How OYO became world’s third largest

hotel chain as per room count

Submitted by:
Group – 2
(Section – A)

Institute of Management Technology, Hyderabad

Term – I
Session: 2019-20

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 ACKNOWLEDGEMENT

We would like to express our deepest appreciation to all those who provided us the opportunity to
complete this report entitled “How OYO became world’s third largest hotel chain as per room
count”.

We are extremely grateful to the management of college for providing all the required resources for
the successful completion of the report. We would like to extend our heartfelt gratitude to Prof.
whose contribution in stimulating suggestions and encouragement, helped us in writing this report.

Date: 22nd August, 2019

Place: Hyderabad

(Prof. Tulika Sharma)

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 TABLE OF CONTENT

S no. Contents Page No.

1. Acknowledgement

2. Summary 5

3. Introduction 6

4. Company’s Profile 7

5. Rewards and Honours 7

6. Board of Directors 8

7. SWOT Analysis 9 – 10

8. PESTEL Analysis 11

9. Competitor’s Analysis 11

10. Company’s Financials 12 – 13

11. Conclusion 14

12. References 15

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 SUMMARY

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 has around 70,000 rooms today, across 8500 properties in 230 towns.
The economy in stay segment is huge, unorganized and fragmented and Oyo brings a scalable and
customer friendly approach to address this opportunity. The concept of Oyo rooms was that of an
aggregator which was essentially a listing of pocket-friendly hotels and homestays which enabled
customers to arrange accommodation with the click of a button.

Oyo was among the first movers of the market to initiate the process of branding the domestic
budget hotel segment, in the price range of Rs 1000 to Rs 3000. The electronic presence of this
segment, was extremely vague earlier. The quality and standards seldom met the promised
parameters. Oyo stepped into the market with its innovative and convenient booking site that
offered hygienic, air conditioned, wi-fi enabled places to stay with the inclusion of breakfast.
Oyo doesn't own any of these properties, instead, it invests in marketing, managing and improving
the quality of the hotels under its fold. It's a win-win situation for Oyo as well as the hotels who
don't have the network, knowledge or the budget for smart marketing. They work with small scale
hotels to standardize offerings, conduct physical quality checks every three to seven days, and train
the staff on etiquette with a provision of cash benefits when customers give them good ratings.
Their online platforms handle the inventory, prediction and generation of demand and adjusting the
prices accordingly. Oyo charges between 15% to 20% as commission on every booking.

Ritesh Agarwal’s true innovative use of technology in hospitality industry has not only won him
high accolades, but also helped him gain the backing of some of the most prominent and powerful
investors in the world such as Softbank, Lightspeed India etc. However, Oyo is not a standalone
company in the market. It is facing competition from Zo rooms, Airbnb, Treebo etc. The segment
has to consolidate in future keeping in mind the current economic growth rate, changing market
trends and rise in purchasing power of the customers.

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 INTRODUCTION

OBJECTIVE: The objective of this report is to recount the success story behind OYO rooms and
how Ritesh Agarwal, the founder of OYO rooms, harnessed the idea of hospitality which led to the
inception of pocket-friendly hotels garnering a lot of investment in this segment.

The journey of Oyo has been rather remarkable in an exceedingly short span of time, from being a
hotel-chain start-up pursued by a 19 years old college dropout to gradually establishing its name in
the international market and becoming one of the leading players of the hotel-stay industry.

A detailed account of the timeline of Oyo Rooms and the various milestones achieved by it over
the years has been given below.

