OYO Disruptive Strategy

OYO INTRODUCTION AND TIMELINE
Oyo Rooms is one start-up that needs no introduction. Ritesh Agarwal, Founder and CEO of
Oyo, began his journey in January 2013, starting with one hotel in Gurgaon. The company, as
of October 2016, has around 6,500 hotels in over 220 cities in India, and has been named
India's largest budget hotel chain.
Oyo rooms has been a major player in India’s booming hospitality industry over the past
couple of years. Oyo belongs to India’s new age technology backed start-ups and the
company aims to leverage data and advanced technology to rise above the competition in the
hospitality sector.
2014- In August of this year, Oyo received its first Series A funding.
2015- In March of this year, Oyo received funding of a whopping amount of $25 million
from its investors namely Lightspeed India, Seqoiua and others.
April 2015- Oyo app was launched. The mobile app was a catalyst in writing the success
story of this hotel chain start-up that was to follow. It is a user-friendly app that helps
customers to book rooms directly. Oyo, by now had expanded to Kolkata, Mumbai, Goa,
Bangalore and was spreading at a massive pace. It has almost come up to 2000 hotels, 20,000
rooms and 100 cities in India.
July 2015- Oyo bagged $100 million in Series C Round of funding from Japanese investor
SoftBank. This year proved to be a financially fulfilling year. Oyo now had the backing of
one of the most prominent and powerful investors in the world.
2016- In January, first month of the year itself, the hotel chain hit the 1 million check-ins
mark and also made an advent outside India into the Asia Pacific market, beginning with
Malaysia.
2017- Continuing its expansion aspiration, it launched a business in Nepal. Nepal and
Malaysia were just a hint of the monstrous development that was to follow.
2018- This is the year that marked the establishment of the Oyo empire in Asia-Pacific and
kick-started international proliferation by establishing operations in UK, UAE, Dubai, China,
Singapore and Indonesia. It also became a unicorn in September when it raised funding of
$800 million from SoftBank and already had raised $200 million from its existing investors.
2019- With the backing of Greenoaks, Sequoia India, Lightspeed India, Hero enterprise and
China Lodging Group as its solid group of investors, Oyo is not far from becoming a global
success story, perhaps to some extent it has. Today it has more than 330,000 rooms in 500
cities globally. And Agarwal, has plans to make it the world’s largest oldest chain by 2023.
Growth Strategy
The business strategy is based on the principle of bringing common standards and processes
to the highly diverse small budget hotel sector. Run by individuals and families, these hotels
have been largely underdeveloped and ignored by major chains. But Ritesh Agarwal is
offering these independent hoteliers the opportunity to benefit from the economies of scale
that these big hotel operators enjoy by joining his rapidly growing Oyo franchise.
The number of rooms in India under Oyo's management soared in the two years ending June
2018, from 1,000 to 100,000. The company then added another 33,000 rooms during the third
quarter of this year. Meanwhile, since entering the Chinese market in November 2017, its
room inventory there reached 129,000 by the end of September. That pushed Oyo into the top
10 ranking in terms of room inventory in China, putting it on track to surpass its home market
in India in the near future.
Worldwide, Oyo added roughly 140,000 rooms to its network during the quarter ended
September 2018. That surpasses Marriott International, the world's biggest hotel operator,
which added over 20,000 rooms in the quarter ended June. Oyo's secret for such rapid growth
is in part due to the fact that it is not yet going head to head with global hotel giants. But it is
also thanks to its innovative approach. The company has brought a "completely new model of
running a hotel".
But the company's fast growth comes with some risks. A market-research analyst has warned
that at Oyo's pace of growth that their organization can easily be overstretched, which may
drag facility and service quality down and damage their brand. Oyo has established a virtuous
cycle of very rapid organic self-growth driven by individual investors and hoteliers by
instantly providing them with comprehensive support to innovative technology and a high
degree of human organization.
Sustainable Competitive strategies

