Almost 9 years ago, while travelling through the country, a college dropout spotted the untouched opportunity in organizing India’s budget hotels. This year his startup has achieved 3.5x growth in revenue with a current value of $10 Billion dollars. It’s easy to guess that OYO Rooms, a thriving venture by a young entrepreneur Ritesh Agarwal, is being spoken about.
The funding marks OYO’s presence as India’s most successful unicorn i.e. private startups valued at over $1 billion only after One97 Communications, Paytm’s parent company. OYO has marked its footprints beyond India—to China, Malaysia, Nepal, and the UK.
OYO- Growth, Expansion and Valuation
In 2012, Ritesh Agarwal launched Oravel Stays to enable listing and booking of budget accommodations. After months of research and experiencing various bed and breakfast homes, guest houses, and small hotels across India, he pivoted Oravel to OYO in May, 2013.
OYO partners with hotels to give guest experience across cities. Shortly after launching Oravel Stays, Ritesh Agarwal got a grant amount of $100,000 as part of the Thiel Fellowship from Peter Thiel.
OYO Rooms currently houses 17,000 employees globally, of which approximately 8000 are in India and South Asia. OYO Hotels & Homes is now recognized as a full-fledged hotel chain that leases and franchises assets.
Over a span of six years, the startup expanded globally with thousands of hotels, vacation homes and millions of rooms in hundreds of cities in India, Malaysia, UAE, Nepal, Brazil, Mexico, UK, Philippines, Japan, Saudi Arabia, Sri Lanka, Indonesia, Vietnam, the United States and more. It is even valued higher than the renowned Taj group of hotels and Oberoi hotel chain.
In 2019, OYO registered 3.5x growth in revenue in FY 2017–18 at Rs 416cr for India operations and a marginal loss of 360 cr. In 2018, OYO reported a loss of 330.97 cr which was better than the previous year.
Also Read: OYO sets foot in UAE after China
In september 2018, OYO Rooms raised $1 billion, of which the Roc filing for the amount $100 million was raised from Star Virtue Investment Ltd. in February 2019.
In october 2019, funding of $1.5 billion was raised by Softbank group, Lightspeed Venture partners and Sequoia India.
In March 2018, OYO acquired Chennai-based service apartment operator Novascotia Boutique Homes stepping into the service apartment and corporate executive stay business.
In 2018, the company plundered into the $40 billion wedding management industry by acquisition of Weddingz.in, a Mumbai-based online forum for wedding venues and vendors to breathe new life into a disintegrated, low-yield, broken customer service.
In April 2019, OYO declared a strategic global distribution partnership with bedbank Hotelbeds. The company also announced two joint-venture with Softbank and Yahoo!Japan. 2019 saw a strategic partnership of OYO with Airbnb. OYO in March 2019, announced a 1400 Crore investment in its India and South Asia businesses as efforts to increase infrastructure, strengthen technology and internal capability.
In May 2019, OYO signalled the acquisition of Amsterdam-based @Leisure Group, Europe's largest vacation rental company. In August 2019, OYO invested in the United States by purchasing the Hooters Casino Hotel, near the Las Vegas Strip, partnering with US-based real estate company Highgate, for $135 million.
Challenges faced by OYO rooms
Despite the shiny, successful exterior , OYO’s reputation has been dubious soon after its founding. OYO’s work culture raises questions about the proficiency of its business, according to financial filings, court documents and interviews with 20 current and former employees, as well as others familiar with the start-up’s operations.
Unethical growth strategies
OYO offers rooms from unavailable hotels, those that have halted its service, according to the company’s chief executive and nine of the current and former employees. This boosts the number of rooms listed on OYO’s site.
Thousands of rooms are from unlicensed hotels and guesthouses, its executives have acknowledged.
To save the trouble from the authorities over the illegal rooms, OYO sometimes provides free stays to the police and other officials, according to nine of the current and former employees and internal WhatsApp messages viewed by The New York Times.
Having a huge base of unmarried couples, a scheme involved workers at properties run directly by OYO conspiring to keep the guests checked in after they left. The workers then cleaned and resold the rooms for cash to other guests and nabbed the money, says an ex-worker.
Complaint of unpaid dues
OYO charges extra on hotels and refused to pay the hotels the full amounts they claimed they were owed, according to interviews with hotel owners and employees, legal complaints, emails viewed by The New York Times.
Some hotel operators have filed criminal complaints against OYO, which said it retained payments. Aditya Ghosh, OYO’s head of India operations, dismissed the argument as “noise,” he said, “the disagreement is about the penalties we charge on customer service failure” .
Protests by hotel owners
Independent protests by small-scaled hotel owners are surfacing up in mid-tier towns like Pune, Kota, Manali, Ahmedabad and Jaipur as well as Delhi and Bengaluru. They claim that OYO has been eluding them of their promised returns and minimum guarantees by imposing a ream of charges, often without informing them. Many of these charges are not specified in the contract between the owner and OYO.
The protestors state that OYO’s accounting and auditing process, and the penalties associated with petty faults and errors, are so heavy that they sometimes find themselves owing money to OYO at the end of the month.
Despite the hurdles, OYO has broadened its horizons beyond the bounds of India as well as just hotels.
“Anyone who’s tried to innovate and attempted creating large organizations has faced bad press; Mark Zuckerberg, Steve Jobs, Elon Musk, Bill Gates—so I think he’s in regal company,” said Ankur Nigam, a partner at KPMG. “I don’t think it’s fair to judge whether he’s a good leader. What’s visible is that he’s managed to build a $5 billion company and nothing succeeds like success”.
At the moment, Oyo is one of India’s most gifted start-ups, with a valuation of $10 billion. Additionally, Ritesh Agarwal has in his hand 30% of the profits. But, it’s one thing to think of business tactics, and another to be morally wrong. OYO should realize the fact that integrity is what makes the pillars strong in the long run. If it loses its ethics in the first few successful years, it’s impossible that the company would ever be remembered for any good.
Diversification of its humble beginnings as a budget hotel chain, Oravel Stays—the entity that owns and operates the OYO brand clearly aims for the sky and has accomplished triumph in the last five years to mark its eminence.
Who are competitors of Oyo Rooms?
How does Oyo tie with hotels?
You can visit the site of partners with OYO and register your hotels and homes to get associated with OYO.
How much does Oyo pay to hotel owner?
Oyo rooms charges a commission of 20-25% from its associated accommodation partners.
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