CHAPTER 1

OYO ROOMS

INTRODUCTION
Oyo Rooms is a network of budget hotels based out of India. Launched by Ritesh Agarwal the
concept was fairly new and thus was accepted well by urban India. What started off as a one
room one city thing in Gurgaon today has around 70,000 rooms across 8500 properties in 230
towns? The concept of Oyo rooms was that of an aggregator which was essentially a listing of
budget hotels and homestays which users who wished to arrange accommodation could select
and book.

The website was known as Oravel. Later this was upgraded to a set of rooms which provided
budget accommodation to people. Today Oyo has services in India, Malaysia, and Nepal and is
slowly emerging to be a solicited option for the budget stay by both families and single travelers.
They also have tie-ups with corporates and business houses for extended stay options.

OYO Rooms, commonly known as OYO, is India's largest hospitality company,[2] consisting
mainly of budget hotels.[3][4][5] It was founded in 2013 by Ritesh Agarwal and has since grown to
over 8,500 hotels in 337 cities in India, Malaysia, UAE, Nepal, China andIndonesia.

In 2012, then 18-year-old Ritesh Agarwal, hailing from Odisha's Rayagada district, launched
Oravel Stays, a website designed to enable listing and booking of budget accommodation. After
three months of research and staying in over 100 bed and breakfast homes, guest houses, and
small hotels, he pivoted Oravel to OYO in 2013.
OYO partners with hotels to give similar guest experience across cities.[11] Shortly after
launching Oravel Stays, Ritesh Agarwal received a grant of $100,000 as part of the Thiel
Fellowship from Peter Thiel.
In March 2015, OYO raised Series A round of funding $24 million from Lightspeed Venture
Partners, Sequoia Capital, Greenoaks Capital and DSG Consumer Partners. In August 2015,
OYO raised another $100 million from Softbank Group, a existing investor. A year later, in
August 2016, OYO raised $90 million from Softbank Group, Innoven Capital and existing
investors. In September 2017, OYO announced it had closed a $250 million series D round of
funding led by Softbank Group, new investor Hero Enterprises led by Sunil Kant
Munjal, Sequoia Capital, Greenoaks Capital and Lightspeed Venture Partners. China
Lodging made a strategic investment of $10 million in OYO in September 2017.

In late 2017, OYO launched OYO Home, an Airbnb-like marketplace for short-term managed
rentals. OYO Home has presence in more than 10 leisure destinations of India including Goa,
Shimla, Pondicherry, Udaipur, Kerala etc. In April 2018, OYO launched its first international
OYO Home in Dubai.
INDUSTRY OVERVIEW

What is the meaning of HOSPITALITY? There is no one single and simple definition to explain
the term of hospitality in this stage.

Many people have tried to describe the hospitality industry in different ways. Some tried to
summarize the scope of the industry and its characteristics of involving both tangible and
intangible features in the service delivery process.

Others attempted to describe the industry by exploring the stakeholders involved, mutual benefits
generated and the industry‟s impacts to the society and economy.

Broadly speaking, Hospitality is the act of kindness in welcoming and looking after the basic
needs of customers or strangers, mainly in relation to food, drink and accommodation.

A contemporary explanation of Hospitality refers to the relationship process between a customer

and a host.

When we talk about the “Hospitality Industry”, we are referring to the companies or
organisations which provide food and/or drink and/or accommodation to people who are “away
from home”. However, this definition of the “Hospitality Industry” only satisfies most situations.

The hospitality industry is a broad category of fields within the service industry that
includes lodging, event planning, theme parks, transportation, cruise line, travelling and
additional fields within the tourism industry.

The hospitality industry is an industry that depends on the availability of leisure time
and disposable income. A hospitality unit such as a restaurant, hotel, or an amusement park
consists of multiple groups such as facility maintenance and direct operations
(servers, housekeepers, porters, kitchen workers, bartenders, management, marketing, and human
resources etc.)
COMPANY OVERVIEW
OYO is a hotel chain operating in more than 150 cities across India, Malaysia, China, and Nepal.
OYO works in close proximity with its hotel partners while exercising full control over the
hotels for ensuring a quality experience for travelers. Its network includes major metros, regional
business hubs, top leisure destinations as well as pilgrimage towns.

