OYO Case Study: History, Valuation, Product, Services & Growth

Oyo Rooms (stylized as OYO), also known as Oyo Hotels & Homes, is an Indian hotel chain. It is one of the largest and fastest-growing hospitality chains of leased and franchised hotels, homes, and living spaces. Founded in 2013 by Ritesh Agarwal, OYO initially consisted mainly of budget hotels. The startup expanded globally with thousands of hotels, vacation homes, and millions of rooms in hundreds of cities in India.

HISTORY
In 2012, Ritesh Agarwal launched Oravel Stays to enable listing and booking of budget accommodations. After undertaking months of research and staying in various bed and breakfast homes, guest houses, and small hotels across India, he pivoted Oravel to OYO in 2013.

OYO partners with hotels to give similar guest experiences across cities. Shortly after launching Oravel Stays, Ritesh Agarwal received a grant of $100,000 as part of the Thiel Fellowship from Peter Thiel. OYO currently has over 17,000 employees globally, of which approximately 8000 are in India and South Asia. OYO Hotels & Homes now identify as a full-fledged hotel chain that leases and franchises assets. The company claims to invest in CAPEX, GMs to oversee operations and customer experience as well as generating around a million job opportunities in India and South Asia alone. OYO has also set up 26 training institutes for hospitality enthusiasts across India.

VALUATION
– The company is currently valued at $10 billion as per the last round of funding.
– September 2018 – raised $1 billion, of which the RoC filing for the amount of $100 million raised from Star Virtue Investment Ltd. was made on 13 February 2019.
– October 2019 – Series F funding of $1.5 billion led by SoftBank Group, Lightspeed Venture Partners, and Sequoia India.
– Founder & CEO, Ritesh Agarwal, through RA Hospitality Holdings (Cayman) in 2019 signed a $2 billion primary and secondary management investment round, supported by global institutional banks and his financial partners, subject to regulatory and shareholder approvals. Lightspeed Venture Partners, and Sequoia India, OYO’s early supporters, are selling part of their holdings in order to help the founder increase his stake and thereby commitment while remaining invested significantly in the company’s long-term mission.

PRODUCT & SERVICES
Oyo Rooms have a wide product portfolio that is updated from time to time to cater to the needs and demands of the various types of customers leading to product line stretch. It has also co-branded with various other service providers like Airtel for Wifi support, Ola for transport support, Biotique for in-room toiletries, Air Pegasus, PayPal, and Mobikwik for payments to increase its service base and for the comfort of the customers. It has multiple product lines with varying depths:
– Hotel Budget Rooms Oyo Rooms partners with hotels with the aim of providing standardized services including free wi-fi and breakfast, flat-screen TVs, spotless white bed linen of a certain thread count, branded toiletries, 6-inch shower heads, a beverage tray, etc. These services are available in around 180+ cities in India and in Malaysia. Budget rooms according to their price range are divided into Standard, Premium, Elite rooms leading to the product depth of 3.
– OYO Townhouse which is promoted as the neighborhood hotel is in the midscale segment targeted at millennial travelers.
– OYO Home, which OYO claims is India’s maiden Home Management System that offers private homes in different locations and is fully managed by OYO.
– OYO Vacation Homes identifies itself as the world’s 3rd largest vacation home brand with vacation rental management brands Belvilla, Danland, and DanCenter along with Germany-based Traum-Ferienwohnungen.
– SilverKey launched in April 2018, caters to the needs of the corporate travelers undertaking business trips for a short or long duration.
– Capital O offers hotel booking services.
– Palette offers a perfectly curated staycation for those in search of an intuitive experience at competitive prices, an upper-end leisure resorts category.
– Collection O offers to book and renting services to business travelers.
– OYO LIFE, targeted at millennials and young professionals in search of fully managed homes on long-term rentals, at affordable prices.

GROWTH
In its first year of operations, OYO clocked a revenue of Rs 32.86 crore and a steep loss of Rs 496.31 crore. By the end of FY 2018, its top line had scaled to Rs 415 crore while losses stood at Rs 360 crore. Year on year, OYO saw its revenues climb 245 percent while losses widened marginally from Rs 355 crore to Rs 360 crore. In its short life, OYO Hotels and Homes have been variously described as a hotel aggregator, an online travel agency (OTA), and even a Ponzi scheme with an unsustainable business model, but never a hotel chain. Today, OYO is India’s largest hotel chain with 173,000 rooms under management. It is also the world’s third-largest, with over half a million rooms over the 18,000 properties that it currently franchises and leases in 500 cities across 10 countries.