Analysis of OYO Rooms as a Growth Venture.

1. Management of Growth Ventures
Arusarka Bose
Aviral Jain (Till Page 9 - Pre Midsem ; Page 10 onwards- Post Midsem)
Debjoy Saha
Febin Mathew
Tanay Raghavendra
Oyo Rooms
This case is an exciting story of rapid growth and innovation that began as an idea in the head of a
young boy belonging to a small village in Odisha. It started with Ritesh Agarwal being unhappy with
the level of hospitality he got across India. He made a deal to improve a small hotel in Gurugram. That
one hotel turned into more than 25,000 and Gurugram turned into cities like Vegas ,London, Mumbai,
Hongkong. Oyo became a global phenomenon. After this rapid expansion , Oyo experiences some
tough times which are now compounded by the pandemic. How did this Indian Unicorn grow and
expand so rapidly and what are the problems it faces?
Oyo Rooms’ Inception and Growth in the Early Years
On a mission to change people stay away from home, OYO Rooms has brought a disruptive innovation
in the hotel industry by bringing more than 4500 hotels under a brand name. Oravel Stays Private
Limited, doing business under the brand OYO Rooms is currently India’s largest network of hotels
offering fabulous hotel stay experience to people at an affordable price.
Realizing the dream
The founder and the current CEO Ritesh Agarwal has an adventurous story where he came up with the
idea of OYO. Born in Bissam Cuttack in Odisha state, Agarwal was brought up in a town called
Titilagarh. It’s a city where people make no more than ₹100 per day. He grew up poor and wasn’t good
at studies. This was his toughest period of his lifetime where he had no career. He travelled extensively
across India searching for a business idea and a job, where he stayed in more than 200 hotels. He
realized that there was no set of standard service and quality followed in most of the hotels which were
non-branded. Most of them had unhygienic rooms and washrooms, unpleasant and rude staff, and had
no comfort and security. These factors led to a situation where most of the hotels went empty and in
debt.
Ritesh Agarwal met the owners of these hotels and promised them to make their hotels better. He had
to change many aesthetics of these hotels, from light bulbs to beds. He posted beautiful pictures of
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2. these hotels and marketed them well. This small interaction that he had with these Hotel Owners gave
him the idea of creating Oyo Rooms. He envisioned a common aggregate business where every hotel
which wants to be part of the OYO network would be thoroughly audited and improved. Ritesh
decided to give this idea his all and see what comes of it.
Thiel Fellowship
The primary factor that fueled Ritesh Agarwal’s initial aspiration is the Thiel Fellowship. It is a
fellowship which was created by the billionaire Peter Thiel through the Thiel Foundation. The
fellowship is intended for students under the age 23. The fellowship provides them an amount of
$100,000 and other resources and guidance over two years. The selected student has to drop out from
the school or college and need to pursue some job, take initiative for a startup or work on a social
movement. The website of Thiel Fellowship itself says that “The Thiel Fellowship gives $100,000 to
young people who want to build new things instead of sitting in a classroom”. Ritesh Agarwal never
fancied himself as a person who wanted to sit in a classroom but rather someone with an urge to
realize his innovative vision. He put hard work into winning this fellowship, and was ultimately one of
the 10 winners of the 2013 Thiel Fellowship making him the only one from India. He was among the
top 1% of applicants for the fellowship who were flown to Silicon Valley for a three-week selection
process.
Initial Funding
After receiving the Thiel Fellowship in 2013, OYO was launched in Gurgaon, Haryana. In September,
the company was accepted in the first programme from VentureNursery, an investor-backed
accelerator, which included seed funding. With the new award, Agarwal planned to expand his work
with OYO to other metropolitan cities. In August of 2014, OYO received its first Series A funding. In
March, 2015, OYO received a whopping amount of $25 million from its investors namely Lightspeed
India, Sequoia and others.
Changing the Scene of Indian Hospitality
In 2015, OYO Rooms, then operated under the brand name Oravel Stays Pvt Ltd, raised $100 M
through investments by Sequoia Capital, Lightspeed Venture Partners, Softbank Capital, and
Greenoaks Capital. OYO, by then, had grown from 30 to 200 hotels and had managed to expand their
presence from a single city to 10 cities, with further plans of having 1000 hotels in 25 cities by 2015
end. Oyo started to brand itself as a company which understands the youth, their requirements and
expectations. This was done because they thought this was the largest untapped market in hospitality
where they would face the least competition from established giants like the Marriott. Ritesh
envisioned the company later expanding to all age demographics. Oyo labelled themselves as a
“tech-enabled start-up” in the hospitality sector, and they surely didn’t disappoint in the innovations
factor and rolled out some groundbreaking innovations in its path to becoming one of the
best-performing hotel chains in the country and abroad.
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3. The OYO App
The Oyo App was launched in April 2015 on the Google Play Store, and quickly became the gold
standard for not just the hospitality sector, but for mobile apps in general. More and more users started
flocking to this app because of its easy-to-use and powerful hotel browsing experience which had an
extensive inventory comprising all available hotels. For the newer generations where a fast-paced
lifestyle is the new norm it was not always possible to do all trip preparations in advance. OYO
understood this and capitalised on it. In addition to last minute bookings, the app allowed users to
make a booking in just 3 taps including the tap to open the app thus cutting down on the booking steps
and time over other hotel booking apps. Something as tedious as booking cancellation only took 1 tap.
This level of streamlining in addition to the fact that payment needed to be done post booking meant
that this app became a quick substitute for the go to agents who booked hotels normally. Relying on its
tech background, Oyo Rooms also started using machine learning algorithms and dynamic homepages
to attract more and more people to their app. Even if they were not looking to go on a trip in the near
future, the goal was to get the app on everyone's phone, so that they use Oyo in the future. Oyo Rooms
started seeing more and more customers as a result of the convenience its app provided to its people.
Which led to a massive expansion in India, with thousands of rooms being added to the Oyo franchise.
Oyo complemented the app with certain other branding and flagship initiatives.
OYO Relationships - Rooms for unmarried couples
In a country like India, where intimacy before marriage is a taboo, OYO rolled out exclusive deals and
hotels especially for unmarried couples. This was a bold move and set the priorities straight from OYO
about their principal customer market. All promotions for this offer was done on social media apps like
Instagram so that OYO has minimal damage and is able to retain their older, more conservative
customers. Though not without its hurdles, this idea was a breakthrough and went on to become much
popular with a niche segment of OYO’s customers.
OYO-We (Women’s Exclusive)
With rising concerns among women, regarding their safety while travelling, OYO recognised the need
for female-centric ambience in the hospitality segment way before its peers. OYO launched OYO-We
to cater to female travellers. Be it for leisure or profession, it catered to women who were travelling
alone and provided them with the best-in-class services.
Extensive plans for each customer’s need:
OYO started a number of tailor-made plans made for satisfying each customer’s demands. Some of the
most popular were OYO townhouse, OYO Life, Collection O, OYO palette, each with different
purpose and separate customer-base. This was done so that OYO can cater to all its customers
irrespective of their needs, preferences and demands.
