In merely five years, India’s Oyo Hotels & Homes has grown from one property to more than 515,000 rooms in more than 500 cities.* Its mission? To become “the most-loved hospitality brand in the world,” according to founder and CEO Ritesh Agarwal.
GURUGRAM, India—Oyo Hotels & Homes is one of the most significant hotel industry growth stories of recent years and attracted funding from major players, notably Japanese bank SoftBank Group and Airbnb.
Founded in 2013 by now 25-year-old Ritesh Agarwal, the company is now looking to expand internationally. Agarwal spoke with Hotel News Now about his brand, its expansion and the innovation needed to survive in today’s hospitality world.
Q: Oyo is setting up a rapid pace for growth having attracted a lot of funding. What are its growth prospects, and how will you be able to achieve your targets to justify the investments?
Agarwal: “We started with one fully managed building in Gurgaon, India, back in 2013, with the ambition of becoming a full-scale hospitality company, and today we lease or franchise over 18,000 buildings across 10 countries.
“Globally, the world’s accommodation market stands at 160 million rooms and is a $3.6 trillion opportunity and growing. With us capturing less than one percent of the larger pie, we are just scratching the surface. We foresee an enormous opportunity for us to build a truly world-class brand.
“We are aggressively moving ahead to not only become the largest hospitality brand but also become the most-loved hospitality brand in the world. We are investing heavily on strengthening our capabilities in technology, talent and network, while creating an ecosystem of efficiency through which we are able to deliver higher yields for our asset owners. We have invested (heavily) in CapEx, appointed hundreds of GMs to oversee operations and customer experience, created job opportunities for over 100,000 people in India alone and set up 26 Oyo Skill Institutes for hospitality enthusiasts.
“On an average, over 75% of hotel owners associated with Oyo have seen an increase of 20% to 30% in occupancy, a 2.5-times jump in (revenue per available room) and a significant jump in profit for every asset operating as an Oyo-branded building. In the last five years, we have seen a 4.3-times year-on-year growth with realised value run-rate of $1.8 billion annualised.”
Q: What synergies are you looking at for Oyo following this notable investment from Airbnb? Would you also be using Airbnb’s reach to market Oyo properties?
Agarwal: “As the sixth-largest hotel chain operator in the world, we at Oyo are committed to offering our guests and travelers great quality living spaces. We are happy to have Airbnb as our partner in this vision. Airbnb’s strong global footprint and access to local communities will open up new opportunities for (us) to strengthen and grow while staying true to our core value proposition.
“We’re excited by the possibilities and committed to bringing benefits to the millions of travelers who can now rely on Airbnb and Oyo to find a home away from home.”
Q: What gap in the market did you find, and why was your move successful?
Agarwal: “Globally, the majority of the chains operate properties that have over 100 rooms, while in reality nearly 80% to 90% of the assets in the hospitality industry are small or independent hotels with less than 100 rooms.
“This was an opportunity that was not realized by large chains and created a unique space for us. It is our mission to create quality living spaces. We believe hospitality and real estate are broken categories. There is a huge disconnect between demand and supply of quality living spaces, forcing travellers and city-dwellers to compromise on location, quality and price. Oyo uses technology and talent to fix this problem.”
Q: Your model has been successful in India. Do you think the same model will work overseas, or are you tweaking your model for different countries?
Agarwal: “We are currently in 10 countries around the world: India, China, Malaysia, Nepal, United Kingdom, United Arab Emirates, Saudi Arabia, Indonesia, The Philippines and Japan. We understand that each market is unique in its own way, so we localize the product experience and interiors of our buildings and our overall approach.
“The macro environment for Oyo to operate in any country remains that majority of the hotels are unbranded and operate at sub-25% occupancy versus the branded ecosystem at 75%. Our teams across international geographies have observed local nuances with respect to the hotel industry in each of the countries we are present in. These observations help us in highly localizing and personalizing the experience for our guests.
“For instance, in The Philippines, as the country has a lot of devout Christians, most hotel rooms keep a copy of the Bible in the drawer or on the table in the rooms for guests; in Indonesia, most hotel rooms have the Qibla sign, also known as Arah Kiblat in the local language Bahasa, (signifying) the direction in which daily prayers should be offered; as Malaysia hosts a lot of Indian tourists, hotels provide information on the nearest Indian/South Indian restaurants.
“(Other examples include) hotels not having a room 13 and in China most hotels accept payment by QR code and even pre-booking by QR code scans because of the high level of online payments in the country.
“We are proud that every country we have opened Oyo hotels in, we have increased the occupancy from 25% to 65% in less than three months on average, and as consistently high as 90%. We’ve received overwhelming support for our high-quality and affordable offerings across all our geographies.”
Q: The U.K. is a relatively new market for you. How is that going?
Agarwal: “In the U.K. we have (more than) 30 hotels across London, Birmingham, Manchester, Blackpool and Edinburgh. We are aiming towards launching our 50th hotel in the U.K. by the end of April.
“The Oyo Townhouse Sussex Gardens, our first in the U.K., saw occupancy jump from 60% to over 90% after it became an Oyo Townhouse. This stellar performance has encouraged the asset owner to sign a second property with Oyo.”
Q: What is the next phase of growth? Which markets, what are you looking at for the future?
Agarwal: “Our expansion across India and international territories is backed by our strong operational capabilities and our ability to use technology to improve efficiencies at every touch point. We are looking at the largest 15 to 20 markets of the world that are characterised by fragmented inventory.
“The future looks bright as these are also all-purpose markets like China and the U.K. We can foresee an enormous opportunity for an Indian hotel chain to become the largest hotel chain in the world in the years to come.
“There is no stopping for us. Wherever there is a scope of hospitality industry, there should be Oyo.”
*Correction, 24 April 2019: This article has been updated to correct Oyo Hotels & Homes' company name and the total number of rooms in its portfolio.