The company has invested heavily in technology in order to keep pace with the competition.
company executives are enthusiastic about the massive potential of machine learning and
artificial intelligence to disrupt the hospitality sector. In September 2017, a new development
centre was launched in Hyderabad to revamp the company’s tech arsenal. Technology is
central to Oyo’s operations and the company currently uses a combination of in-house and
proprietary software to handle its business operations.
Currently, the company uses several applications to enhance customer experience. One of
these allows users to book a stay in Oyo rooms within 5 seconds. Another application,
krypton, enables the company to guide auditors to perform targeted audits, thus working
towards providing a better customer experience. Big data analytics will enable the company
to understand demand patterns and customer preferences, thus helping to shape the future
direction of the company.
Oyo employs about 700 software engineers out of a total 8,500-strong workforce. This
engineering team releases about 20 new pieces of software every day, including new mobile
apps and updated versions of existing apps.
One of the company's most effective apps, dubbed ORBIS, instantly calculates a hotel's
projected occupancy rates and revenue after joining the Oyo platform. The app calculates all
the risks involved in a deal and decides on whether to approve it on the basis of data science.
Oyo typically signs a deal 10 days after the first meeting with a property owner.
The booking software behind the website analyses large amounts of real-time data and
continually calculates the demand-supply situation. It resets room rates in a given area 15
million of times a day to optimize occupancy. At the same time, a few thousand salespeople
make bulk deals with local businesses. With that combination of technology and human
power, Oyo boosts the occupancy rates for new member hotels within weeks.
Given that schools and colleges rarely provide the type of training that makes graduates
employable, OYO decided to set up "skill institutes" to train staff from scratch to ensure that
the service quality of the housekeeping and maintenance staff remained consistent. The first
of these 25 skill institutes were set up in late 2016. Till date, they have hired and trained over
10,000 young individuals in different aspects of housekeeping and maintenance.
Another strategic step taken by Oyo was the appointment of the new CEO Aditya Ghosh,
who was IndiGo's former president and chief executive officer (CEO), He was instrumental
in turning the airline into the largest and most profitable one in India, and also into one of the
fastest growing low-cost carriers in the world. With the new induction in the top line
management the company is confident that he will be able to help OYO set new benchmarks
in the hospitality industry and nurture a high-performing workforce.
Acquisition strategy by OYO
Challenges being faced

As the company makes inroads into more markets, it will struggle to manage the
accompanying complexities that come in with organic growth and acquisitions. Among other
things, it will need to focus on quality and location, ensure standardised services, and safety
of guests.
As Every country has a different culture and it is very important for a player to have an in-
depth customer perspective, knowing their tastes and preferences. Beyond anything, it’s
important to know how the prospective market itself will respond to the offering of OYO.
There is a difference between Japan and China on one hand and the US on the other hand,
customers in the former countries like being offered service while Americans prefer self-
service.
In addition, OYO, like most other Indian tech start-ups, faces mounting losses that will likely
rise further as it expands into newer markets. For the financial year ended March 2019, OYO
reported a net loss of Rs511.8 crore.
Challenges tackled
Rapid growth is being backed by quality operations. Oyo has a robust ground team which is
headed by captains or team leaders. They also have an app which allows their employees to
monitor quality. Customer feedback is integrated into that and it helps the company to look
out for problem areas and rectify them immediately. Their social response systems are super
quick and responds within minutes of receiving a complaint. Oyo uses technology
extensively to sustain and increase the quality of operations. They have been able to deliver
good hospitality which has helped them to scale up rapidly.
Oyo says it will continue to focus on expansion, but customer experience will remain as its
priority, and it’s also working to tighten quality and safety processes.
Future plans of OYO

In 2019, the company aims to further its market share in the hospitality industry and
strengthen its existing verticals the company’s market share is merely 1.3% of India’s hotel
market, and the belief within the company is that there is a vast potential for expansion. The
company is targeting to grow its room inventory to 1,80,000 from the existing number of
70,000 by entering into partnerships with various hotels. It is here that Oyo’s newly adopted
franchising model will come into play, making it easier for the company to expand
horizontally.
Plans are also in place to expand in weekend destinations like Coorg and Chikmagalur. Oyo
is seeing weekends becoming a powerful way of growth within the city expansion, they have
a target of increasing the market share from 5% to 10% in 50-weekend destinations this year.
The company also plans to build on the success of Oyo homes and Oyo townhouses. The
townhouse project, in particular, has been very successful with all townhouses reporting 90%
occupancy and the company plans to expand this segment vertically, with geographical
expansion not being a priority right now. Besides the mentioned expansion plans, the
company also hopes to become stronger in the food, beverage and banquet segments. 2016
and 2017 saw Oyo rooms expand into the midscale segment and the coming years could also
see them expand into the luxury segment

OYO Disruptive Strategy

Uploaded by

Copyright:

Available Formats

OYO Disruptive Strategy

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

OYO Disruptive Strategy

Uploaded by

Copyright:

Available Formats

OYO INTRODUCTION AND TIMELINE

Sustainable Competitive strategies

Acquisition strategy by OYO

Challenges being faced

Future plans of OYO

You might also like