With Softbank funding, Oyo’s outsized ambitions now extend beyond hotel bookings

Indian hospitality tech company Oyo Rooms’ ambition to become the world’s largest hotel chain by 2023 is no secret. But a look at its recent and rumored acquisitions hint at a larger-scale play that includes other types of spaces such as homes, banquet venues, and possibly, workspaces.

Since its launch in 2013, Oyo has expanded its footprint to more than 500 cities in eight countries: India, China, Malaysia, Nepal, the UK, the UAE, Indonesia, and the Philippines. This includes over 13,000 franchised and leased hotels as well as 3,000 homes, translating into around 450,000 rooms.

Ritesh Agarwal, CEO and founder of Oyo / Photo credit: Oyo

Oyo’s business model centers around franchised and leased hotels. “We go to the unbranded hotel owners, sign franchise or lease agreements, and have them join the Oyo family,” explains Ritesh Agarwal, founder and group CEO of Oyo Hotels and Homes.

To join Oyo’s platform, hotels need to comply with around 30 standard measures, such as clean white linen with a minimum thread count, free wifi, free breakfast, and clean washrooms. Hotel owners pay a commission to Oyo for each booking.

“Every night, almost 250,000 heads rest on a pillow in an Oyo,” says Agarwal. The repeat user base alone has grown by 214 percent year-on-year.

As part of its bid to become the world’s dominant hotel chain, Oyo has taken steps to penetrate the Southeast Asian market, where competitors like Indonesia’s RedDoorz have already gained a foothold. Oyo aims to have more than 2 million rooms in the region alone by 2023.

In October 2018, Oyo entered Indonesia with more than 30 hotels and 1,000 rooms. Within just three months, it has grown its operations five-fold to more than 4,100 rooms in 16 cities. It plans to spend US$100 million to strengthen its presence in the country.

In January this year, Oyo entered the Philippines, setting aside US$50 million for investment in the country. It has 21 franchised and leased hotels with more than 500 rooms in three key cities, and aims to increase this number to 20,000 rooms.

“We are betting big on this market and have also allocated US$200 million from our last round of funding to strengthen our capabilities for the market and drive our next wave of growth in [Southeast Asia],” says Agarwal. The region, as well as Europe and the Middle East, is “characterized by a similar supply-demand imbalance and a fragmented hospitality marketplace.”

Diversifying to places of work, play, and celebrations

In Europe, though, Oyo’s strategy differs. Having realized that there was a larger opportunity and demand for mid-market accommodation in Europe, the company entered the market with the Oyo Townhouse brand, which focuses on what it calls “aspirational living spaces.” It also attracts corporate travelers, especially millennials who “like to switch seamlessly from work to play.”

This is why apart from featuring a contemporary design aesthetic, Oyo Townhouses are equipped with high-speed internet, whiteboards, free printers, business services, magazines, Netflix, Kindle, and a 24/7 kitchen.

Oyo entered the British market in 2018 with four Townhouses offering more than 80 rooms. It also has 68 Townhouses in India – a number that the company plans to grow by as much as 500 in 2019. It is also reportedly set to enter the US market to offer affordable living spaces to millennials and middle-income earners.

These townhouses and homes are complemented by Oyo’s March 2018 acquisition of Novascotia Boutique Homes, a Chennai-based operator of serviced apartments. The properties under Novascotia have become part of Oyo Silverkey, which offers apartments as alternatives to hotels for both leisure and business travelers.

Funding and financial health