 2011: Ritesh Agarwal harboured the idea of enhancing the hospitality segment which
compelled him to take the plunge with his first start-up called Oravel. It enabled listing and
accommodation of hotel rooms that was within the budget. It later on got upgraded to what
came to be known as Oyo rooms.
 2013: Ritesh Agarwal was also selected for Thiel Fellowship, an initiative taken by the
founder of PayPal, which gave him a funding of $100,000 to pursue his entrepreneurial
idea. Later that year, Oyo was launched in Gurgaon.
 2014: In August 2014, Oyo received its first Series-A funding, thereby, paving its way into
becoming the face of Indian Start-Ups.
 2015: In March 2015, Oyo received funding of $25 million from its investors namely
Lightspeed India, Seqoiua and others. In April that year, Oyo launched its mobile app. The
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 conveniently. It enabled the
expansion of Oyo to cities like Kolkata, Mumbai, Goa, Bangalore and was spreading at a
massive pace. In July, Oyo bagged $100 million in Series-C Round of funding from
Japanese investor SoftBank, one of the most prominent and powerful investors in the world.
By the end of 2015 it had approximately 2000 hotels, 20,000 rooms and 100 cities PAN
India.
 2016: In January, 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: Carrying forward its expansion aspiration, Oyo launched its business in Nepal.
 2018: This is the year when Oyo stepped into the International market by establishing
operations in countries like UK, UAE, Dubai, China, Singapore and Indonesia. It also
received another milestone in September when it raised a funding of $800 million from
SoftBank after having raised $200 million in the same year 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 on its way of becoming a global
success story. Today it has more than 330,000 rooms in 500 cities globally. And Agarwal
has plans of making it the world’s largest chain by 2023.

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 THE COMPANY PROFILE:
TYPE P RIVATELY HELD COMPANY
INDUSTRY HOSPITALITY
F OUNDED 2013; 6 YEARS AGO
F OUNDER RITESH AGARWAL

HEADQUARTERS GURGAON, HARYANA, INDIA

AREA SERVED ASIA AND EUROPE
KEY P EOPLE ADITYA GHOSH, CEO
WEBSITE WWW. OYOROOMS .COM
REVENUE OYO INDIA EYES RS 1400 CRORE REVENUE
IN FY19 AFTER LOGGING RS 416 CRORE IN
FY18
P ROPERTIES 18,000+
HOLIDAY HOMES 45,000+
NO OF EMPLOYEES 10,001+ EMPLOYEES
SPECIALTIES BUDGET HOTELS, LONG STAYS, SUITES,
P REMIUM HOTELS, ELITE HOTELS , WOMEN
EXCLUSIVE HOTELS

It has 450,000 listings in India in 500 cities in India, China, Malaysia, Nepal, Sri Lanka, the United
Kingdom, United States, the United Arab Emirates, Saudi Arabia, the Philippines’, Indonesia and
Japan. The company also operates OYO Home, an Airbnb-like marketplace for short-term managed
rentals.

REWARDS AND HONOURS

 In November 2017, London Business School in collaboration with Management Today
felicitated Ritesh Agarwal, CEO with Real Innovation Award. Ritesh won in the “If At
First You Don’t Succeed” category – sweeping both the people’s choice vote and the jury
award.
 The Ministry of Skill Development and Entrepreneurship awarded OYO the National
Entrepreneurship Award 2017 in the hospitality category, in recognition of the work done
by the company to create affordable, high-quality accommodation for travellers in the
country.
 OYO won the CX Innovation of the Year Award in at Quest Customer Experience
Awards in 2017. OYO’s service innovations recognized by customer service experts
included OYO Captain and Kryton app - both of which helped enhance on-ground
experience and raise service scores.
 In 2018, budget hotel aggregator OYO Rooms won top honours at India’s biggest and best
awards for startups – ET Startup Awards, joining a group of peers distinguished by

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technical and entrepreneurial prowess. Indian start-up OYO, which has been on an
expansion mode in the UK, is among some of the key names on the shortlist for the UK-
India Awards in 2019.

BOARD OF DIRECTORS

Ritesh Agarwal Anil Goel Group

Founder & Chief Technology
CEO & Product
Officer

Abhishek Gupta Abhinav Sinha

Chief Financial Chief Operating
Officer Officer

Dinesh Ramamurthi
Maninder Gulati
Chief Human
Resource Officer Chief Strategy Officer

Siddharth Dasgupta
Anuj Tejpal
President of
Corporate Affairs CBDO

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 SWOT ANALYSIS

SWOT Analysis represents the Strengths, Weaknesses, Opportunities, and Threats that Oyo Vit
encounters both internally and externally. According to a global executive survey conducted by
Harvard Business Review & Brightline Initiative – only 20% of the strategic targets set by
organizations are realized. The remaining 80% are not achieved because of incomprehensive
planning, limited resource allocation, and poor execution.

