Oyo Business Model(Case Study) How Oyo Works & Earns?

2 Minute Summary

Oyo Rooms is the largest branded network of hotels. Currently, OYO rooms are operating with more than 450,000 listings in almost 5,000 cities across India, Malaysia, UAE, Nepal, China, and Indonesia. The man behind the great startup which is popular as OYO Rooms of Oyo rooms is Ritesh Agrawal. He was born in Bisham in Cuttack, Orissa in the year 1993 on 16th November. Oravel Stays Pvt.Ltd was Ritesh Agarwal’s first startup. Some Problem Faced by OYO were High Cash Burn, Standardization, Competition, Malpractices. It acquired Novascotia Boutique Homes on Sep 28, 2017, AblePlus Solutions Pvt. Ltd. On July 10, 2018, Weddingz on Aug 13, 2018, Innov8 Co-working on March 15, 2019, Qianyu Islands on March 26, 2019, Leisure Group  on May 1, 2019OYO has got 12 funding rounds until now.In which it has raised for about $ 1.7B. Full Detail in Blog.

DO YOU KNOW?

Out of total rooms booked via OYO rooms,
 
28 per cent of people book Oyo rooms after they get into a new city.

36 per cent of people are business travellers.

Another 36 per cent is made up of couples.

Oyo Rooms is the largest branded network of hotels.

Currently, OYO rooms are operating with more than 450,000 listings in almost 5,000 cities across India, Malaysia, UAE, Nepal, China, and Indonesia.

WHATS IN IT FOR YOU?

FOUNDER – OYO ROOMS

The man behind the great startup which is popular as OYO Rooms of Oyo rooms is Ritesh Agrawal.

Ritesh Agarwal was born and brought up an in a middle-class Marwari family.
He was born in Bisham in Cuttack, Orissa in the year 1993 on 16th November.

Ritesh started his entrepreneurial journey at the age of 17. He dropped out of his college, in the year 2012, in the same year he launched Oravel Stays Pvt.Ltd.

Oravel Stays Pvt.Ltd was Ritesh Agarwal’s first startup. He designed this company for customers to enjoy the platform for enabling listing and booking of budget accommodation.

Being a passionate traveller, he soon realized that the budget accommodation sector lacked many things.

Therefore, in 2013 he transformed Oravel to OYO Rooms with the key vision of offering affordable and standardized accommodations.

Undoubtedly, he achieved so much in such a short span of time.
He is a great inspiration for the people who believe success is earned only after one has years and years of experience.
Hence, his achievements are worth knowing.

Achievements of  Ritesh Agarwal
Ritesh Aggarwal, at the age of 24 was India’s biggest entrepreneur.
He has won many national as well as international awards.

I have mentioned a few awards that he has won :

• TiE-Lumis Entrepreneurial Excellence award in 2014
• Business World young entrepreneur award
• Forbes “30 under 30” in the consumer tech sector
• Top 50 entrepreneurs in 2013 by TATA First Dot powered by NEN awards

 

OYO BUSINESS MODEL (OLD)

Earlier, OYO used aggregator business model same as of  Uber and Ola

Oyo’s earlier strategy was to book some of the rooms of the hotel’s inventory.

Then, they used to apply uniform standards and develop user’s friendly environment in the hotels to maintain it as per the quality standards exclusively for Oyo customers.

OYO gets a heavy discount from the hotel owners as they book rooms in advance for the whole year.

Then they allow customers to book the rooms from an online platform under the name of OYO rooms.

The benefit to hotel owners was that they got bulk bookings in advance.

The benefit to customers was that they got high discounts.

Let me explain to you by an example:-

Suppose,

If the cost of 1 room/night = Rs. 3000
 
Oyo rooms get a discount on the bulk reservation, let’s say 50%
Cost to OYO rooms = 3000*50/100= Rs. 1500

Oyo resells it at Rs. 1800 to customer

Profit to customer= Rs. 1200

Profit to OYO is Rs. 200/room.

PROBLEM FACED BY OYO

There were many challenges faced by OYO rooms based on their hotel aggregator business model.

Let us discuss some of the major challenges faced –

• High  Cash burn rate
  
  Hotel Aggregator business model involves a very high cash burn rate.
  Advance booking of the hotel rooms for the whole year needs a lot of cash burn.
  
  Also, since the company is in their expansion mode they are offering heavy discounts in order to acquire the customers.
  
  
• Standardization
  
  One of the major issues was of standardization which was faced by OYO.
  
  Since the company was dealing with non-branded hotels, the level of professionalism was low.
  
  It soon became a challenge for OYO to delight their customers at every point of contact.
  
  
• Competition
  
  OYO is the market leader and it is true that leaders define the path.
  
  Oyo has opened paths for many other competitors.
• Malpractices
  
  The partners who are the hotel owners used to book their own hotel rooms when they used to see lower prices on the Oyo’s platform and this became malpractice benefiting the hotel owners.
  
  To stop this, and to expand the business, Oyo Rooms has started leasing of hotels and places where it has full control over the day-to-day operations of these hotels.

PRESENT DAY BUSINESS MODEL (NEW)

The company started off its operations by building its business model around the aggregator business model but things have changed since 2018.

The New business model of Oyo Rooms is Fully stack and Franchise Business.

It’s just the company doesn’t lease the hotel rooms anymore, but now it asks the hotel partners to operate them as a franchise.

The founders of OYO decided to shift its business model to a pure franchise business model.

They have partnered with hotels and made them work with them under their name.

The founder and CEO Ritesh Agarwal says – “Oyo now gets over 90% of revenue from hotels under franchise model”.

