‘We'll Continue to Deliver on Our Promise of Creating Quality Living Spaces’
OYO has been at the forefront of the small and budget hotel revolution in India, Malaysia, and Nepal, and we will continue to strengthen our footprint in China by focussing on locally relevant standardised services at affordable prices. We'll continue to deliver on our promise of creating quality living spaces and delight the guests of OYO Jodian (translated as hotels in Chinese) while ensuring high yield for asset owners. We entered China with a thought that how will a Chinese company run itself if it wanted to emulate OYO and the results are visible. Each and every aspect of o ur operations in China is highly localised.
Oyo Aims to Provide an Affordable and Trusted Stay Options for Both Indian and International Tourists
Ritesh Agarwal, Founder & CEO, OYO, speaks to Business Digest and shares what keeps ahead and at the forefront.
OYO is present across 230 cities in India as well as in Malaysia and Nepal. What made you decide to venture outside of the country?
OYO was launched in 2013 with an objective to create a perfect equilibrium between location, comfort, and pricing. In the past five years, we've delivered predictable, affordable and always-available hotel accommodation to travellers by using proprietary technology and skilled talent pool of hospitality experts. Our idea behind the overseas expansion is to reach out to hospitality markets across the world that have characteristics similar to India. Unbranded hotel room supply accounts for a majority share of hotel supply worldwide; our model is suitable for such markets to transform their hospitality experience. Our entry and expansion in China is aligned with OYO's mission of creating beautiful living spaces by empowering hotel owners to become better hospitality players while ensuring an end-to-end controlled experience for the guests. With this expansion to global territories, we aim to provide an affordable and trusted stay options for both Indian and international tourists, business travellers and local city-dwellers.
You have plans to expand to China. What made you choose China as the next country to expand to? How different or similar is the Chinese market?
In China, we saw a similar market opportunity. The country's tourism industry is flourishing, and it offers a tremendous opportunity both in terms of the market size and travellers while its hospitality sector is as fragmented as India's. OYO's launch in the country aims at providing an affordable and trusted stay option for both Indian and international tourists, business travellers and local city-dwellers.
OYO has been at the forefront of the small and budget hotel revolution in India, Malaysia, and Nepal, and we will continue to strengthen our footprint in China by focussing on locally relevant standardised services at affordable prices. We'll continue to deliver on our promise of creating quality living spaces and delight the guests of OYO Jodian (translated as hotels in Chinese) while ensuring high yield for asset owners.
We entered China with a thought that how will a Chinese company run itself if it wanted to emulate OYO and the results are visible. Each and every aspect of our operations in China is highly localised. This localisation has helped us in customising our offering from the point of view of a traveller in the country and what was lacking from his/her experience earlier when OYO was not around. This also gave us an
edge with the local talent pool. To sum it up, OYO copied what OYO itself has been executing since its inception in India to gain this momentum in China.
What are some of the lessons you learnt from the success and challenges you faced in the home market before you ventured into the global market?
The Indian budget hospitality market, when we started out, was largely segmented with no real sense of consistency. The problem that we saw was not the lack of budget accommodation, or even accessing these properties, but the lack of predictability and standardisation in terms of the customer experience. So we launched OYO with a goal to provide hassle-free stay experience at affordable prices without any compromise on location or comfort.
Our expertise in managing a chain of hotels along with OYO's business model creates a unique offering for both the customers and hotel partners. We have multiple techbased solutions for our asset partners including the Property Manager app that acts as an end to end one-stop solution tablet-based app for managing all daily functions of the property – visibility bookings, sales channels, customer requests, housekeeping, finances. With the Owner App, the asset owners can have complete visibility of cash flows, business performance, pricing, customer reviews, and recommendations. Further to this, we have a robust on-ground team of OYO Captain that undertakes physical audits of property at regular intervals to ensure standards of service quality are maintained. All these facets come together to create an empowering ecosystem for our guests and partners, and that's what makes OYO exceptional.
We identified the most critical elements contributing to a delightful stay – clean linen, WiFi, breakfast, AC rooms, TV and clean washrooms – and have been successful in ensuring a consistent standard of service and amenities for our guests. It is gratifying to say that we have been able to bring about a change in the way people consider staying away from home.
In the international market your competition is from local and international players? How have you geared to take on the global giants?
