Emerald Emerging Markets Case Studies

OYO Rooms: providing affordable hotel stays

Tripti Ghosh Sharma, Rohit Jain, Sahil Kapoor, Vijeyta Gaur, Abhishek Roy,
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 OYO Rooms: providing affordable
hotel stays
Tripti Ghosh Sharma, Rohit Jain, Sahil Kapoor, Vijeyta Gaur and Abhishek Roy
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We invented our business model to solve a customer problem of not getting a highly predictable Tripti Ghosh Sharma is
hotel experience across different hotel rooms, particularly in the budget travel space. In the last Assistant Professor at the
six months, we have clearly demonstrated that this model is a great fit for India, where budget Department of Marketing,
hotels are known for (always) delivering an inconsistent experience. (Ritesh Aggarwal, Founder Institute of Management
& CEO, 1 April 2015) Technology, Ghaziabad,
India. Rohit Jain,
On January 12, 2016, the management at OYO’s headquarters in Gurgaon, India, was Sahil Kapoor,
contemplating a lucrative option of widening its wings across the Indian subcontinent. OYO Vijeyta Gaur and
Abhishek Roy are
was on a look out for viable opportunities for creating affordable home stays across India.
Students, all at the
Almost a year back, when OYO secured funding of US$25m from Greenoaks Capital and
Institute of Management
many others with the motive of aggressively expanding its network of branded hotels in Technology, Ghaziabad,
India. India.
Convenience along with impeccable quality had always been two major attributes for
travellers looking for a pleasant stay. However, consistency in services had mostly been
unpredictable. This unpredictability in hotel stay experience was what OYO pledged to
mitigate by providing a standardized experience to its guests across its wide chain of
hotels. No matter what a guest agreed to pay for his stay, he never wished to tackle
problems like dirty linen, running taps, unclean floors, dilapidated buildings, payment
issues, sputtering air-conditioners, etc. The occurrence of such inefficacies resulted in a
trust deficit among guests. OYO wanted to abate such shortcomings. OYO promised
assurance of standardized quality without burning a hole in traveller’s pocket and that
made it emerge as one of the most popular hotel booking options amongst avid travellers
(Forbes, 2015). By 2014, OYO started gaining traction and travellers adopted OYO’s
website and mobile app to book rooms across various metro cities all over India. Customer
care centres were also established to deliver customized services. By early 2015, OYO saw
a huge potential in the unbranded hotel segment as less than 2 per cent of all hotels were
branded till then. OYO underwent an expansion spree and by December 2015, OYO had
its presence in more than 150 cities. Such a fast-paced expansion led to a slack in
operational effectiveness which translated to a slump in customer ratings from 4.2 to 3.9.
However, in late 2015, customers started sharing their experiences over the internet
through various consumer review platforms and over social media websites. OYO faced
severe criticism when negative reviews grew thick across all platforms. Guests expressed Disclaimer. This case is written
their grievances against ill customer services, inhospitable rooms and errant facilities. solely for educational
purposes and is not intended
Distaste for OYO services and facilities amassed subsequently. Moreover, owners of hotels to represent successful or
had started expressing their resentment with the way business was being conducted by unsuccessful managerial
decision-making. The authors
OYO, citing a number of concerns. Several doubts were raised on the way business was may have disguised names;
financial and other
being conducted by the hotel aggregator and even the business model adopted was recognizable information to
subject to scrutiny by experts. protect confidentiality.

DOI 10.1108/EEMCS-01-2017-0015 VOL. 7 NO. 3 2017, pp. 1-26, © Emerald Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES PAGE 1
 To sum up, a refrain similar to aggregator start-ups surfaced and from various quarters
doubts regarding OYO’s business model came to the fore. Was OYO living up to the
expectations it had promised to its customers? Under threat with such customer issues,
OYO’ management was pondering over the right strategic options for sustainability of the
business as also for growth in the long term. Also, one of the key areas OYO was
contemplating was the options available for recovering lost customers and hotel owners.
OYO improved its services to attain its previous rating of 4.2 by October, 2016.