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4. Capturing growing internet users through social media campaigns
After building flagship niche segments to target certain groups of customers, Oyo started expanding its
presence on the social media sphere by having witty day-to-day campaigns on societal events. The goal
of this move was to in the most crude sense, “become viral” and increase the reach of their company.
Sometimes, the active nature of the company also backfired on the them, for instance the heavily
publicised #oYoMama trend where the company was heavily trolled. Largely, however, Oyo has been
able to garner more and more reach on domains like facebook, twitter and instagram. All of these
moves meant that Oyo Rooms established itself in India as a big player in the hospitality industry and
was looking ripe to expand internationally.
Raising more Capital and Expanding to Foreign Markets
OYO Rooms had shared a report in May, 2016 that claimed that the company had reached unit-level
profitability, meaning, on an average, OYO made a profit on every room sold. The average booking
rates of the rooms ranged from Rs 1,400 to 1,800. Ritesh Agarwal, Founder and CEO of OYO,
furnished a press statement saying that their team had delivered a 15x year on year growth, with 2.3
million booked room-night transactions in the first quarter of 2016. Banking on these numbers, Oyo
Rooms went into their fourth round of funding.
Series D funding and Townhouse
OYO raised $250 million (INR 1600 crore) in Series D financing round led by SoftBank through
SoftBank Vision Fund with participation from existing investors Sequoia India, Lightspeed Venture
Partners and Greenoaks Capital. Hero Enterprise also joined the round as a new investor. The
investment was to help OYO accelerate network coverage to consolidate brand leadership in economy
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5. (OYO Rooms) and mid-market (Townhouse) segments. The deal made OYO a key company in
SoftBank’s portfolio—which included the likes of Paytm, Flipkart, Hike, Grofers and InMobi—and the
second Indian company to receive an investment from SoftBank’s $100 billion Vision Fund. The
launch of its Townhouse brand in January 2017 had played a key part in improving Oyo’s image with
customers. Townhouse properties were owned by Oyo and fully managed by the company’s
staff—they worked like any other branded budget hotel. Townhouse had helped Oyo improve customer
service and address the problems of fake bookings and high cancellation rates that it faced under the
marketplace model.In less than four years, OYO had become India’s largest hospitality company in
terms of network presence and inventory. Travellers and city-dwellers alike had comprehensively
embraced OYO’s offering of hassle-free and affordable stay accommodation, available anytime
anywhere, at the touch of a button.
Oyo Rooms becomes a Unicorn
On Sept. 25 2018, OYO Rooms announced that it had secured $1 billion (Rs7,200 crore) in fresh
funding. The capital infusion was led by existing investors SoftBank Vision Fund, Sequoia Capital,
and Lightspeed Venture Partners. The three had pumped in $800 million with a promise to invest $200
million more.The funding made OYO India’s latest unicorn—private startups valued at over $1
billion—and the second-most valuable after One97 Communications, digital payments app Paytm’s
parent company that in August sold a $356 million stake to Warren Buffett’s Berkshire Hathaway. In a
public statement, OYO claimed to operate 8,500 hotels and over 125,000 rooms in more than 230
cities in India and planned to utilise the latest funding in its overseas expansion plan. Around 60
percent of it was to be put into China, where OYO had launched its operation the previous year. OYO
also claimed to have set up a base of over 50,000 rooms in China in a span of three months.
Expansion into key Asian Markets
China offered a tremendous opportunity both in terms of the market size and travelers. It was also a
fragmented market and there were sufficient opportunities for OYO to cater to the needs of the
mid-income traveler looking for quality-assured accommodation at an affordable price point. With
properties spread across 285 Chinese cities, including Hangzhou, Xian, Nanjing, Guangzhou,
Chengdu, Shenzhen, Xiamen, and Kunming, Oyo deepened its presence in the world's second-largest
economy and was set to add 35,000 rooms a month.Oyo was also a 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 they planned to expand across 35
cities, including Yogyakarta, Bandung and Bali.By late 2018, OYO had entered Sri Lanka as part of its
expansion plan in the South Asian market, and had presence in seven countries including India, China,
Indonesia, Malaysia, Nepal, the UK and UAE. The move came barely a few weeks after the
announcement of appointment of Aditya Ghosh, former IndiGo President, as OYO's chief executive
officer for India and South Asia. In 2019, entry was officially made into Thailand, with the opening of
8,000 rooms in 250 hotels across 13 cities, including Bangkok, Pattaya, Phuket and Hua Hin.
South-east Asia, and in particular Malaysia, was Oyo’s first foray outside of India, and by 2019, Oyo
was present in 160-plus cities over 2,500 franchised and leased hotels across Malaysia, Indonesia, the
Philippines and Vietnam. That number further rose with the addition of Oyo Thailand.In 2019, Oyo
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6. appointed Mandar Vaidya as the CEO for South-east Asia and the Middle East, two high potential
markets where the India-based company was set to focus on as part of its expansion strategy.
With over 15 years of experience, Vaidya was responsible for driving business growth for Oyo in these
two regions, which included key markets like Indonesia, Malaysia, the Philippines, Vietnam, the UAE
and Saudi Arabia. In South-east Asia, the company had already committed over $200 million in
investment to fuel its aggressive expansion plans in the region over the next couple of years.
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7. Expansion into the USA and Problems on Home Turf
With rapid expansion in Asia, Oyo Rooms was looking to quickly achieve its goal of becoming the
largest hotel chain in the World. The company’s valuation was peaking at upwards of $10 billion. Oyo
Rooms had expanded to around 18,000 locations in India and 10,000 locations in China. Things were
looking bright for this Indian unicorn. The Indian market saw a 3 times growth while the global market
for Oyo saw a rapid 4.5 times growth.
The Oyo Business Landscape
The company attributed this growth to three things, firstly it was the addition of new units. The new
hotels drove the additional revenue of this hospitality venture, but additionally this was accompanied
with an increased same store revenue. Especially in its largest market, India, Oyo Rooms saw a large
number of repeat customers or word of mouth customers. Lastly, Oyo was also able to capitalise on its
assets, with things like weddings. Oyo Rooms hosted an extraordinary 50,000 weddings in 2019 alone.
Even though the Oyo enterprise was growing, it was still running in losses. They reported a massive
$335 million in losses in 2019. However, both the companies and investors alike were not worried by
these numbers. It was widely believed that Oyo was on the correct path and it would be a matter of
time, when the company became profitable. This was because Oyo as a business model has 3 phases,
The first phase is more about growth and presence. This involves a lot of first time investments in
striking deals with hotels and local authorities. A heavy investment is also made in branding Oyo in
that market. Oyo in this phase tries to bring assets together and partner with initial properties. So,
understandably this phase sees a lot of investment with no immediate return, resulting in reported
losses. However, in the second phase, Oyo Rooms try to get enough density of consumers to charge a
reasonable gross margin. From this phase onwards, the sole aim is to turn the investment made in
phase one into profit. After achieving a good gross margin, the third phase is to grow quickly to
achieve operating efficiencies and hence improve their earnings. Seeing markets like India who were in
their third phase cutting losses quickly, it was assumed to be a matter of time before which Oyo Rooms
became profitable. Keeping all of these aspects in mind, CEO Ritesh Agarwal realised that this was the
best moment for Oyo Rooms to expand into the USA.