OYO revolutionized the fragmented and legacy-driven budget hospitality space in India by
enabling standardization of services, amenities and in-room experience and its proprietary apps
for inventory-management, room-service, revenue-management, and customer-relationship
management.

In January 2017, OYO launched Townhouse - a managed hotel-brand designed to function as a

social hotspot to cater to city dwellers and a new generation of guests. The company is also
responsible for launching India‟s maiden Home Management System - OYO Home where it has
unlocked over 1,000 homes for travelers in India‟s top travel destinations, including Goa,
Pondicherry, Udaipur, Nainital, Coorg, and Manali. With SilverKey, OYO is working towards
building India‟s largest corporate-focused service brand.

OYO is India's largest hotel network spread across India. It is present in 230 cities as of now and
is expanding internationally as well (Operational in Malaysia and Nepal)

The sole goal is to change the way people stay away from home. Have a look at the best part of
the concept:

STANDARDIZATION:

AC Rooms

Spotless Linen

Clean Washrooms

Free WIFI

Complimentary Breakfast

TV

OYO KIT has biotique products(soap, lotion and body wash) which is a part of this
standardization!

In this era, everyone is bitten by Internet Bug and OYO has got all of us covered. The free WIFI
has great speed and complimentary breakfast has great options.

OYO is for all and the only aim is to provide the best of our services to the guest!

Recently, a new concept was introduced which is called as „Townhouse‟

A Townhouse is a premium high-end property which is completely taken care by OYO. From the
interior to the exterior constructions.

Townhouse is a friendly neighborhood hotel which creates a perfect equilibrium between

location, comfort, and pricing

OYO Rooms is an online aggregator of budget hotels. OYO Rooms partners with hotels with the
aim of standardization on various measures in each room including free wifi and breakfast,
flatscreen TVs, spotless white bed linen of a certain thread count, branded toiletries, 6-inch
shower heads, a beverage tray and so on.

The standards are audited every few days so that the customers are assured a quality experience.
OYO‟s budget stays range from 999 ($16) to 4,000 rupees ($66). OYO provides property owners
with support such as quality standardized supplies and service training. OYO boasts of a 24x7 in-
house customer service center.

However recently OYO has changed its policy and allow you to spend only 25% of your hard
earned referral money when you book a hotel, the rest must be paid by the guest from his pocket,
a complete "U-turn" from their initial model.

When Ritesh Agrawal walked into a meeting with venture investor BejulSomaia last year, his
rucksack attracted immediate attention. Curious as to what the young entrepreneur was carting
around, Somaia asked him about it and was amazed to hear the answer.

For Agarwal, who left home in Odisha as a teenager to seek his fortune, carrying all his
possessions wherever he went was second nature. And now, as cofounder of an online aggregator
of budget hotel rooms, checking into a new room every night was also business.

"It helps me get a pulse of what customers and hotel owners want and also gives me the
convenience of not maintaining a home," says the itinerant founder whose startup, OYO Rooms,
has recently raised funds from Japan's Softbank.

Some four years after he landed in Delhi, Agarwal, who once sold SIM cards in his hometown,
has built one of the most valuable Internet startups in India by a college dropout.

The hands-on approach is a big reason why Agarwal has been able to aggressively ramp up OYO
Rooms from five cities in December 2014 to 73 cities now.

"He has a very strong grip on all the levers of the business. In five minutes he can go from a
strategic conversation to drilling down into the minute details important to a property owner,"
said Somaia, whose firm Lightspeed invested in OYO in January 2014.

Agarwal, hailing from a business family, moved to Delhi in 2011 to start his entrepreneurial
journey after deciding to skip engineering college entrance exams. He had also briefly enrolled
in University of London's India campus.
It was when he was 18 that he founded Oravel Stays, which was building the Indian version of
home sharing portal AirBnB. Agarwal got in touch with accelerator VentureNursery, flew down
to Mumbai and got seed funding of around Rs 30 lakh after a three-month programme.

Agarwal, who stayed at over 100 bed-and-breakfast rooms while running Oravel, soon
discovered that the problem for these portals was not discovery. "The big problem was that these
portals are not standardised," said Agarwal.

It was around the same time that Agarwal became the first Indian to be chosen for Thiel
Fellowship, where he was given $100,000 grant by early Facebook investor and PayPal
cofounder Peter Thiel. The fellowship is given to entrepreneurs below 20 years of age who skip
college for two years to start running their own business.