The industry
Ever since the financial crisis of 2008, globally there had been a rise in the search for value
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consciousness among all. Consumers had become overly concerned about their spending
priorities. There was unwillingness to spend money (Euromoniitor, 2016) on lavish 5-star
hotels, and this phenomenon was quite stark in the case of emerging economies. There
was an increase in the percentage of people using branded budget rooms in USA, India
and China.
The Indian tourism and hospitality industry emerged as one of the key drivers for the growth
of the service industry in India. Considering the rich cultural and historical heritage spread
across the country, tourism in India had significant potential. The hotel industry had
managed a roughly stable business opportunity and 2015 witnessed slightly elevated
occupancy levels in India (Exhibit 1).
Hotels rooms’ online booking witnessed an upswing. The online sales volume registered a
growth of approximately 25 per cent because of surge in demand for both business and
leisure purposes (Exhibit 2). Another reason for such an uptick in online booking had been
the ease and convenience clubbed with competitive discounts offered on the mobile
platform. Lodging, in value terms, had grown by 11 per cent and was expected to reach
$7.12bn in 2015 at a CAGR of 5 per cent.
Buoyed by demand in both premium and mid-market segments, the overall hotel industry
in India had grown by 11 per cent to reach $6.67bn from $6.03bn in 2014-2015. India had
an estimated 0.17 million hotel rooms with a predicted addition of 60,000 rooms against the
demands of an economy growing at 7-9 per cent p.a. According to data released by the
Department of Industrial Policy and Promotion, hospitality was one of the sectors which
attracted the highest FDI. As per the forecast released on 1 April 2016, there was a need
to add a total of 21,599 rooms, and more rise in demand was anticipated, reflecting a
healthy growth of the hotel industry in the coming years (Industry outlook CMIE, 2016a).
Another reason for predicted strong growth was that the Ministry of Tourism was working
aggressively to increase the visits of foreign tourists (Industry outlook CMIE, 2016b). Also,
RevPAR (revenue per available room) of the organized sector had been increasing
although average room rates had dropped by $1.62 to close at $89.
The hotel industry was confronted with a plethora of issues. It was a labour-intensive
industry, called for huge investments and the majority of the players had less control over
the increasing churn rates, despite their initiatives towards delivering quality, as
competition was intense and customers were becoming increasingly demanding. Often
customers did not find the quality offered by hoteliers commensurate with the price they
paid. Hence, many hotel owners had started competing vehemently on price and had
begun providing discounts through online hotel aggregators.
Online aggregators played a pivotal role in digitally enabling the business of hoteliers’ by
providing convenient booking and check-in and check-out facilities for customers. Online
aggregators gave the hotel owners a platform where customers could make comparisons
on price and make an informed choice. However, switching cost for hotel owners was
negligible, as the online aggregators did not control the operation of the hotel. Therefore,
the bargaining power of aggregators was moderate. For moving up the value chain, hotel

PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 7 NO. 3 2017

 aggregators knew that they had to emphasize on quality improvement, thereby attracting
a larger customer base as well as more lucrative clients. Technological innovation along
with greater emphasis on quality of service would contribute to bringing about an alignment
between demand and supply.
Several players had started applying the concept of digital inventory management,
pioneered globally by OYO. Eventually, technology was expected to become a new asset
to improve the efficiency of the players. Moreover, OYO’s popularity and effective service
delivery made two of the well-established travel retailers Makemytrip.com and Goibibo.com
launch their own inventory management based brands in 2015, namely, Value⫹ and
GoStays, respectively.
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Major models in the industry

There were two basic models that were prevalent in the hotel industry in India which
essentially encompassed the modus operandi of all the hotels that operated back then. The
broadly classified models were as mentioned hereunder.