Expansion into the USA
In June of 2019, Oyo Rooms announced its plan to invest a whopping $300 million to aggregate hotels
across America under its brand image. This investment, was partnered in parallel with heavy
advertisement across social media domains all branded under #LivingTheGoodLife. The goal was to
push the narrative of weekend breaks as an outlet away from stress. The company realised that a
heavily corporate society like the ones present in most American cities needed a different angle of
marketing to increase reach. The mantras of safety and security that Oyo had adopted in India
remained an undertone in the USA but not the primary driver of the Oyo brand because this was not an
exclusive benefit that the company provided in that competitive landscape. Soon after the initial
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8. investment, Oyo Rooms reported that they were growing at the pace of one hotel a day and that they
had expanded to over 21 states across more than 100 hotels. In parallel, they established flagship
forays into cities like Las Vegas with the introduction of Oyo Hotel and Casino. The average
occupancy of Oyo Rooms was around 87% in this 6 month period, which was much more than the
Pre-Oyo period.The company sentiment on the expansion into USA was echoed by the CEO in a
global press release saying :
“OYO will continue to drive growth across the U.S. while delivering quality customer service. We are
excited with our rapid growth and early success in the U.S., our newest home-market. While we continue to
transform buildings across the country, we want to stay true to our philosophy that everyone, every day
should be #LivingTheGoodLife. We do this by offering good quality ‘value-chic’accommodations, with
great ratings at unique price points.”
Losing Faith in Customer Base
To expand more rapidly Oyo rooms were also trying to make strategic connections with American
lawmakers by offering free rooms to certain leaders in the congress. This led to their controversies and
rumors spreading about Oyo and the quality of their rooms in the USA. The promising expansion to
the USA started to teether after these controversies, with Oyo’s revenue per room dipping. Back home,
in the Asian markets as well, more and more hotels were coming forward and complaining about the
lack of timely payments from Oyo. More and more customers were taking to social media to criticise
the quality of rooms being provided. The public fury against Oyo Rooms hit a peak after a woman was
raped in one of their rooms, just a couple of days after a man had been kidnapped there. This raised
questions against one of the major selling points of Oyo as a company that provides safe,secure and
cheap rooms.
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9. Fighting the Pandemic
This bad publicity both within the public and hotel owners was compounded with the advent of the
Pandemic. The spreading of the virus Covid-19 saw the world going into quarantine. Tourism and
Hospitality as an industry took a big hit. Because of a lack of demand for their rooms, Oyo Rooms had
to drastically cut costs. They had to fire more than 20 % of their workforce to reduce expenses and
send several more on furloughs. The company CEO, Ritesh Agarwal released a public video asking for
unity from the workforce and promising that there are no more people who are going to be fired. Oyo
Rooms had to stop its expansions into Latin America and slow down expansions into other parts of the
world. Oyo Rooms valuation had reduced by over 50 % to around $3 billion. Oyo Rooms continues to
be one of the biggest unicorns to come from India and a major player in the hospitality industry. It will
be interesting to see how they handle the setback of the pandemic and hopefully to come back stronger.
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10. Post Mid-Sem Case Evaluation
So far we have talked in detail about the inception story of Oyo Rooms. We have discussed the idea
behind it , how it came into fruition and what is the present day situation. Now, we shift our case to the
strategic aspect of Oyo Rooms. We will first use several metrics to scan and identify various aspects of
Oyo Rooms and how it compares in the hospitality industry. Finally, we use this analysis to predict
what the future holds for Oyo Rooms.
Financial Status
After its Series F funding round, OYO had last raised funding of $2 billion in October 2019, when
Agarwal had pumped in money into his own startup raising his own stake to over 30%. During the
COVID-19 pandemic, Agarwal had said that the company continues to have $1 billion in the bank to
continue operations.
However, the valuation of the startup had also crashed from $10 billion to $8 billion in 2019-2020.
According to a Hurun report released in August 2020, the fall in valuation has been marked in line
with the AirBnB valuation markdown to factor the COVID-19 impact on the hospitality business.
In January 2021, OYO raised INR 54 Cr from Hindustan Media Ventures Ltd, as part of the company’s
Series F1 funding round raising its valuation to the $9 Bn mark as a result. However, in another cost
restructuring exercise, in March 2021, OYO offloaded 150 employees from its ancillary unit finance
shared services to research and consultancy firm KPMG.
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11. All through last year, OYO either laid off or furloughed several of its employees to tide through the
tough period. In September last year, OYO increased the furlough period for its employees by another
six months, till February 2021. The company also provided a Voluntary Separation Program (VSP),
through which employees would be provided with financial assistance, relaxation on ESOP vesting,
health insurance coverage, career transition support amongst other things.
OYO lead investor Softbank Vision Fund CEO Rajeev Misra said last year that the company had
reduced its monthly burn by 70% from $100 Mn pre-Covid to $30 Mn per month. He had said that the
company was clocking nearly $25-30 Mn per month in revenue and had achieved break-even.
Earlier this year, OYO had claimed that it had $1 Bn in cash and cash-equivalent to navigate the
post-pandemic market.
Scenario Planning for Oyo Rooms
Among the many tools that are used for strategic planning, scenario planning helps us capture a whole
wide range of possibilities. The motivation behind us doing this for Oyo Rooms and the hospitality
industry is to help us establish a foundation for the risk assessment that we finally want to do for Oyo
Rooms. Here we will do the scenario planning for the company for a period of the next 10 years . First,
we will focus on some trends in the hospitality industry and then develop some uncertainties that Oyo
Rooms faces. Finally, we will combine the two to give full fledged scenarios.
Trends in the Hospitality Industry
1. Global tourism continues to grow rapidly in Asia and Asia Pacific travel, with these travellers
bringing their own set of ideals
2. Tourists are preferring to stay in their hotels more than they did previously. Valuing the luxuries
hotels provide and paying extra for conveniences like Smart Rooms.
3. The influence of social media on travellers making bookings continues to increase.
4. Transport continues to get cheaper making travelling more accessible.
5. Governments continue to increase safety and security regulations for hotels in prime tourist
spots.
6. More and more travellers are placing emphasis on safety, hygiene and environmental efficiency
of the hotels they stay in.
7. Technological advancements for payment, distribution, services is becoming a key
differentiator in performance of hotels.
8. Travellers are being drawn into hotels that can provide virtual/augmented reality tours before
they have made their bookings.
9. More and more hotels are trying to keep most of their rooms independent for their self
customisation. Brand differentiation has become a key competitive strategy.