Competition is good for consumers and hotel partners, and it keeps us on our toes. Five years ago, in 2013, we started OYO with the intent to solve the demand-supply imbalance that afflicted India's hospitality industry and realised the importance of quality living spaces. In these years, we've built and demonstrated deep capabilities in partnering with various formats of real estate and rapidly transforming them into beautiful living spaces. After disrupting the budget space and enabling value-driven experiences for both our guests and asset partners, we have made our presence felt in the mid-segment space with OYO Townhouse, SilverKey, OYO Home and added multiple brands to OYO's portfolio with Capital O, Edition O and Palette Resorts by OYO.
With a unique operating model powered by award-winning service and operational efficiencies, OYO has created a unique space for itself both in the Indian market and foray into the international markets with a strong performance in China and the UK In a brief span of 10 months, we've expanded OYO's chain of hotels in China to 171 cities with over 87,000 rooms. We are running four Townhouse hotels in the UK and this strong performance is a testament to OYO's razor-sharp focus on creating quality living spaces, globally.
How important has been the role of SoftBank as an investor in your global march?
SoftBank has been one of the foremost investors in OYO, not only in terms of funds but also in the kind of confidence Masayoshi Son has shown in our mission. SoftBank's association with us for the past three years has not only reinforced investor confidence in our brand and its unique business model, but with each fresh influx of funding, we are able to develop and expand our capabilities further and explore newer avenues of hospitality and aesthetic living. Son has always been known for his ingenuity and differentiated thinking and has expressed his confidence in what we are trying to build – quality living spaces for millions of travellers at perfect locations at affordable prices. He's a visionary in the truest sense and is committed to investing in order to build ecosystems, creating jobs and driving impact, and has a
very enthusiastic view of the Indian market and its vast potential. With the kind of support and guidance he has offered OYO, within five years of our inception, we have solidified our position as South Asia's largest and world's fastest growing hotel chain in terms of network presence and inventory and become the go-to hospitality brand for hassle-free and affordable accommodation.
From 2013 to 2018, within five short years, you have seen phenomenal growth. Do you think you have consolidated enough before expanding?
We are ardent believers in innovation and want to do things differently every day. The last five years have truly been an extraordinary journey of growth and grit. OYO India currently has over 125,000 rooms is witnessing 3x growth in transactions year-on-year with net take rates over 20 per cent. In addition to attaining unit-level profitability, the company is benefiting from 90 per cent demand coming from its direct channels, improving operating efficiencies and customer loyalty, with over ~67 per cent of the top line in India coming from repeat customers. OYO China, on the other hand, has presence in 171 cities with over 87,000 rooms, in over ten months since its foray into the market. While we continue to be focused on expansion into new markets, our priority will remain high-quality customer experiences and increased yields for hotel owners.
It is also being speculated that soon you would be expanding to Dubai? Is that correct?
As mentioned above, we are on a constant lookout for destinations with similar traits as of Indian budget hospitality market and facing the challenge of demand and supply gap. We'll continue to identify and explore such markets but currently, don't have any comments to offer on venturing into Dubai.
Do you think OYO has solved complex problems and is wellplaced to apply their solutions to international markets? What are some of the business model innovations you have undertaken in recent times?
Our approach in China and other international destinations has been similar to what we have had in India since inception. The macro remains the same. There are 4 million rooms in India and 32 million rooms in China which are unbranded and less than 100 room hotels. We understand how to operate small hotels profitably. Our macro ability to operate small assets profitably comprises some of OYO's core attributes of franchising and leasing small assets and ensuring high yields while delivering a quality experience for our guests. As we move to newer territories there will be tactical differences but the ultimate goal stays the same – working with unbranded hotels, standardising them and making them better hospitality players. At the end of the day, the customer wins because they get a better-quality product at a lower price. We are also supporting our customer to enhance their business by implementing new-age technology like AI, IoT and machine learning. When the asset owner and customer win, then we count it as a win for OYO too.
What marks the success of a new venture?
In addition to revenue numbers and growth statistics, which are of course the most quantifiable identifiers of how well or poorly any venture is doing, it is also important to map the outcomes of the said venture, in terms of the kind of impact it has had on the given industrial segment and/or consumer behaviour. This often serves as a strong indicator of whether the venture is succeeding in achieving its objectives or not. For us at OYO, beyond the growth numbers, the fact that 90 per cent comes from repeat and organic customers, makes us really happy. This is a testament to how much our guests enjoy the OYO hospitality.
As a millennial entrepreneur, what is your message to aspiring young entrepreneurs?
A great idea is worthless if you don't get started. I would suggest starting early and asking for honest feedback, so you know what to expect when the time comes for Series A, B or even C funding. It is essential to see your idea through to fruition before diversifying. Building a strong core team of members early on, who not only offer their expertise but also their counsel and trust also goes a long way.