Online budget room aggregators

Online budget room aggregators (OBAs) formulated a contract with the hotel management
where terms of contract, regarding the number of rooms, negotiations regarding preferred
rooms of the hotel according to their location, price of the rooms, amenities that could be
provided by the hotel like TV, AC, telephone, room service, etc. were finalized and agreed
upon. Those rooms of hotel were pre-purchased by the aggregators and revenue
generated became the responsibility of the aggregator itself. However, it was ensured that
the terms of service responsibility were fulfilled by the hotel management.
Another model often adopted by such aggregators involved formulating a contract with the
hotel management of not pre-purchasing the rooms (Exploring Startups, 2015) but sharing
revenues on the leads/bookings provided by the aggregators (Exhibit 3).
The most important thing to consider in those two models was that the aggregators marketed
the rooms with their own names and not with the hotel’s name. Only the location of the hotel was
mentioned to the guests and not the name. The rooms were purchased on a negotiated price
with the hotel management and were offered to consumers at discounted rates. The price
range generally varied from approximately $15 to $90.1 (Exhibit 4). The benefit derived by the
hotel owner was an assured sum in exchange of a few rooms which otherwise might have
remained vacant. Major players operating under this model were:
Zo rooms. Started in 2013 by seven co-founders, Zostel Hospitality Pvt. Ltd. was designed
primarily for backpackers featuring dorms with bunk beds, board games and free Wi-fi as
its basic offerings (Yourstory, 2015). In November 2014, the founders ventured into another
project known as Zo Rooms that was aimed at providing standardized hotel stays enabled
by technology to cater to tech-savvy youths. Till February 2016 Zo Rooms had 20,000
properties listed on its portal.
Stayzilla. Founded by Sanchit Singhi, Yogendra Vasupal and Rupal Singh in Chennai in the
year 2005, Stayzilla entered into the budget hotel segment (Stayzilla, 2016; Thesmartceo
(2016)). It planned to list its value-based properties in Tier-2 and Tier-3 cities. Stayzilla used the
market approach model. It was a platform dedicated to both verified homestays and alternate
stays. By 2016, it had more than 55,000 stay options in more than 4,000 cities in India.
WudStay. Founded by Prafulla Mathur in 2015, WudStay started as a budget hotel
aggregator with presence in two cities and tie-ups with 15 hotels (Yourstory, 2016a). It also
acquired offline hotel aggregator Awesome Stays to expand its reach inorganically.
WudStay soon made its foray into the long-stay segment or paying guest accommodation
space. WudStay platform planned to touch 65 cities with an inventory of 10,000 rooms by
August 2016.

VOL. 7 NO. 3 2017 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3

 Online travel agencies
Online travel agencies (OTAs), as compared to OBAs, had relatively lesser stakes involved
where they entered into a contract with the hotel management for making their rooms
available on their portal/platform. For that, a straight commission was charged from the
hotel management for the bookings provided and all service- and marketing-related
activities were taken care of by the hotel management itself (refer to Exhibit 5 for details
regarding major players). For example, Goibibo generally charged flat 30 per cent on the
booking provided by them. That model often allowed OTAs to provide rooms at a cheaper
price than OBAs. OTAs even offered rooms at prices as low as $3 (Exhibit 6). Foreseeing
a business opportunity, major OTAs delisted OBAs like Zo Rooms and OYO from their
websites. The following sections detail the major players operating under this model.
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MakeMyTrip. Deep Kalra and Keyur Joshi founded MakeMyTrip in 2000 as an online travel
company that provided online travel services ranging from holiday packages to hotel
reservations and rail tickets (Economic Times (2016)). Operating as an online travel
agency, MakeMyTrip acquired 25 per cent of the market share in the OTA segment and
was giving tough competition to online hotel aggregators. It even launched its branded
hotel chain named Value⫹ to compete with OBA players.
Goibibo. Goibibo is an online travel aggregator founded in 2009 under the Ibibo group in
2009 (Yourstory, 2016b, 2016c). A team of five led by Ashish Kashyap founded it. Enabled
by technology, speed and service was the major yardstick that led to the success of Ibibo.
Although it entered late in the OTA segment, it came out strongly against the existing
players and had diversified into other avenues like bus booking and cloud-based hotel
solution.