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12. Uncertainties faced by Oyo Rooms
1. Will hotels start moving away from aggregate systems like Oyo with the advent of AI and IoT?
2. Will government regulations on safety and hygiene increase Oyo’s operating costs?
3. Will more and more people start moving away from Oyo’s economical room options for travel?
4. Will the rise of social media make Oyo rooms more susceptible to bad PR?
5. Will the evolution towards a global borderless civilisation continue?
6. Will Oyo be able to increase its margins without losing demand?
7. Will Oyo be able to differentiate its brand in a post covid world?
Correlation Matrix
1 2 3 4 5 6 7
1 + 0 + + ? - 0
2 X + 0 - 0 - 0
3 X X + + 0 + -
4 X X X + 0 - ?
5 X X X X + ? 0
6 X X X X X + +
7 X X X X X X +
+ = Positive Correlation
- = Negative Correlation
0 = No Correlation
? = Indeterminate
Final Scenarios
Travellers want luxuries
As the world gets more and more globalised, traditional travel destinations are losing their sheen.
Travellers who look at their vacation as a source away from the stress of work and education do not
like to stand in lines for hours to see something they have seen so many times online. This is especially
compounded in travellers who do not yet have a family and are just going on a trip to have fun with
their friends. More and more travellers are thus saving up for their vacations to spend on high luxury
hotel chains and resorts. In this scenario, we look at a world where the economical room options and
travel budget become less and less important for travellers. Travellers would want to prioritise the
value of their money instead of the money itself. Thus, mega hotel chains would benefit by providing
more and more luxuries to their travellers at a cheaper cost. Hotel chains that have higher brand value
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13. might also see increased activity. Social media posts showcasing luxuries of hotels would also create a
chain in which would incentivise other people to take these luxuries in the future.
Hotels’ get diverse options
Even smaller businesses in the hospitality industry have started incorporating technology in their
operations. More and more hotel websites have a three step book option now, and have recommended
system based advertising. In this scenario, we look at a world where less and less hotel organisations
and businesses want to opt into Oyo’s business models where Oyo gets control of a certain set of
rooms. This is especially compounded by the payment issues hotel owners have had with Oyo in the
past. More and more individual websites for bookings start coming up with owners having
independence to create their own unique rooms without giving a part to Oyo Rooms. Hotels apart from
easier payment and booking options start introducing technological advancements like virtual reality
and augmented reality to give their consumers newer experiences. More and more platforms like make
my trip rise where hotels can just place their options with robotic travel agents introduced.
Regulations become tighter and tighter
Government bodies have started reflecting more and more on the security and environmental opinions
of their voters. Countries worldwide have been making stricter regulations on how hotels in their
countries work both from a sustainability, security and hygiene point of view. In this scenario, we look
at a world where hotels have to focus more on keeping the top notch hygiene with regular inspections.
Operating costs of hotels start to increase as expectations from consumers start increasing. More and
more hotels differentiate their brand on the basis of sustainability and hygiene.
Impact of Social Media Increases
As digitisation of the society keeps increasing, more and more consumers look for recommendations
on social media like twitter. In this scenario, we look at a world where more and more people look for
recommendations online. Hotel chains have to keep active PR campaigns on these platforms to make
sure they are in the know how of travellers.
Risk Assessment of Oyo Rooms
Litigation and Regulations Costs
This is a big risk for Oyo as a lot of crimes have been committed in Oyo provided rooms. The victims
of these crimes often have a good case against Oyo as it was its lax security that allowed the crime to
go on. In India, as many as 6 individuals have gotten settlements from Oyo for this very reason.
Additionally as Oyo expands, all the governments in those locations might increase regulations for
safety ultimately leading to an increase in operational costs for Oyo. This is already seen in countries
like the USA and UK where these normalised costs are higher than India and China.
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14. Sustainability of Rooms
In achieving economically cheap rooms, a lot of Oyo hotels fail to achieve the recycling and energy
saving standards that other hotel rooms do. More and more consumers find environmental
sustainability an important metric to judge a business’s performance. If Oyo continues down the path
of non eco friendly rooms then it might see widespread social media backlash against its operations
and subsequent boycotting of the firm.
Scarcity of Luxury options
As previously stated, more and more consumers want a value for the money they spend on the hotels.
Free meals, smart rooms, spas, resorts, local experiences are all items that the consumers have started
to spend money on. A lot of rooms that Oyo Rooms provide are cheap but provide fewer of these
options. Oyo needs to increase how many luxury options they can provide at these rates otherwise they
might lose consumers to other chains that are slightly more expensive but provide these features.
Constant scrutiny on Social Media
Oyo Rooms has a consumer feedback twitter account which it publicises as a to-go consumer service
option. The goal of this is to send the message that Oyo rooms are always there for its consumers;
however this has opened the company to bad consumer feedback online. More and more consumers
use this twitter account to complain about Oyo rooms. The issue with this feedback happening on a
public platform is that this incentivises more and more people to not choose from Oyo because they
continuously see bad trends in regards to Oyo rooms. Oyo needs to build and consolidate its social
media message drastically otherwise it runs the risk of losing consumers based on bad PR.
Hotel Chains moving away from partnerships
A lot of hotel owners, amongst several other complaints,have complained about delayed payments
from Oyo rooms. As the global technology drive keeps going on, more and more hotels have access to
tools like AI, IoT and basic frontend software and web management. The risk this poses to Oyo is that
more and more hotels have their own internet presence, with features like 3 - step payments and
recommender systems. There is nothing exclusive that Oyo rooms can provide to hotel chains. Given
the previous history of irregular payments, more and more hotels might back out of deals with Oyo or
be apprehensive to sign one at the very least.
Competitive Landscape:
OYO Rooms's top competitors include FabHotels, Treebo, Booking.com, MakeMyTrip and ClearTrip.
While Oyo rooms has gained a good amount of market share, it’s not an easy road to become the
market leader. This is essentially because any technological disruptions or new strategies in the
hospitality industry are quickly replicated by competitors. Often the difference in operational costs
even in the most optimised state is marginal. This means that a large part of your growth is
proportional to first mover’s advantage and reputation (positioning). During the pandemic, Oyo has
been slightly better off than its competitors in terms of losses faced, however that has not meant that
Oyo is not invulnerable to a shift in market dynamics. Being one of the larger players in this
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15. competitive landscape has also meant that Oyo has faced significantly more scrutiny than other
companies in uncertain times such as the pandemic. This has largely impacted the reputation of Oyo
rooms in countries such as India and China.
Direct Competitors
OYO Rooms' direct competitors include Fabhotels, Treebo, Booking.com, MakeMyTrip and ClearTrip,
all in hospitality industry providing room services, house stay, apartments, villa and much more
accommodations to traveler at very reasonable prices and providing the best services like Oyo Rooms.
