How Oyo plans to conquer Indonesia with $300m investment

According to the latest Google-Temasek-Bain & Co study, online travel in Southeast Asia grew to US$34.4 billion in 2019, up from US$19.4 billion in 2015. The rise of the budget hotel segment has been in the limelight as it offers affordable accommodation aimed at budget-conscious travelers.

Where the budget hotel space is concerned, it looks like Indian hotel chain Oyo Homes & Hotels is catching up with the competition. It has been persistently growing its presence in Southeast Asia, particularly in Indonesia, in the past year.

Photo credit: Oyo

The startup entered Indonesia in 2018 with an initial investment of US$100 million and fewer than 10 employees. Today, Oyo claims to be a leading hotel chain in the country with a presence in more than 100 cities.

Moreover, the company recently entered the long-term housing rental segment in Indonesia by launching Oyo Life. It also said it is open to explore more opportunities within the accommodation segment in the future.

KrAsia recently spoke to Mandar Vaidya, CEO of Oyo for Southeast Asia and the Middle East, about the firm’s recent investment in Indonesia and its business strategies.

We’d like to clarify Oyo’s statement regarding its investment commitment for Indonesia. In September, Oyo said it was investing US$100 million in the country, but a recent press release suggests that the investment is actually US$300 million. Could you please explain?

Yes, the number has changed and it signifies our increased focus on Indonesia. When the first statement was out, we certainly looked at Indonesia as an important market but we weren’t clear about how much of a priority it would be. Now it has become very clear to us that Southeast Asia, in general, and Indonesia, in particular, is going to be one of the focus markets of Oyo’s business globally.

In that context, we want to co-invest more aggressively with our partners. When we start working with a new partner, the first thing we do is to inspect the property and see how much improvement it needs. We use data to see what consumers in the country want and how the properties can accommodate those needs. We always tell partners that they need to dramatically improve service quality and for that, we’d invest money in them as well.

So to answer your question, we are now committed to investing US$300 million in Indonesia as we believe that the country requires much more focus than we previously expected.

Considering that Oyo has tripled its investment commitment within several months, is it likely to increase again within the next one or two years?

The investment commitment is for the foreseeable future. What we do is that we make an investment at several levels. For hotel partners, the investment depends on the size of the hotel, the possibility of business, and most importantly, what the hotel requires [to attract consumers]. When we get closer to a certain number, let’s say after we spend US$150 million or US$200 million, then we’d review, and maybe who knows, if needed, we might restate [the investment] again.

The competition between budget hotel chains is fierce in Indonesia. How are you positioning Oyo among the competition?

Interestingly, we started operations in Indonesia just 15 months ago. We were catching up with the competition quickly and we have overtaken them. We actually began at the bottom and we came out on top, as our capital outlays grew.