FINANCIAL FACTS AND FIGURES

    458,000 ROOMS GLOBALLY AND REALISED VALUE RUN RATE OF $1.8B    
WITH A Y-O-Y GROWTH OF 4.3X AS AT                                    
          DECEMBER 2018

Categories –  Hospitality, Hotel, Leisure, Reservations, Travel

Founded Date   –  May 21, 2013

Founders –  Ritesh Agarwal

Last Funding Type –  Series E

Number of Employees –  1001-5000

Legal Name – Oravel Stays Private Limited

Digital links

Website –            www.oyorooms.com
Facebook-          https://www.facebook.com/oyorooms     
LinkedIn –            https://www.linkedin.com/company/oyo-rooms
Twitter  –              https://twitter.com/oyorooms
Contact Email  –  bookings@oyorooms.com
Phone Number – +91-9313931393

Till now OYO has 6 acquisition.

It acquired –

• Novascotia Boutique Homes on Sep 28, 2017
• AblePlus Solutions Pvt. Ltd. On July 10, 2018
• Weddingz on Aug 13, 2018
• Innov8 Co-working on March 15, 2019
• Qianyu Islands on March 26, 2019
• Leisure Group  on May 1, 2019

FUNDING ROUND AND AMOUNT

OYO has got 12 funding rounds until now.
In which it has raised for about $ 1.7B.

They got their latest funding on Apr 1, 2019, from a Series E round.
Airbnb Invested for about $ 75 Million in OYO.

Website and its monthly traffic

OYO is ranked 9,303 among websites globally.

And it has more than 6,129,043 monthly web visitors.

MANAGEMENT AND THE CORE TEAM

CEO  – Ritesh Agarwal

CFO –  Abhishek Gupta

GROUP CHIEF TECHNOLOGY AND PRODUCT OFFICER – Anil Goel

CHIEF OPERATING OFFICER – Abhinav Sinha

CHIEF HUMAN RESOURCES OFFICER –  Dinesh Ramamurthi

CHIEF STRATEGY OFFICER – Maninder Gulati

PRESIDENT- CORPORATE AFFAIRS – Siddhartha Dasgupta

CBDO  –  Anuj Tejpal

The strategy adopted by Oyo

You might have thought about the strategies implemented by OYO that, made it so successful.

Let’s discuss the strategical approach of the brand OYO ROOMS.

To maintain its ranking and perform above all its competitors, OYO focuses mainly upon mass retention and acquisition.

It is using Digital Marketing section very aggressively for customer acquisition and lead generation.

Oyo knows the power of Social media. Hence, it is very strategically using all the platforms available for social media coverage.

They target mass potential customer based on their behaviour, interest and many other factors which are readily available via Digital Marketing.

Social media presence of OYO includes more than 2.7 lakh fans on Facebook, more than 8000 followers on twitter.

The company claims to have over 1.5 million app downloads with a very good number of active users.

The brand actively participates into several social media campaigns such as –

• #Aurkyachahiye videos on youtube.
• IPL final verbal combat by OYO
• Fathers Day celebration campaigns
• They also featured Bollywood celebs Manoj Bajpai and Raveena Tandon in a campaign named Jai Hind which was a massive success.

SWOT ANALYSIS

STRENGTH

First Mover Advantage

Standardization

Young and highly spirited leader


WEAKNESS

Customer Dissatisfaction

 Low Return on Investment

OPPORTUNITY

Focus on budget accommodation

Lucrative Opportunities in International Markets

THREATS

Competition

Growing Protectionism

SERVICES PROVIDED BY OYO

OYO with a new business model also came up with new verticals.

The services included in the Oyo Rooms business model are –

OYO FLAGSHIP

Now, Oyo Rooms has started leasing or franchising of hotels and places where they have full control over all the operations and day to day activities of these places.

Events & Other Long Stays

OYO has also started serving rooms and banquets for family functions like (weddings, parties, etc) as well as for the corporate which involves hotel rooms for their guests to stay for long.

Commercial Places

OYO is also stepping into the renting of commercial places.
Now the customers can also book office spaces via OYO.

Oyo Wizard

The Brand also has started some subscription plans for customers where the subscribers can get exclusive deals and discounts.

Oyo Townhouse

To stand out of the competition and retains  its value proposition in terms of standardized
hospitality and quality,

The Brand has recently launched the Oyo Townhouse.

Each OYO Townhouse is designed to complement its neighbourhood. OYO has undertaken complete operations of these Townhouse units along with interior and exterior re-engineering.

The concept of Oyo Townhouse is based on the needs of the millennial traveller.

The company is claiming that this townhouse network is its fastest-moving network and will include more than 400 Townhouse properties by the end of 2019.

FAQs

UPDATES

1. SoftBank Group Corp. is dispatching two executives to help Oyo Hotels, one of the largest startups in its portfolio, right its virus-stricken business in Japan, according to people familiar with the matter.
2. NoBroker ties-up with OYO LIFE, to scale up its co-living service.
3. Delhi HC directs Oyo to furnish an affidavit of unencumbered assets for Anam Datsec
4. OYO Indonesia in hot water after refund and payment complaints go viral.
5. Agarwal will work with Dr Apoorv Sharma, founder of VCats to promote entrepreneurship across the country’s tier 1, 2 and 3 cities and help India become ‘Atma nirbhar’ (self-reliant).
6. Indian hotel group OYO in talks with UAE, Saudi partners to review agreements.
7. OYO, FICCI develops online certification course for the hospitality industry.