OYO: Evolution
With a vision to create a platform to find affordable and standardized accommodation,
Ritesh Aggarwal who became the First Asian resident to be offered a Thiel Fellow-founded
Oravel in 2012 which later branched out to become OYO.
OYO started off with one hotel in Gurgaon in May 2013 and quickly crossed the mark of 100
rooms within a year. Later OYO received Series A funding in August 2014, Series B funding
in March 2015 and Series C funding by July 2015 from few of the key investors like Sequoia
Capital, Greenoaks Capital, Softbank, Lightspeed Venture Partners (LSVP) and DSG
Consumer Partners which helped OYO increase its national presence. To cut down on the
booking time, OYO in April 2015 launched an app that allowed the guests to book a room
in mere 5 s with three taps on their mobile screens. With a series of funding received from
the investors, OYO was able to expand its network to 100⫹ cities by August 2015 and it
crossed the mark of 1 million hotel check-ins by January 2016.
Later the same month, it marked its entry into the international market by entering Malaysia.
Malaysian hotel industry being – unorganized and trust-deficient had similar characteristics
to that of the Indian market. The entry into the international market displayed the global
ambition of the company. OYO was also featured at “Start Up India” policy launch by the
Prime Minister of India, Mr Narendra Modi on 16 January 2016. OYO featured in Forbes
global 30 under 30 Consumer Technology list in February and won a Quest Experience
Award for Best Use of Social Media for Customer Experience for being India’s most
responsive brand on Facebook with a 93 per cent queries resolved in ⬍30 min in March
2016. It was also featured in LinkedIn’s Top Attractors List in the month of June. Today OYO
has more than 70,000 rooms in 200⫹ cities (refer to Exhibit 7 for timeline of OYO).

Business model of OYO

The founder of OYO, Ritesh Agarwal, was always inspired by the idea of budget hotels at
a pocket-friendly price. The root of OYO was sowed with the incubation of Oravel by Ritesh

PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 7 NO. 3 2017

 at an incubation centre at Mumbai-based Venture Nursery. Oravel was all about connecting
travellers to budget hotels across major cities of India. But that did not solve the problem
of an unstandardized experience that existed across different budget hotels. The basic
nature of budget hotels, i.e. providing low-cost service, was majorly inconsistent and
variability in service was in stark contrast with the service offered in premium hotels where
standardization of services was the most essential. With the intention to address that gap
led to the inception of a technology-based hotel aggregator, OYO which offered consistent
experience of premium hotels at a budget price. Although OYO’s basic business model
was like other OBA players, which was blocking of inventory at a discounted price or using
a revenue-sharing model (Smart CEO, 2015), what made OYO different was that it invested
in its hotel partners’ rooms to develop them to a standard promised by OYO over its
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website/app (Exhibit 8 – explains the hotel listing process of OYO). That was of utmost
importance to OYO’s model to support its claim of standardized experience without burning
a hole in the guest’s pocket. On an average, OYO spent $161.29 to 322.58 (Economic
Times, 2015a) per room to support and help the hotel owners to raise the standard of the
hotel rooms. Basic offerings across all OYO were air conditioner, clean bed linen, TV, Wi-Fi,
clean washroom and complimentary breakfast.

Changing consumer preferences and OYO

There had been a remarkable shift in the behavior of the consumers in the recent years
in India. The change in behaviour was attributed to the change in needs and increase
in the disposable income of the consumers. As the GenY took to technology, they had
easy access to all the information through internet (Exhibit 9). These consumers were
therefore always on a hunt for products and services that were cheaper, faster and
better.
OYO had tailored its offerings to the rapidly changing consumer preferences to increase its
market presence. Also, OYO was present in all major metros, holiday hotspots like
Gangtok, Goa, etc. (BEF, 2016) and popular pilgrimage places like Banaras to cater to
different needs of its customers. Young consumers’ travel habits had gone through a
paradigm shift. They were now travelling not just for vacations but also for knowledge and
experience. Even when they travelled to offbeat locations, they always desired high-quality
stays. All these factors opened up a huge market opportunity for OYO to make its presence
felt in every nook and corner of country. Also, the customer was price-sensitive and the
same was reflected in their choice of hotel accommodation (Exhibit 10). Earlier, there had
not been any minimum standard associated with budget hotel accommodation, but the
same was to go through a transformation. By widening its presence pan India, OYO wanted
to not just be a traveller’s travel partner but to also be his lifestyle partner. Consumers’
choices varied substantially. If one wanted OYO for a night-out, someone else wanted it to
avoid a commute during night.
Thus, it was imperative upon OYO to keep up with the changing consumer preferences
through constant innovation and seamless service delivery. It also had to make its
presence felt substantially across all the channels that a Millennial associated himself
closely with. In addition, social media presence was another driving force to leave a mark
on a consumer’s lifestyle.
Thus, the crux of the matter laid at building the brand equity through increased brand
preference to garner higher rewards.