"One big learning from Thiel fellowship was think really big and create an impact, without
thinking if anybody has done it before," said Agarwal, who decided to pivot the model to OYO
Rooms, putting most of the Thiel grant into the business.

And investors feel that Agarwal has the maturity to build an organisation and execution
capabilities. "I always thought Ritesh was unusual for his age (or any age) in terms of his clarity
of thought and purpose. He embraces the concept of hiring people better than him and giving
them the freedom to contribute," said Somaia, adding that experienced founders also struggle
with this.

Perhaps as part of his growing up, Agarwal decided to move out of OYO to an apartment two
months ago.

Oyo is a sort of an aggregator, the way Uber is - an online 'hotel' marketplace - and even as I
write, it's turning into India's largest chain of hotels. Just 21, Ritesh Aggarwal seems set for
getting 400 properties in its fold by the turn of 2015. OYO's model is simple: it adopts hotels to
get them in its fold; gets them to follow certain standards of services, features, staff, pricing,
security etc.,; and then sells their rooms under its own brand, for a certain cut. Currently, the
company is under the invest-and expand mode - primarily funding its technology, hiring and
market development activities - and has attracted two rounds of PE funding already from the
likes of Sequoia. This new segment operates on the asset-light business model, and is a sure
disruptor for the traditional capital-weighed-down hospitality industry.

OYO's traction and market coverage has swiftly increased thanks also because of being listed
with travel aggregators like Make MyTrip, Clear trip and hotels.com. Add app-based booking
facility to this launched in September, and OYO seems set to expand faster beyond the 5000
rooms that it has now. The Hospitality industry segment targeting small business travelers and
budget tourists is eminently swift-cash, and that works in the favor of OYO, because revenues
get realized quicker too.

OYO doesn't own any of these properties, and instead, invests in marketing and management
quality improvement for the hotels under its fold. It's a win-win for OYO and the hotels, many of
whom just don't have the network, knowledge or the budget for smart marketing, and they run
empty. OYO helps them improve their yields. But OYO will need not only to up its scale and
size to finally begin making money, it will also have to bring in more stringent offline quality
control mechanisms onboard to manage customer experience and keep the brand growing.

While some may say it's no great shakes, as one just needs to copy the AirBnB model. It's not
easy in India, where there are no standards being followed by class B and C hotels; where the
owners are not entirely professionally trained or oriented for the hospitality space, and where, it's
not easy to get money to improve your hotel. To OYO's credit, it seems to have created an
understandable and compelling value proposition for partner hotels. Stayzilla and ZoRooms have
joined the game, and OYO will certainly have to keep doing new and interesting things to stay
ahead of the pack.

It can be anybody's guess, that after a year's good going, OYO can be in a great situation to get
some big cash after a stake-sale. Unless there's some drastic mess, OYO looks sure to stay. It's
time when Ritesh Agrawal needs to get down to the task of building the OYO organization into a
compelling, high-quality unit, ready to handle the load of ten million+ customers.

At the age of 17, Ritesh launched Oravel travels which later branched out to become Oyo
rooms. He has travelled all over India and discovered the issue of lack of budget hotels in India.
Later while working on his first startup he identified that not only there is a lack of hotel but also
the prices of hotels are very high that‟s why he started Oyo.

Today at the age of 24 he is one the biggest businessman in India. He has won many national and
international awards. Below are the few awards that he won:

 Forbes “30 under 30” in the consumer tech sector

  Top 50 entrepreneurs in 2013 by TATA First Dot powered by NEN awards
 TiE-Lumis Entrepreneurial Excellence award in 2014
 Business World young entrepreneur award

Ritesh has also written a book named “A complete Encyclopaedia of top 100 engineering
colleges” and was the best seller of the year. Ritesh also became the youngest speaker in the
panel of Think EDU panel in 2014.

Journey:

Oyo started its journey in May 2013 with single property and slowly increased the number of
properties from 1 to 15 in July 2014 now Oyo has partnered with more than 6500 hotels across
the nation. In 2016 Oyo made his first international expansion in Malaysia than in 2017 Oyo
started its operation in Nepal. In September 2018 Oyo Rooms announced its expansion in
London

Success Mantra:

The objective of Oyo‟s inception was to provide standard rooms at very affordable price and this
has become the mantra of their success.