STRENGTHS WEAKNESSES

Standardisation: 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.
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.

Spirit of Innovation: The root idea 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
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.

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the approach taken which is one strong reason for its
instant success.

OPPORTUNITIES THREATS

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.
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,
MakeMyTrip etc. 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.

A surge in the number of business travellers 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.

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 PESTEL ANALYSIS
 Political Factors - The positive attitude of the ruling government towards business growth
and launching Schemes such as Digital India, Make in India & Start-up India has provided
great growth opportunities to the OYO rooms.

 Economic Factors - The Economy of the Country is growing and this attracts many
investors within or from outside the country which eventually reduced the risks of the
company and also promotes growth.

 Socio Economical Factors - with great understanding of the demographics such as age
groups, Income Level and marital status, OYO focused its business on low budget Hotels
and targeted mostly the middle-class people in order to maximize profits.

 Technology Factors - OYO rooms introduced mobile applications in Android and IOS
platforms where you can literally book the rooms in just three clicks and also cancel the
bookings easily. Without technology, rooms can’t be booked, hosts can’t be contacted and
OYO rooms wouldn’t function as it does today.

 Environmental / Ethical Factors - Providing proper training to the staff members,

improving infrastructure, optimum utilization of resources are some of the steps taken by
the OYO rooms towards the betterment of the society and the environment.

 Legal Factors - Introduction of GST containing a slab of 18 % did a setback to the

company’s growth rate however by rigorous efforts they were able to bring down the tax
rate to 12% for the hotels having tariff between Rs 1000-2500 per day and for the hotels
having tariff less than Rs 1000 per day were exempted.

COMPETITOR ANALYSIS
OYO Rooms Airbnb FabHotels Differential factors
Airbnb is the biggest player
Consumer
15 million 100 million 3 million among the three with 100 million
Portfolio
bookings annually
Hotel bookings,
Hotel bookings,
hotel essentials, Budget OYO has more product offerings
homestays
Offerings customized hotel under its belt compared to Airbnb
and tour
apartments, bookings and FabHotels
packages
star rated resorts
Primarily India and Airbnb has a demographic
Demographics other countries of Worldwide India advantage
Asia as its worldwide presence

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 OYO is by far the highest grossing
Revenue INR 0.2
INR 1.25 billion INR 0.3 billion company in India, but has not yet
(IND) billion
started earning profits

COMPANY’S FINANCIALS

Profit & Loss

800

600

400
Rs. in Crores

200

-200

-400

-600
Total Operating Adjusted Net
Total Income Gross Profit
Expenditure Profit Profit
Mar 18 326.8 628.22 -301.42 -302.64 -340.92
Mar 17 107.59 419.56 -311.96 -312.54 -336.71
Mar 16 32.68 513.15 -480.47 -481.19 -496.12

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 Cash Flow Summary
2000

1500

1000
Rs. in Crores

500

-500

-1000

-1500
Net Cash from Operating Net Cash Used in Investing Net Cash Used in Financing
Activities Activities Activities
Mar 18 -390.05 -1264.04 1661.17
Mar 17 -324.03 -22.61 339.49
Mar 16 -496.22 -244.56 692.87