All of these companies own a significant portion of market shares in certain demographics. But,
overall their global growth fades in comparison to Oyo. Certain other big players like AirBnB have
invested in Oyo Rooms (200 million USD) hence reducing the competitive rivalry. Booking Holdings
remains one of Oyo’s biggest rivals with key demographic hold in North America and European
markets. It is a platform for travelers that want to book and plan travel, trips, flights, accommodations,
and more, and hospitality and travel companies that want to acquire new customers.
Indirect Competitors
Indirect competitors are mostly in the travel and tourism industry such as Goibibo, which is one of the
leading companies providing quick search, fast payments, settlement and booking air ticket, railway
ticket and hotel booking services. The primary reason for their survival is the large amounts of
discounts and clubbing rewards which the customers receive on booking from them. Likewise, there
are lots of big names such as Makemytrip, Yatra and much more that not only provide hotel booking
but also the flight booking facility and thus proving to be a comprehensive package for the customers.
15

16. Porter 5 Forces Analysis
● Competitive rivalry: Moderate as sustainable growth is a challenge and keeping up the
competitive advantage is difficult.
Competitors – Fabhotels, Treebo, Booking.com
○ Number of competitors are moderate
○ Diversity of competitors is normal
○ Quality differences is high
○ Product differentiation is moderate
○ Switching costs is low
○ Barriers to exit are moderate
● Threats of new entrants: The industry exhibits high entry barriers to new entrants,
particularly because of the combined factors of economies of scale and high capital cost of
entry, together with the limited supply of suitable locations.
● Threats of substitute: High because there are a large number of close substitutes.
○ Buyer’s propensity to substitute is high
○ Relative price performance of substitutes is moderate
○ Perceived level of product differentiation is moderate
○ Switching costs are low
● Bargaining power of suppliers: High because individual house/PG owners have several
options to collaborate.
○ Number of suppliers are high
○ Uniqueness of supplier’s services (differentiation) is low
○ Switching cost for supplier’s services is high.
● Bargaining power of customers: High because of more substitutes
○ Buyer volume (number of customers) is high
○ Buyer’s ability to substitute is high
○ Buyer’s switching costs is low
PESTELAnalysis
A PESTEL analysis is a framework or tool used by marketers to analyse and monitor the
macro-environmental factors that have an impact on an organisation. The result of which is used to
identify threats and weaknesses which are used in a SWOT Analysis.
Political Factors
High political stability provides a stable and friendly business environment with predictable market
growth trends. However, when there is political chaos, it deters the investors and harms the
stakeholders' trust in economic and consequent organizational performance. Currently, OYO Rooms is
present in different countries, each having their own political tensions. Growing tensions and
16

17. instabilities in the global political environment can affect the hospitality industry growth and limit the
growth opportunities available to OYO Rooms.
Travel bans can kill the hotel and tourism industry
The government has a stronghold over the hotel industry. For instance, if the political party in power
sets a travel ban, it could hurt the tourism and hotel industry immediately. All it takes is one decision
and a country loses the vast majority of its economy. Due to the COVID- 19 pandemic, the
governments all over the world were forced to go for a lockdown and had to restrict travelling across
countries. This had a devastating impact on the entire hospitality and tourism sector.
Tax Reforms
Tax reforms on the hotel industry can vary across governments. When the government is controlled by
a far-left political party, then usually it may impose higher taxes on the rich and powerful hotels or may
restrict foreign hotel industries from entering their nation. On the other hand, a right wing government
is far more liberal in terms of trade and business. So it will be easier for OYO Rooms to pave their way
to such nations and can improve their business due to lower taxes.
Economic Factors
Economic factors have a significant impact on how an organisation does business and also how
profitable they are. Factors include – economic growth, interest rates, exchange rates, inflation,
disposable income of consumers and businesses and so on.
These factors can be further broken down into macro-economical and micro-economical factors.
Macro-economical factors deal with the management of demand in any given economy. Governments
use interest rate control, taxation policy and government expenditure as their main mechanisms for
controlling the economy.
The strength of currency can bolster the hotel industry
The strength and weakness of currency can affect the attractiveness of a vacation spot. For example, if
international currencies are stronger than the American dollar, people outside of the United States will
want to visit. Since OYO Rooms has significant expansion in the US, the strength and weakness of the
US Dollar may have a significant impact on their business.
Economic Cycling
While all businesses are affected by economic changes, the hotel industry is one of the most
susceptible to its influence. It goes through economic cycles first and comes out first. Whether it comes
out successfully depends on a few primary factors, including unemployment rates, job growth, and
travel spent. The COVID-19 pandemic had a serious impact on the global economy which had led to
unemployment, price rise etc which all adversely affected OYO Rooms.
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18. Social Factors
Social Factors which are also known as socio-cultural factors, are the areas that involve the shared
belief and attitudes of the population. These factors include – population growth, age distribution,
health consciousness, career attitudes and so on. These factors are of particular interest as they have a
direct effect on how marketers understand customers and what drives them.
Demographic Trend
Changes in demographic patterns like aging population, migration trends and socio-economic variables
have paramount importance for international business organizations like OYO Rooms. India is a
country where the population growth is so rapid, especially the youth. This will lead to more travel,
tourism and in fact is a fertilizer for the hotel industry. OYO For Couples has also led the youth
population to be attracted towards OYO.
Attitude towards Health & Safety
Safety is one of the crucial issues faced by OYO Rooms. To attract the youth, especially the women,
hospitality industries have to assure them of minimum safety conditions so that they won't be harassed
or humiliated by some miscreants. Also the attitude of people towards their health will also make them
choose the hotels which provide them the best facilities for food, water etc.
Technological Factors
The technology used must be beyond standards especially when it comes to hotel management. They
are considered more safe and secure. Technology helps to reduce work effort and enhance results. It
would be a boon to humanity which will help to show progress of property and advances in the hotel
industry.
Book through App
The number of mobile phone users increased by 42% from 2010 to 2020. Improvement in technology
has also helped in increasing digital payments which is one of the major benefits OYO has due to their
online booking system. OYO Rooms introduced mobile applications in Android and IOS platforms for
booking of the budget hotels in the area of the customer’s search. In addition to it they provided the
hotel owners to link up with them in order to increase the customers.
Fast sharing news thanks to the internet
Because of social media, the news is available and updated 24/7. Any incidents close to the hotel can
be reported within minutes, shared online by thousands, and have articles written up by media outlets
in seconds. It’s so quick that hotel owners can’t do much to stop it.
Reviews on blogs and social media can make or break a hotel’s reputation
Anyone can write a review and post it on a blog or share it on social media. People who stay at hotels
will take photos and write up an honest post about their experience. This is a good and bad thing for
the hotel industry. Hotel owners who are confident that their hotels are worthy will pay social media
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19. influencers to write about it. Hopefully, this will grab attention and the hotel chain will gain new
customers. However, it only takes one scathing review to destroy a reputation.
Traveling websites force hotels to remain competitive
Travel websites have made it easier for people to select the best hotels. On these sites, they can read
reviews and past commentary of previous customers. If OYO Rooms or any other hotel industry didn’t
suffice their needs, then they are going to receive a negative review. So, this will make the hotel
industry competitive.