Monitoring service quality at OYO

OYO used a stringent 150-point checklist to bring on board a hotel property and it provided
six basic features in every room that it sold under its brand name. For hotel aggregators,
it was essential to set up a mechanism to ascertain the quality of service delivery from time
to time so that any threat to customer satisfaction or the brand identity could be nipped in

VOL. 7 NO. 3 2017 EMERALD EMERGING MARKETS CASE STUDIES PAGE 5

 the bud. OYO extended full support to the hotel owners so that they could increase their
operational efficiency and effectiveness. It provided technological support to hotel partners
and made them adept at accessing technology. Whenever a hotel was taken on board, the
hotel staff and the infrastructure went through a transformational process which included
revamping the hotel rooms and training the staff to reach a defined level of service
excellency. Moreover, a hotel partner was kept under constant vigilance through a
foolproof method developed by OYO through the process of internal auditing. The
procedure started with the identification of a list of hotels from which complaints mostly
generated. OYO had developed a 3C approach or the three crosses approach according
to which a cross was awarded to the hotel and a predefined weightage was assigned to
that cross depending upon the gravity of the complaint. A hotel with a cumulative weighted
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score of 20 crosses was struck down from the list of functioning hotels and OYO cut all ties
with it.
Weightage to lapses in service quality was assigned depending on the quantum of
detrimental effect it had on the customer experience. For example, shifting of rooms was
ascribed the highest weightage of four crosses (YourStory, 2016d). Apart from auditing,
OYO also kept a track of number of issues being generated from various hotels and the rate
at which they were being resolved by the hotel staff. Aided by technology the entire
process of monitoring and control was made fast and simple.
The auditing team did a root cause analysis with the help of technology and also helped the
hotel owners rectify their mistakes. Every three to four days, there was a strict audit for a
group of 40 hotels on a checklist of 30 points. There was a dedicated app that collected
relevant information from occupancy reports and customer feedback on a daily basis and
auditing was done based on the data thus collected. Moreover, the control team kept a tab
on the frequency of complaints made each day at a hotel and the rate at which those
complaints were resolved.
After the audit, the hotel rooms not adhering to set standards were designated as black
rooms and were made unavailable to the guests. If, however, a black room was allotted to
a guest beforehand, he was provided with an alternate room and the same was
communicated by OYO though a text message and it was imperative upon the hotel owner
to abide by the directions failing which the hotel was crossed off and OYO’ customer care
came to the guest’s rescue to allot him a better room.

Challenges facing OYO

There was a plethora of challenges that OYO had to take a close look at. Challenges arose
with respect to the stakeholders, i.e. the customers as well as the hoteliers. Issues in
service delivery and hotel management kept coming thick and strong and OYO had to be
on its toes to resolve every issue to protect its brand image (Exhibit 11).
“Their business is just to grab, grab and grab. They were unable to pay me the money for
the pre-purchased rooms, which they had committed to purchase for the next month”, read
one of the tweets from a Mumbai-based hotelier (Economic Times, 2016b).
That message and several other such inhibitions from hotel owners made it evident that
owners of hotels had started expressing their resentment with the way business was being
conducted by OYO. Irregularities in payment and not abiding to written contracts were a
few reasons which made the hoteliers think twice before continuing relations with OYO. It
was not that they disliked the business model or they could not realize the benefits accrued
from the aggregation business, but it was the inefficacy in the conduct of business that
invited such exasperation. Bitterness in relationship with the hoteliers could also be noticed
in hotel owners who dishonoured the contract to switch between the brands.
Revenue generation at an OYO-branded hotel was subject to the occupancy rate and the
rates decided in the contract terms. Though OYO provided stability to a hotel’s revenue

