How do OYO Rooms Work?

Himangi Khare Himangi Khare
Oct 27, 2020 6 min read
How do OYO Rooms Work?

Oyo Rooms is the largest branded community of lodges presently running 450,000 listings in 5,000 towns in India, Malaysia, UAE, Nepal, China and Indonesia. The organization commenced its operations by constructing its enterprise version around the aggregator enterprise version.

Oyo rooms working model operates on the investment worth $1.7 Billion (modern investment raised on April 1st,2019). Meanwhile, the organization values $5.7 Billion with its headquarters in Gurgaon, Haryana. Oyo rooms offer their services in India in conjunction with worldwide locations like China, Malaysia, Nepal, the United Kingdom, the United Arab Emirates, Saudi Arabia, the Philippines, Indonesia and Japan with serving more than than 500 towns in India whilst running greater than 45,000 rooms globally as of January 2019.

Ritesh Agarwal, founder of Oyo Rooms stated that Oyo is now including 10,000 rooms or near 500 lodges each month below its franchise version. The shift in its enterprise version has additionally allowed Oyo to elevate its fee. Earlier, below the aggregator version, Oyo charged 18% fee from resort proprietors each month.

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Oyo Pricing System

Moving to a franchise version had little or no effect on the pricing of rooms, the finance class of rooms priced Rs1,000-1,500 in line with night time will stay unchanged. The finances Oyo Rooms class below the franchise version will now fee everywhere among Rs1,000 and Rs2,500; the Oyo Town House class has a price range of Rs2,500 and above, and holiday houses below the Oyo Homes class will cost Rs1,000 in line with the room.

Oyo Rooms Dominate the Market by 68%
Oyo Rooms Dominate the Market by 68%

Earlier, the organization used to arrange the accomplice with lodges, rent a few rooms, and promote them below its personal logo. Even though the procedure remains the same, Oyo Rooms enterprise version has modified its path to a new structure. To preserve the logo image, they make the companion's offer offerings at predetermined requirements whilst they lead them to greater visibility to their user-base.

Earlier the company used to rent lodges at a predetermined rate and supplied them to the customers at a take-up rate. This has been modified to a fee-based totally sales version. Oyo rooms charge a commission of 22% from its hotel partners. However, this commission does vary according to the services provided by the brand.

Agarwal was among the select few chosen for the two-year mentorship program run by Peter Thiel, co-founder of PayPal, early Facebook investor and the person who many name as the worldwide tech industryโ€™s influential figure.

Since its launch in 2013, Gurugram-based Oyo has emerged as one of the biggest motels and rooms platform for travelers looking out no-frills, cushy lodging at much less expensive prices. While Oyo Rooms has modified lots over the years, tweaking and re-modelling of the unique industrial enterprise concept for Oyo, the middle concept is to attach travelers with motels.

The company has gone from budget hotel aggregator to a hospitality chain and a real estate business too. Oyo rooms cost a fee of 22% from its lodge companions. However, this fee does range steady with the offerings furnished with the resource of using the brand. The beginning started out on an asset-mild version however over the years, with investments throughout numerous companies inside Oyo, the organization has long passed from rate range lodge aggregator to a hospitality chain and an actual property enterprise too.

Oyo Rooms Business Model

The organization could rent the lodge rooms and revamp it to a standardized format, allow reserving through its website or application. However, in 2015, the organization started moving to a franchisee version, wherein, in choosing leasing rooms, it started out offering partnerships to motels. Here are the numerous verticals that Oyo has brought over the years

  • Hotel room aggregation
  • Franchise version
  • Owned motels
  • Co-living

Hotel Room Aggregation

Oyo in 2016 had 5,855 motels in its community with a complete stock of over 68K rooms, while nowadays it has a portfolio of greater than 35K motels and 125K holiday homes, and over 1.2 Million rooms throughout 80 worldwide locations and 800 cities. Its verticals range from vacation homes, enterprise motels, casinos and co-working areas.

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That boom has additionally been made feasible because of the fact that the startup saved iterating the version and ensured that it now no longer stays restricted to the rate range lodge space. With extra than one round of investment secured from maximum important traders which include Softbank, the startup ventured into extra modern classes and has continuously released new ventures or manufacturers below its umbrella.

Oyo Rooms in India VS China
Oyo Rooms in India VS China

Franchise Model

In 2017, Oyo CEO Agarwal announced that the organization has โ€œdeveloped its enterprise to a 100% extraordinary franchise, manipulate or operate. We no longer anymore do lodge aggregation and feature flip out to be a full-scale hospitality organization.โ€ Oyoโ€™s shift from lodge aggregation to franchise version were given here in particular to lessen its operational fees and to enhance serviceability, the organization stated.

For instance, Oyo Townhouse is deliberate and constructed throughout the needs and desires of millennial visitors beginning in particularly designed beds, TVs, open areas for conferences and greater. While merchandise like Collection O is a mid-scale enterprise lodge presenting larger and spacious rooms with pinnacle rate furnishing and linen, on-request laundry, limitless breakfast, 24X7 in-room dining, high-velocity WIFI workstations in each room etc.

These merchandises were a separate Oyo product, in which the organization rents out homes and renovates them based totally on the wishes and plans. So, overall, the organization has stopped reserving unique rooms for Oyo visitors, however alternatively, books the complete lodge or flat below its call and rents it out to customers.

Owned Hotels

Further, the organization gives its lodge companions the choice to run the assets both themselves or allow Oyo to run the operations. The organization additionally gives economic guide through its partnership with economic institutions that have allotted loans to greater than a hundred properties. Loans are to be had for upgrading space, operating capital and different wishes.

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Co-living

As in retaining a combined report with the resource of using Jones Lang LaSalle (JLL) and the Federation of Indian Chambers of Commerce & Industry (FICCI) the Indian co-living marketplace is predicted to boom at a robust CAGR of 17% within the subsequent 5 years. Identifying the marketplace opportunity, Oyo entered the phase in 2018 with Oyo Life, which operates a fully-provided condo housing arm of Oyo.

Oyo believes that the maximum important benefit of co-living areas, alternatively than paying visitors or serviced apartments, is that it notably cuts down the value of residing because of the fact now no longer handiest do humans proportion the lease however additionally revel in upload on offerings which include each day housekeeping, laundry/ on-name resident facility control; curated meals, etc.

Oyo works with big builders and impartial asset proprietors to take over a whole building, tower or an impartial house. Oyo Life isn't an aggregator and takes obligation for a stop to stop control of areas, rent whole homes, furnish, clean rework.

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