Environmental Factors
Environmental and weather changes have a direct impact on the hotel industry. In serious or severe
weather conditions, taxes are applied to avail more friendly and environment related products. The
hotel industry does not create or demand any factors that affect their credibility.
Local Climate
Hotel guests stay in hotels for a variety of reasons, such as when visiting family, friends, on business,
or vacationing. When vacationing, customers want to stay somewhere cool and relaxing. The weather
in the local area is the deciding factor for whether someone chooses to stay at a certain hotel. This isn’t
something hotel owners can control, but they must understand the seasonal differences before pricing
their rooms — and adjust accordingly.
Natural Calamities
Most of the environmental factors which affect hotel business are flood, storm or heavy rains. These
factors play a vital role, especially in the monsoon season. Hotel industries have to take proper
measures to tackle these situations. This will help them to minimize troubles and loss.
Legal Factors
Legal factors include - health and safety, equal opportunities, advertising standards, consumer rights
and laws, product labelling and product safety. It is clear that companies need to know what is and
what is not legal in order to trade successfully. If an organisation trades globally this becomes a very
tricky area to get right as each country has its own set of rules and regulations.
Crime rates ruin hotel profit
Everyone wants to stay somewhere safe. If a hotel is near an area with high crime rates, it’ll struggle to
survive. Choosing a spot with low crime is crucial for all hotel owners, otherwise, customers won’t
stay at their locations.
Innkeeper laws
Hotel owners follow innkeeper laws, which ensure the welfare and safety of guests and their
properties. In some locations, the innkeeper law must be posted inside the door of every guest room of
the hotel. In most cases, the innkeeper law will state how much compensation the innkeeper will pay
guests if their property is stolen or damaged.
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20. Truth-in-menu laws
Any hotel with food or beverage establishments within must follow truth-in-menu laws, which means
the food establishment must be truthful about the food and beverages served to guests. The
establishment needs to be honest about the calories in the good and nutritional ingredients of the
dishes.
SWOT Analysis
Strength:
● Wide range of hotel selection: Hotel categories available suitable for every user's needs.
● Technology-enabled: OYO App offers a great hotel browsing experience, and easy booking and
cancellation.
● Innovative Offers and Deals: OYO has been known to roll-out industry changing deals on
hotels, catering to the needs of Women(OYO-We), couples(OYO Relationships) and more.
● Social Media Presence: Time and again, OYO has used social media to its advantage through
innovative relatable advertisements and influencer marketing.
● Young and highly spirited leader:The founder of Oyo is a youngster who has won a lot of
accolades and besides entrepreneurship caters to a wide range of interests. This is reflective of
every strategy undertaken by Oyo gives a freshness to the approach taken which is a strong
reason for its success.
Weakness:
● High Cash Burn Rate: Hotel Aggregator business model involves high cash burn in advance
booking process / discounts etc. Oyo is doing rapid expansion which involves high cash burn.
So, drop in hotel bookings can be fatal.
● Poor service quality: although oyo has tried to standardize the basic amenities for the
rooms,based on the price they charge. But not in case of the services provided which in turn has
made the quality and reliability of services questionable.
● Tight margins: the hotels that are on the tie up with oyo also have other agents which are not in
the hands of oyo to control. The model depends on how well the margins they provide for their
hotels which can be risky in the long run
● Decreasing Faith among customers and hotel owners:
● Complaints about Lack of Timely Payments to hotels
● This leads to decrement in maintenance quality and consequently customer dissatisfaction.
● Security Concerns in OYO - Women molester, Kidnapping in hotel rooms
Opportunities
● Growing demand for aggregators: As the world reels from the repeated recessionary trends, job
losses and pay cuts, most of the high end hotels are facing difficulties to balance supply and
demand which in turn increases the scope for Oyo. As most of the hotels would prefer to take
external support in order to source new business.
20

21. ● Focus on budget accommodation: in the earlier days the trend was more biased towards luxury
and high end hotels but the case is no more as such. People are trying to lower the spending and
focus on saving so the budget hotels can provide decent lodging facilities which are in high
demand.
● A surge in the number of business travelers in emerging economies: The number of people who
travel for business purposes from both genders has grown immensely in recent times. This has
resulted in an increase in the demand for budget stays.
● Great availability of premium investors, including softbank, Sequoia capital and Lightspeed
Venture partners.
Threats:
● Pandemic Issue: Shortage in the number of customers during a pandemic has made OYO incur
heavy losses and they had to lay-off workers in multiple hotels.
● Malpractices by partner hotel owners: 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.
● Standardization: Since the company was dealing with non-branded hotels, the level of
professionalism was low.
● Competition ; As mentioned previously, Oyo Rooms faces intense competition from
organisations like Booking.com, FabHotels, Treebo, Booking.com, MakeMyTrip and
ClearTrip.
SWOT MATRIX
Strengths Weakness
Opportunities S-O Strategies
● Roll out pandemic
supportive innovations that
cater to the changed
scenario.
● Through key offers and
deals, incentivize OYO
travel plans.
W-O Strategies
● Enforce regulatory
protocols to maintain
consumer satisfaction.
● Reward good performance
of hotels to boost morale.
Threats S-T Strategies
● Make smart expansion and
globalisation decisions until
normal business is restored.
● Make innovative changes to
cater customers best in a
post-pandemic scenario.
W-T Strategies
● Increase security,
customer welfare in
hotels.
● Focus on “Quality over
Quantity”, prioritizing
superior service in
existing hotels before
expansion.
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22. Miles and Snow Typology
OYO’s current strategy was largely Prospector, aiming for rapid expansion in foreign countries like the
US and UK and frequently decreasing prices to rock bottom in order to fill rooms to meet targets. UK
OYO staff have said that OYO have regularly added unviable hotels in order to achieve high growth
rates(For example, the Small hotel on the island of South Uist off Scotland’s north-west coast).
This strategy was offering high returns at the start, but as OYO grew, rapid expansion meant it couldn’t
maintain quality of service in its home turf, the hotels in India. Partner hotel owners regularly
complained of delay in payment and customers of dissatisfactory service. These issues were magnified
by the onset of the pandemic, where customers became scarce and Oyo’s rapid expansion led to heavy
losses. This resulted in OYO cutting costs by firing employees. As a result OYO Rooms valuation
reduced by over 50%.
In the aftermath of these issues, as COVID is coming under control and tourism is regaining steam, we
think that the best strategy for OYO is the Analyzer strategy. The reasons for this choice being -
● Maintaining Current Market and current customer satisfaction: As the situation moving forward
is still uncertain, OYO should try its hardest to maintain the current customer base by 1)
Enforcing strict regulations to maintain service quality across all hotels. 2) Ensuring regular
pay for all employees and necessary support to all hotel partners, to ensure that they stay
motivated to provide the best service.