Standardization: Oyo room promises to provide the same facilities and amenities which are
shown on the app or website while booking and Oyo make sure that their hotel partners are
providing the same to the customers what they promised.
Affordability: Oyo rooms provide high-quality customer experience at very affordable price.

Technology: Oyo has made hotel booking very easy and hassles free. With the help of Oyo app,
a user can book a room in just 3 clicks and within 5 seconds.

Oyo rooms Business Model:

Let us go step by step to understand the business model of Oyo rooms.

 Oyo books a part of hotel inventory beforehand.

 Oyo organizes the booked rooms under their brand name.
 Oyo signs a contract with the hotels to provide standardized services to their
customers.
 The bookings are made through the website and mobile application.
 Then customer books rooms at predetermined prices by Oyo.

Oyo does more than 15 million booking in last year and has an annual growth run rate of
approximately 400 billion every year.

From late 2017 Oyo changed its business model from being a hotel aggregator into franchises.
The shift was mainly to reduce operational costs and improve serviceability, the company said.
SWOT ANALYSIS OF CUSTOMER SERVICE INDUSTRY

Strengths Of Hospitality Industry in India

1. Natural and cultural diversity : India has a rich cultural heritage. The “unity in diversity”
tag attracts most tourists. The coastlines, sunny beaches, backwaters of Kerala, snow capped
Himalayas and the quiescent lakes are incredible.

2. Demand-supply gap : Indian hotel industry is facing a mismatch between the demand and
supply of rooms leading to higher room rates and occupancy levels. With the privilege of hosting
Commonwealth Games 2010 there is more demand of rooms in five star hotels. This has led to
the rapid expansion of the sector.

3. Government support: The government has realized the importance of tourism and has
proposed a budget of Rs. 540 crore for the development of the industry. The priority is being
given to the development of the infrastructure and of new tourist destinations and circuits. The
Department of Tourism (DOT) has already started the “Incredible India” campaign for the
promotion of tourism in India.

4. Increase in the market share: India‟s share in international tourism and hospitality market is
expected to increase over the long-term. New budget and star hotels are being established.
Moreover, foreign hospitality players are heading towards Indian markets.
Weaknesses of Hospitality Industry in India

1.Poor support infrastructure: Though the government is taking necessary steps, many more
things need to be done to improve the infrastructure. In 2003, the total expenditure made in this
regard was US $150 billion in China compared to US$ 21 billion in India.

2.Slow implementation: The lack of adequate recognition for the tourism industry has been
hampering its growth prospects. Whatever steps are being taken by the government are
implemented at a slower pace.

3.Susceptible to political events: The internal security scenario and social unrest also hamper
the foreign tourist arrival rates.

Opportunities of Hospitality Industry In India

1.Rising income: Owing to the rise in income levels, Indians have more spare money to spend,
which is expected to enhance leisure tourism.

2.Open sky benefits: With the open sky policy, the travel and tourism industry has seen an
increase in business. Increased airline activity has stimulated demand and has helped improve the
infrastructure. It has benefited both international and domestic travels.
Threats of Hospitality Industry In India

1. Fluctuations in international tourist arrivals: The total dependency on foreign tourists can
be risky, as there are wide fluctuations in international tourism. Domestic tourism needs to be
given equal importance and measures should be taken to promote it.

2.Increasing competition: Several international majors like the Four Seasons, Shangri-La and
Aman Resorts are entering the Indian markets. Two other groups – the Carlson Group and the
Marriott chain – are also looking forward to join this race. This will increase the competition for
the existing Indian hotel majors.
SWO T ANALYSIS OF OYO

Strengths in the SWOT analysis of Oyo Rooms :

Strengths are defined as what each business does best in its gamut of operationswhich can give it
an upper hand over its competitors. The following are the strengths of Oyo Rooms:

 Standardisation: The Oyo rooms are mostly owned by various providers but have just been
standardized under the Oyo franchise and thus people are guaranteed of standardized
service in all Oyo rooms wherever they may be located.
 Ever growing network: What started off as a one room one hotel thing in Gurgaon now has
around 8500 properties to its credit and an additional inventory of 4000 motels and
homestays? This is a clear strength.
 Spirit of Innovation: The root idea or need from which Oyo rooms were conceptualized is
a highly innovative one of a one-stop shop for a budget stay in India. The company
continues to maintain its strong spirit of innovation as is evident from the policy to
standardize rooms amongst many others.
 Subsidising Hotel Stays: Oyo subsidizes rooms to make them affordable for customers and
similar to Ola and Uber have emerged successfully in their line of business.
 Young and highly spirited leader: The founder of Oyo Ritesh Agarwal 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 that Oyo adopts since there is a freshness to the
approach taken which is one strong reason for its instant success.
Weaknesses in the SWOT analysis of Oyo Rooms :