PAGE 6 EMERALD EMERGING MARKETS CASE STUDIES VOL. 7 NO. 3 2017

 generation, it did not give the hotel owner an opportunity to develop a brand of its own.
Moreover, OYO often slashed prices at its own will, giving the hotel owners lesser say,
making hoteliers apprehensive about brand dilution.
Also, 3-star hotels offering discount was not common because hoteliers feared brand
dilution. OYO ran the risk of providing rooms at discounted rates which was very harmful for
the hotel’s business. That too alienated hoteliers from signing up with OYO. Hotel owners
resorted to a variable tariff structure, i.e. during peak season, they increased their room
tariffs to rake in better profits. These decisions were not aligned to the original proposition
of OYO. OYO had pledged to provide constant rates all through the year and that often led
to hoteliers’ displeasure. Therefore, dynamic pricing which was a well-established norm in
the hospitality industry was not paid adherence to by OYO as its USP was low price.
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Moreover, OYO’s business model did not permit hotel brands to be promoted on its
website, making tracking the location of the desired hotel very tiresome for the customer.
OYO had to constantly invest in hotel properties to raise its standards to comply with the
prescribed offerings of OYO. In addition to investments in physical assets, training and
development of hotel staff was very crucial to deliver what OYO aimed to. Hence, a
constant source of investment in building properties and service personnel was essential
to ensure all the stakeholders could reap benefits from the ecosystem thus established:
I booked a room and paid in full but on the day when I was supposed to check-in, I got a call
from customer care of OYO that due to electricity failure they are shifting me to another hotel
(Which was not the case when I checked up with the hotel myself).On reaching Jaipur I tried
calling the number given by OYO for the new hotel but that number was out of service. I called
OYO Rooms again. They put me on hold on the pretext of finding out the details and I waited
for 15 mins but they kept me on hold. After 1 hr I got a room which was around 20 km from
railway station. Initially they had promised me a room near railway station. (Abhishek Chandra
about his experience with OYO).

Redressal of grievances had becoming crucial for OYO, as in the absence of the same, OYO
would have added to its existing losses of customers as also loss of hotel property. Hence, it
was imperative upon OYO to put in place an efficient backend support system that could
resolve issues 24 ⫻ 7. This called for installation of an able customer care or customer
complaint centre. This, of course, required investment and a constant monitoring mechanism.
Moreover, OYO spent around $7.52 towards customer acquisition on every customer but could
retain only 40 per cent of them which translated into major losses for the firm.

OYO 2.0 – new initiatives

With innovation, as one of its growth strategy, OYO swiftly moved up the value chain by forging
ties with India’s leading Telecom player, Airtel, to provide its guests faster internet connectivity
and direct-to-home services. That made the hotel stay more pleasant and promoted brand
loyalty. Also, it was observed that 40 per cent of the total guests that OYO had were women.
That led OYO launch a women-exclusive brand by the name OYO WE (Economic Times,
2015b). Assisted by an all women staff, OYO WE offered women-specific services like library
with women magazines, beauty-on-call service, etc. OYO converted an assortment of its
properties into OYO WE brand. OYO made hotel stays more hospitable by piloting OYO Café,
an aggregator platform which listed hotels’ food items under OYO Café brand. This would make
use of excess hotel inventory and would assist the hotel partners pad up their revenues.
OYO made booking through an app that included a three-step process (OYO Blog, 2015)
which cut down on the booking timing. Such was the app that it made hotel bookings in no
time and made the entire process effortless. After a mandatory sign up was made, all the
customer had to do was put his query in the search option and he would receive all the
required information about the hotels in the proximity (Exhibit 12). Post this, he only had to
tap the booking option and the deal was made, plain and simple. By 2016, OYO had close
to 1.5 million mobile app downloads.