● Moderate Emphasis on Innovation: To adapt to the changing times, OYO needs to adapt its
services to fit better with the times. How hotel chains recover from the pandemic slump will be
key to future growth and expansion. OYO needs to make some innovative changes that make it
the better choice in the tourism industry post-pandemic.
Ansoff Growth Matrix
Market Penetration
1. Increase production Capacity:
a. Increased production capacity to reach more customers within the same market
b. Controlled overhead costs would lead to competitive pricing and would appeal to the
consumers in the same market
c. Increased attractiveness and competitive pricing within the same market will lead to
increased sales and consumption – and thus a higher market penetration
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23. 2. Increased Marketing Investment
3. Enhanced Distribution
a. Improved supply chains and distribution systems may lead to increased penetration
within the same market by improving accessibility
4. Competitive Pricing
5. Reduce operational costs
a. Lower operational costs will lead to fewer costs being passed on to the consumers and
will make the products offered by OYO to be more desirable and affordable
Market Development
1. Research and Development
a. The R&D should focus on identifying and understanding different market cultures,
trends, and consumer behaviors - and how they differ with consumer behaviour patterns
in existing markets
2. Regional Expansion
a. Regional expansion should also take into consideration any cultural differences that will
need to be accommodated in the expansion process in terms of marketing or product
modifications and consumption methods.
Product Development
1. Launch new and specialized hotel categories:
a. Engage in R&D activities to understand and identify new points of consumer demand.
The company then undergoes a NPD process and develops and launches new products
in the market for consumers. This increases the breadth of the company’s reach, and
also allows Oyo rooms to penetrate new market segments
2. Partnerships with tourism companies like MakeMyTrip, Thomas Cook, etc., and providing
specialized rooms to customers approaching through those channels.
Diversification
1. Seasonal prices policy. Introduction of progressive price patterns in order to take into account
the changing preferences of consumers as well as their ability to respond to prices.
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24. 2. Introduction of transport services for customers for meetings/seeing off at airports, railway
stations; city taxi services, etc.
3. Tourist guides and travel plans for leisure travelers’ travel arrangements, plane and train,
tickets sale.
A8 Scan Metrics
Achievable KSF 3
Appropriate KASH 1
Approachable Profit 1
Affordable Cash 4
Accessible Financing 3
Agreeable Growth 2
Adequate Infrastructure 3
Absorbable Risk 3
Total 20
Where, 1 is highly negative, 2 is negative, 3 is positive, and 4 is highly positive.
Justification:
Achievable KSF
High innovation, great level of disruption, understand the demographic
they are serving
Appropriate KASH Great knowledge, poor attitude, poor skill, neutral habit
Approachable Profit Haven’t reached their break even point
Affordable Cash Have 11% (1 billion) of their value available in cash
Accessible Financing
Multiple VCs funding like Softbank, LightSpeed Ventura, Sequoia
Capital, etc.
Agreeable Growth
Have increased scale but it has not been profitable; caused a decrement in
quality
Adequate
Infrastructure
Spurts of growth in terms of hotels indicate that there is no lack of
infrastructure
Absorbable Risk
Performance among the competition has been the best during covid
disruption
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25. Growth Strategy
Horizontal Diversification / Vertical Integration
● OYO started a number of tailor-made plans made for satisfying each customer’s demands.
Some of the most popular were OYO townhouse, OYO Life, Collection O, OYO palette, each
with a different purpose and separate customer-base. This was done so that OYO can cater to
all its customers irrespective of their needs, preferences and demands.
This is an example of Related Product Diversification, since OYO is creating newer products in
the same industry catering to varied user needs.
● Limited Scope of Vertical Integration.
Marketing Strategy Analysis for Oyo Rooms
Segmentation of hospitality industry and Oyo Rooms targeting
When analysing the marketing strategy that Oyo Rooms has, it is important for us to understand what
are the different groups of people that exist in the hospitality industry. The major consumer groups can
be divided into three broad categories - Luxury travellers, Backpackers and business executives. The
luxury travellers often look for destination holidays, generally away from their home countries. They
want high quality 5 star hotels and often do not care about the cost of travelling and do not want to
compromise on the quality and service of the hotels. The backpackers are frequent travellers but very
budget oriented. They often need economical solutions for hotel rooms. They do not mind
compromising on the quality of the hotel rooms and long as the cost is within their range. The business
executives are also frequent travellers but do not want to compromise on luxury. They are often on
trips for some business operations and hence look at their hotel rooms as a pathway away from work
stress. They are more budget conscious than the luxurious travellers, however not as much as
backpackers. There are some other segments that are not considered here, as they are not as frequent as
these segments. Oyo Rooms targets the backpackers and business executive travellers.
Positioning of Oyo Rooms
Oyo Rooms positions itself as a standardised budget hotel aggregator. It is often seen as a value for
money option in the eyes of the target audience. It is not associated with luxury travel options.
Oftentimes, especially in markets like India, Oyo Rooms are associated with the thinking of a newer
generation. Hence generally, as a brand Oyo Rooms positioning has existed for the youth and not for
the older travellers. Lastly, Oyo Rooms also has this picture of exceptional customer service in the eyes
of its target audience.
Promotional and Marketing Strategy
Oyo has a strong social media presence on Facebook and Twitter. It uses these platforms to spread
digital content to its youthful demographic. Essentially the strategy, as previously mentioned, is to use
all means of social media by targeting potential customers based on their interest, behavior and other
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26. parameters which are readily available via digital marketing. The end goal is to go ‘viral’. The
following are some Oyo Campaigns :
● Oyo Rooms’ Dubsmash Contest
● #AurKyaChahiye videos on Oyo Rooms’ youtube channel
● Mother’s Day Celebration campaigns, Campaigns based on sporting events, Campaigns around
days such as valentine’s day
● Oyo Rooms in India has also launched several nationalistic campaigns like Jai Hind, to capture
the growing nationalistic sentiment in the country
Flaws in this strategy and possible solutions
The biggest flaw with the marketing strategy of Oyo is that it is promoting its product only to the youth
and not to all demographics. This problem is that this narrows Oyo’s customer demographic, without
their being a real need to do so. Oyo’s product is equally useful to all age groups. Narrowing down its
promotional campaigns to social media, means that oyo has been unable to tap into older
demographics. Oftentimes, the older demographics have higher purchasing power and are willing to
spend more than the youth. An easy solution to rectify this is to start new marketing campaigns in
parallel on traditional media like TV and newspapers. Advertising on streaming services also achieves
this purpose. A good example of this demographic expansion is Zomato. Who initially positioned
themselves as a youth brand, but later expanded into older demographics through traditional media.
Mergers and Acquisitions for Oyo Rooms
OYO Rooms has made 9 acquisitions till now. The company has spent over $ 557M for the
acquisitions. OYO Rooms has invested in multiple sectors such as Hotel, IT, Local Services, Online
Travel and more. The Merger and Acquisitions division has been one of the strong points of Oyo. They
have had to pay exorbitant amounts for some companies, but this has been compensated because of the
diversification of operations these companies provide.The companies which have been acquired by
OYO are being discussed next.