Weaknesses are used to refer to areas where the business or the brand needs improvement.
Some of the key weaknesses of Oyo rooms are:

 A strategy of co-branding: Oyo does not own any of the rooms that it lets out. But it is
more like a hotel aggregation platform where the buyer and seller are allowed to transact
with each other through a common window provided by Oyo. Thus they just cobrand with
various budget hotels but do not own the rooms.
 Poor service quality: Though Oyo has tried to standardize amenities for each room based
on the prices they charge, they have not been able to do the same with services. This has
made the service quality and reliability highly questionable.
 Tight margins: Hotels that are on a tie-up with Oyo can also loop in other agents for which
Oyo cannot do anything much to circumvent. In this context, the model thrives solely on
how well the margins they provide for their hotels are which can be risky in the long run.

Opportunities in the SWOT analysis of Oyo Rooms :

Opportunities refer to those avenues in the environment that surrounds the business on which it
can capitalize to increase its returns. Some of the opportunities include:

 Growing demand for aggregators: As the world reels from the aftermath fo repeated
recessionary trends, pay cuts, and job losses, most higher end hotels are struggling to
balance supply and demand. This increases the scope for aggregators like Oyo since most
hotels would prefer to take external support for sourcing new business.
 Focus on budget accommodation: Earlier the trend was more biased towards luxury and
boutique hotels but not anymore. People are trying to minimise spending and focus on
saving and thus budget hotels that can provide decent boarding and lodging facilities are
on a high demand today.
 A surge in the number of business travelers in emerging economies: The number of people
who travel on business from both genders has grown profusely in emerging economies.
This has resulted in a demand for budget stays.
Threats in the SWOT analysis of Oyo Rooms :

Threats are those factors in the environment which can be detrimental to the growth of the
business. Some of the threats include:

 Competition: With lowered barriers to entry, every new entrepreneur is looking at

aggregating services. There are a lot of online portals like ibibo, trivago, makemytripetc
which offer a varied gamut of services similar to Oyo.
 Growing concerns about safety: Today there is negative imagery of unsafe stays and the
number of cases of harassment is on an increase. Though Oyo does not guarantee safety at
any point in time for its hotels they have a moral commitment to ensure that no such
untoward incidents happen.
COMPETITORS OF OYO

ClearTrip

Cleartrip is an online travel platform where travelers can search for and book flights to any
destination.

MakeMyTrip

MakeMyTrip is an online travel company which provides a range of travel products and services.

Treebo

A new age hotel brand offering comfortable stays at budget prices. Say no to mediocre rooms &
indifferent service. Unlock affordable luxury.

Fabhotels

Hotel aggregate site

Yatra

Yatra online offers a booking service that enables individuals to find and book flights, hotels and
holiday packages.
LIMITATIONS OF OYO

- Business Model of Oyo Vit can be easily imitated by the competitors in the industryname
industry. To overcome these challenges companyname needs to build a platform model that can
integrate suppliers, vendors and end users.

- Extra cost of building new supply chain and logistics network - Internet and Artificial
Intelligence has significantly altered the business model in the Competition, Entrepreneurship,
Growth strategy industry and given the decreasing significance of the dealer network Oyo Vit
has to build a new robust supply chain network. That can be extremely expensive.

- Niche markets and local monopolies that company‟s like OYO Rooms: Another Unicorn in the
Making? able to exploit are fast disappearing. The customer network that Oyo Vit has promoted
is proving less and less effective.

- High cost of replacing existing experts within the organization. Few employees are responsible
for the Oyo Vit's knowledge base and replacing them will be extremely difficult in the present
conditions.

- Low investments into Oyo Vit's customer oriented services - This can lead to competitors
gaining advantage in near future.

- High turnover of employees at the lower levels is also a concern for the Oyo Vit . It can lead to
higher salaries to maintain the talent within the firm.