PROFIT AND LOSS ACCOUNT

Oravel Stays Pvt Ltd
Profit & Loss (Rs in Crores)
Year Mar 18 Mar 17 Mar 16
INCOME:
Sales Turnover 265.91 82.33 17.54
Other Income 60.89 25.26 15.14
Total Income 326.8 107.59 32.68
EXPENDITURE:
Power & Fuel Cost 0.95 1.21 1.03
Employee Cost 251.73 196.69 121.53
Other Manufacturing Expenses 26.58 14.4 183.4
Selling and Administration Expenses 243.76 151.51 199.24
Miscellaneous Expenses 105.21 55.75 7.95
Total Expenditure 628.22 419.56 513.15
Operating Profit -301.42 -311.96 -480.47
Interest 1.22 0.58 0.72
Gross Profit -302.64 -312.54 -481.19
Depreciation 8.89 9.58 6.27
Profit Before Tax -311.53 -322.12 -487.46
Deferred Tax 0 0 8.86
Reported Net Profit -311.53 -322.12 -496.31
Extraordinary Items 29.39 14.59 -0.19
Adjusted Net Profit -340.92 -336.71 -496.12

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 P & L Balance brought forward -836.7 -514.58 -21.63
P & L Balance carried down -1148.22 -836.7 -517.95

CASH FLOW SUMMARY

Oravel Stays Pvt Ltd
Cash Flow Summary (Rs in Crores)
Year Mar 18 Mar 17 Mar 16
Cash and Cash Equivalents at Beginning of the year 3.38 10.53 58.45
Net Cash from Operating Activities -390.05 -324.03 -496.22
Net Cash Used in Investing Activities -1264.04 -22.61 -244.56
Net Cash Used in Financing Activities 1661.17 339.49 692.87
Net Inc/(Dec) in Cash and Cash Equivalent 7.08 -7.15 -47.91
Cash and Cash Equivalents at End of the year 10.47 3.38 10.53

CONCLUSION

OYO has revolutionized the hotel booking and staying experience. It aims at reaching out to an
undifferentiated market segment by creating and delivering efficient value proposition to the
customers. The company is focusing on value creation for its customers by providing them the best
facilities and services at the best price. OYO has been successful in increasing its revenue over the
years and has established itself as a major hotel service provider.

OYO offers services for every kind of user starting from individuals, corporates to business
travellers. It has offerings such as “OYO Silver key” specifically designed for business travellers,
“OYO Townhouse” for the millennial travellers, “OYO Palette Resorts” for the holiday travellers
and so on. It is focusing on the mass as well as on digital marketing section aggressively for lead
generation and customer acquisition. It is strategizing to use all means of social media by targeting
potential customers based on their interest, behaviour and other parameters.

OYO is moving from hotel aggregator model to the franchising model and all hotels will be shifted
to the franchising model. Due to the shift the company is able to manage agreement, franchise
partners and hotel inventory more efficiently with fewer hotel staff.

OYO not only works as an aggregator but also invests in the hotel to make it more appealing and
customer friendly. It has invested in the hotels systems, tools and processes to enhance service
delivery, rather than marketing and discounting. As it is focusing more on the franchise model, it is
heavily investing in the hotel partners. OYO has every kind of product in its kitty including budget

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accommodations, luxury resorts, homestays and customized apartments and homes for the business
travellers.

REFERENCES

 Capitaline.com
https://www.capitaline.com/SiteFrame.aspx?id=1

 Kaushal, B. (2019) Oyo's 8-year-old Journey is a Quintessential Indian Legend in

the Book of Business World Stories (Infographic). Entrepreneur. Retrieved August
18, 2019, from:
https://www.entrepreneur.com/article/326623

 Bhasin, H. (2019) SWOT analysis of Oyo Rooms. MARKETING91. Retrieved

August 18, 2019, from:
https://www.marketing91.com/swot-analysis-oyo-rooms/

 ET ONLINE. (2018) ET Startup Awards 2018: OYO wins Startup of the Year.
Retrieved August 18, 2019, from:
https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/et-startup-
awards-2018-oyo-wins-startup-of-the-year/videoshow/65444155.cms?from=mdr

 Gupta, A. (2019) ANNUAL REPORT CARD 2018. Retrieved August 18, 2019, from:
https://www.oyorooms.com/officialoyoblog/2019/02/05/annual-report-card-2018-2

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 Kesharwani, S. and Kumar,V. On Your Own: An Oyo Story A Case Study. Retrieved
August 18, 2019, from:
http://www.ijemr.net/DOC/OnYourOwnAnOyoStory(325-331).pdf

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