Novascotia Boutique Homes
OYO Rooms has acquired Chennai-based service apartment operator Novascotia Boutique Homes on
March 18, 2018, marking its first major buyout as well as establishing its presence in the service
apartment and corporate executive stay segment.
AblePlus Solutions Private Limited
Ableplus Solutions Private Limited is a Private incorporated on 10 January 2017. It is classified as
Non-govt company and is registered at Registrar of Companies, Mumbai. AblePlus specialises in
developing Internet of Things (IoT) solutions. It was acquired by OYO on July 10, 2018.
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27. Weddingz
OYO Rooms acquired Weddingz, which claims to be India's largest Wedding company, on August 13,
2018. After the COVID-19 pandemic began, OYO has come up with a new program named ‘Wz Safe’
which conducts weddings by following the government issued norms and with maximum safety.
Qianyu Islands
Qianyu Islands is an asset-light hotel aggregator, operating via its online platform founded in 2017,
China. The company partners with small-and-medium hotels, renovates/manages the interiors/services
to offer standardized experiences, and lists them on its platform. Users can further search, compare and
book hotel rooms via the online platform/app. In March 26, 2019, the company was acquired by the
Chinese arm of OYO Rooms and continues to operate independently.
Danamica
OYO Rooms has acquired Copenhagen-based data science firm Danamica on September 2, 2019 as the
fast-growing lodging startup works to expand its business in Europe. Danamica, which was founded in
2016, has built machine learning tools and “business intelligence capabilities” to specialize in dynamic
pricing of rental properties. The firm’s algorithm analyzes 144,000 data points every hour and makes
60 million price changes every day with a prediction accuracy of 97% to help hotels boost their
revenue.
DoneThing
DoneThing is a personal assistance service which enables you to shop from roadside to malls, pick and
drop things, run errands and find domestic or professional help via App/WhatsApp/Call/SMS. It was
founded on June 1, 2015 in Gurgaon, Haryana.
@Leisure Group
The @Leisure Group is one of the largest players in the European online market for accommodation
rentals. It is based in Amsterdam, Netherlands. OYO Rooms acquired @Leisure Group on May 1,
2019. The acquisition marks the first big international investment by India-based OYO and puts it feet
first in the Europe marketplace for private accommodation. @Leisure Group has more than 30,000
fully managed rental properties across Europe, operating nine brands including Belvilla, DanCenter
and Danland.
MDI
MDI offers a wide variety of apartments that accommodate various site conditions. Founded on Oct 1,
2008 in Tokyo, Japan.OYO and SoftBank have jointly acquired an 80% stake in Japanese rental
apartment operator MDI for an estimated $100 million investment. The acquisition will help OYO to
leverage MDI’s strong network and business development capabilities in Japan’s real estate market.
Following the acquisition, OYO will list a section of 37,000 rooms under MDI management on its
room rental platform. It will supplement the company’s existing inventory of more than 2,000 rooms in
Japan.Primarily aimed to target students and young professionals in Japan, OYO aims to leverage the
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28. 2021 Olympic Games opportunity and growing popularity as a tourist destination to achieve a
dominant market share in the country.
Innov8
Innov8 Coworking offers premium & beautifully crafted office space where people can create,
connect, and grow their businesses at prime locations across pan-India. Innov8 hosts people from
diverse backgrounds such as digital nomads, entrepreneurs, freelancers, corporate employees and
startup enthusiasts. Innov8 has been acquired by OYO Rooms in an all-cash deal worth about INR 220
Cr ($31.84 Mn). While the acquisition will see OYO scaling faster with the existing inventory, Innov8
gets financial bandwidth to expand further in the growing co-working business in the country. The
workplace as a service space presents an exciting opportunity for OYO Rooms to utilize its existing
technology and operational expertise. Through a targeted multi-brand strategy, OYO aims to provide a
differentiated experience for co-workers at different price points and help expand access to co-working
spaces to more and more businesses and professionals across the country.
2030 Vision:
Finally, combining all our previous analysis on Oyo Rooms and its operations we predict the nature of
organisation Oyo Rooms will be like in 2030.
Global expansion
We expect OYO’s world presence to rise exponentially over the next 10 years. This is backed by the
fact that it continues to rapidly expand in most areas, even with the pandemic ongoing. While the
expansion in South America has been negative we expect Oyo Rooms to bounce back stronger post the
pandemic. If not the world leader, it will at least rise to a decent reputation globally for providing
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29. quality, cheap accommodation. From 800k+ rooms at present, OYO has the potential to raise it’s
territories to more than 4 million rooms. By competing with other hotel chains in different segments
like business, family, etc OYO can rise up to the position of top 3 hotel chain services. It’s valuation is
also expected to rise from $8 Billion to $200+ Billion in 10 years. Some factors that could stop Oyo’s
expansion have already been discussed previously. We think amongst these factors, perhaps the most
dangerous would be the inability of Oyo Rooms to persuade local hotel owners to come into a
partnership with the firm. This is something Oyo needs to solve as soon as possible by instilling a
culture of on time payments and upholding of contract terms to the very roots of the company.
Tech-driven Innovation
Being a tech-based startup, we expect OYO to tap into the potential behind new technologies like
Artificial Intelligence, Augmented/Virtual Reality and integrate within the OYO App to benefit and
provide new experiences to its customers. Already, a lot of organisations in the hospitality industry are
beginning to tap into these aspects for their use. We think Oyo would be able to outperform these
firms, because of its greater ability to execute and implement tech driven plans. This ability comes
from the fact that Oyo has acquired several tech driven firms to aid and propagate its rise as a
tech-driven firm , something which its competitors have not done. However, this vision is also double
edged. If Oyo is unable to continue its culture of innovation, it will most certainly fall much behind its
competitors. We think this is a less likely scenario given Oyo’s precedence.
Marketing Strategy
As OYO continues to evolve, it can change its positioning strategy from youth-focused to various other
groups like business focused individuals, family friendly outlets, etc. We envision this growth being
similar to how previous startups have expanded to a must have for all age groups(cars were marketed
early on as a tool for the elite businessman of the society - this positioning changed as the purchasing
power of the society changed). As time progresses, more and more people in society would be
technologically enabled. This would make Oyo a viable option for more and more people thus
changing its demographic and positioning. Oyo’s positioning and advertisements would then also
move to themes that are relatable across the society, rather than only those instances which are
relatable to the youth.
To conclude, Oyo Rooms through all its problems and dilemmas offers a lot of potential. Potential to
become the Amazon of the hospitality industry , potential to provide travelling solutions to each and
every strata of the society. Whatever happens post the pandemic, Oyo Rooms will forever remain one
of the most interesting and unique cases to study rapid expansion and growth of new ventures. We
thank Professor Bhowmick Bhaskar for giving us the opportunity and resources to build this case. The
lessons we have learnt while writing it will help us throughout the rest of our lives.
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