotels Expands Across China And Indonesia While Facing Backlash At Home
Reviewed by Admin
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Desember 19, 2018
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Reviewed by Admin
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Desember 19, 2018
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