RITESH AGARWAL | FOUNDER & GROUP CHIEF EXECUTIVE OFFICER | OYO Agarwal tells Ajay Modi how he digs south Indian food and why he still stands behind the reception desk of OYO properties to check in guests
RITESH AGARWAL tells Ajay Modi how he digs south Indian food and why he still stands at the reception desk of OYO properties to check in people
There could not have been a better time for a lunch with Ritesh Agarwal, founder and group chief executive officer for budget hospitality start-up OYO. Agarwal, one of the youngest entrepreneurs in the country, turned 25 last month. The SoftBank-funded company emerged a unicorn, valued at $5 billion, just two months before Agarwal celebrated his 25th birthday. Around the time of his birthday, OYO announced the hiring of former Indigo Airlines president Aditya Ghosh as chief executive for India and South Asia.
Agarwal, a vegetarian, is fond of south Indian cuisine and had suggested Dakshin, a restaurant in Sheraton, New Delhi, for the lunch. He told me later on that he is emotionally attached to this particular hotel because way back in in 2012 it was in the lobby of this hotel that his angel investors, Shravan Shroff and Ravi Kiran, had agreed to support his idea.
Dressed formally in a white shirt and blue trousers, Agarwal is just in time for the meeting. We choose to sit at a corner table in the restaurant, almost empty when we start. We decide to order a vegetarian south Indian thali. “The last three months have been eventful,” says Agarwal, trying the banana mini dosa and sabudana dosa served with tamarind and coconut chutney before the main course arrives. He talks about Udupi in Karnataka, which, according to ancient scripts, is the dosa's birthplace. “You get the most amazing south Indian food there.”
Agarwal’s love for south Indian food is quite striking. He has idlis and dosas for breakfast almost every day. “I feel it is better to have certainty. I have no regret that I have not tried other stuff in Delhi.” He mostly eats home-cooked breakfast at his Gurugram residence and sometimes at an outlet of the Naivedyam Restaurants chain located close to his office. He prefers south Indian fare also when he is travelling. “Sagar Ratna has really standardised the south Indian highway eating experience. You take any highway from Delhi and you get that,” he adds.
Agarwal, who hails from Odisha, always wanted to do something of his own. His father used to run a grocery shop and would have happily let him join the family business. But he used to feel challenged by his eldest sister who was exceptional in studies. “I was not bad myself and at times stood first during my school days.” After completing his secondary education from a convent school, Agarwal landed in Kota (Rajasthan) for his higher secondary in science and then sit for his engineering entrance exams. “By the time the exams came I was clear I wanted to build Oravel (that ater on became the holding company for the OYO brand). I sat for a bunch of entrance exams. But I was clear that even if I went to university, my mind would gravitate towards doing something new and I would not be a great student.”
The main course is served: There is a choice of vegetables along with rasam, appam, parotta and curd. I notice many more guests have started trooping in.
“My mom makes mini idlis incredibly well. In most cities, I know at least three places that serve south Indian food,” he says, adding that he has found such a restaurant even in Shanghai. China today is OYO’s biggest market with a network of over 180,000 rooms which makes it one of the top five players there.
Agarwal says when he came to Delhi from Kota, he joined an undergraduate business school at the insistence of his parents. After three days of college, he decided to take a day off to think about Oravel (which is now the holding company of OYO). One day turned into several days and he never went back to college. “Before my angel investors agreed to invest in Oravel, they wanted a confirmation from my parents that I won’t be forced to go back to the college.” Agarwal’s father came to Delhi and reluctantly agreed.
After Agarwal arrived in Delhi, he stayed in small bed and breakfast accommodations for more than three months. “I saw that most hotel chains focus on assets with hundred rooms or more. But 95 per cent of the world’s assets are less than hundred rooms and no such hotel had a chain. There could have been two reasons: Either it does not work or nobody tried. I felt I must take it up even if the chances of success are limited,” says Agarwal.
At the age of 18, Agarwal made his first pitch to a hotel owner, Sunil Bawa, in Gurugram. “I felt like a guy with five years experience doing the pitch. But the owner on the other side probably didn’t feel the same. I had proposed that if we make money we will share, if there is loss, I will bear it. He said it does not look like you can pay for a loss.” However, Bawa complimented Agarwal for his sincerity and agreed.
Agarwal says the hospitality business needs to have a perfect equilibrium of location, quality and price. “This 20-room asset had a good location. We invested some capital to upgrade the hotel from my savings and the owner’s savings. I became the front office manager while being the trainer for more front office guys and other staff.” The hotel’s tariff was reduced from ~2,000 to ~999 and the occupancy surged from 20 per cent to over 85 per cent, compensating for the price drop. “A lot of people think the idea of pricing it at ~999 was taken from Ginger hotels. But that was not the case.” Agarwal had earlier sold Airtel’s sim cards that offered life-time validity for a price of ~999 and decided to use the same price point for the first OYO asset.
The next big development in Agarwal’s life came in the form of the Thiel Fellowship, which awards $100,000 to young dropouts, aged 22 years or less, to build new things. In 2013, Agarwal was the first Indian to get the fellowship. “I had multiple interviews during which I was getting calls from really successful people from all over. I got to interact with so many of them. Then one day I got a mail that I was one of the shortlisted 40 candidates who will be flown to the US. I felt that could be the first and the last chance for me to visit the US,” he says.
Agarwal got selected and spent a year in the Bay Area, while the one OYO property that time was run by his colleague Anuj Tejpal. It was during this stay that he turned vegetarian. He says he had two key learnings from that one year: First, thinking big is very important. Second, while innovation is absolutely fine, one should not shy away from just redesigning an industry's problems. He returned to India in 2014. Upon his return, Agarwal got an investment of ~400 million from Lightspeed Venture Partners and started expanding in Gurugram and then in other parts of the national capital region before going to other cities. The infusion of $100 million from Japan’s SoftBank in 2015, now OYO’s biggest shareholder and investor, was led by Nikesh Arora. “Before we finalised, we had the opportunity to meet Masayoshi Son in Tokyo. I still remember the discussion. His ability to understand our business at such depth even before our meeting blew me away. He explained to us the potential mistakes that we could make,” recalls Agarwal.
He credits OYO’s China entry to Masayoshi Son, whose fund accounts for a bulk of the $1 billion raised by the start-up in September. “SoftBank’s ability to support an entrepreneur think big is truly unique. For example, China is a potential that had always excited me. But there was never that confidence of going there. Son san said if I believed in it I must go and try. That gave me the confidence and today we have 180,000 keys in China,” says Agarwal as he finishes the payasam. In India, the start-up has more than 143,000 rooms. Besides India and China, OYO has a presence in five countries including the UAE and the UK.
Agarwal says he makes sure he visits his parents in Odisha every Diwali. “My mom convinces my father to send pocket money to me even now. She keeps on telling him that if I were in a university now he would have been paying for my education. So he must do it anyway.” Being at the front desk early in his career gave Agarwal key insights about customers; he still assumes the role of a receptionist when he has the time. “I go to an OYO and check in people at the reception for the whole day. It is a very holy experience for me. When the customer wants a quick check-in I scramble to do it fast.”