VOL. 7 NO. 3 2017 EMERALD EMERGING MARKETS CASE STUDIES PAGE 7

 OYO took major initiatives to make the customer experience memorable and assisted the
guests in ways different from what prevailed in the industry then. One such initiative was
that OYO became the global first in early check-ins and allowed guest check-in at as early
as 6 a.m. Also, OYO launched couple-friendly rooms in 2016 to tap the market left
untouched since a long time. OYO forged ties with Airtel to provide HD digital TV in every
OYO branded rooms and OYO also partnered with Bioque for supplies of toiletries. Such
initiatives added to standardization and consistency in operational effectiveness. Such
measures helped gain customer confidence and increase brand equity.
On the promotions front, OYO invested a lot on advertising digitally. With the help of TVC
and other media communication channels such as Jai Hind, Father’s Day Celebration and
IPL Final Verbal Combat and A Salute to the heroes of 1965 war and OYO Explorer – Pune,
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OYO could reach to a wider audience. (It enjoyed a Twitter following of over 25,200
followers and a Facebook presence of over 361,121 fans by 2016).

Way ahead
Well-established industries are always invaded through disruptions and these disruptive
models either succeed to change the core concept of the industry or end up reshaping a part
of it. With expansion plans looming large, OYO was considering growth options to widen its
reach.
Also, the company thought that backward integration by facilitating a one-stop shop for
hotels to procure daily essentials would help OYO deliver long-term value to its vendors
and keep a tab on the quality of products provided to the guests. Partnering with state and
central government in enhancing the tourism industry would provide OYO a firm footing in
Keywords: India and might help it gain more traction amongst the travellers. OYO knew initial success
Marketing, could be deceptive and scaling up would face a plethora of challenges. It started its
Services marketing, rigorous expansion but did it overlook the quality of service? Had it been expanding at the
Strategic management/ cost of operative excellence? Would it be able to meet the expectations of the hotel
planning owners? And those of the consumers?

References
BEF (2016), “HOW is OYO catering to the changing needs of Millennials”, 16 April, available at: www.ibef.
org/blogs/how-is-oyo-catering-to-the-changing-needs-of-millennials (accessed 1 September 2016).
CrisilResearch (2016), available at: www.crisilresearch.com/industryasync.jspx?serviceId⫽20&
State⫽null#storyId#121854#sectionId#3535#newsFeedId#undefined (accessed 20 August 2016).

Economic Times (2015a), “Softbank invests Rs 630 Crore in OYO”, available at: http://economictimes.
indiatimes.com/industry/banking/finance/softbank-invests-rs-630-crore-in-oyo-rooms/articleshow/
48322379.cms (accessed 16 August 2016).

Economic Times (2015b), “OYO WE: budget hotels marketplace for OYO Rooms launches exclusive
brand for women”, 15 September, available at: http://articles.economictimes.indiatimes.com/2015-09-
15/news/66568601_1_women-travellers-itc-hotels-lady-travellers (accessed 03 October 2016).
Economic Times (2016a), “Lodging in India”, 16 April, available at: http://articles.economictimes.
indiatimes.com/2016-01-12/news/69704913_1_hotel-segment-hotel-chains-market-share/ (accessed
1 September 2016).

Economic Times (2016b), “Hotels check out of OYO, zo after unhappy stay”, 11 March, available at:
http://economictimes.indiatimes.com/industry/services/hotels-/-restaurants/hotels-check-out-of-oyo-
zo-after-unhappy-stay/articleshow/51351848.cms (accessed 03 October 2016).

Economic Times (2016c), available at: http://tech.economictimes.indiatimes.com/news/startups/

hotels-check-out-of-oyo-zo-after-unhappy-stay/51353624 (accessed 20 August 2016).

Euromoniitor (2016), “Lodging in India”, 3 August, available at: www.portal.euromonitor.com/portal/

analysis/tab (accessed 1 September 2016).

Euromonitor International (2016), available at: www.portal.euromonitor.com/portal/statistics/tab

(accessed 20 August 2016).

PAGE 8 EMERALD EMERGING MARKETS CASE STUDIES VOL. 7 NO. 3 2017

 Exploring Startups (2015), “Challenges in room aggregation business in India”, 9 December, available
at: www.exploringstartups.com/challenges-in-room-aggregation-business-in-india/ (accessed 16
August 2016).

Exploring Startups (2016), available at: www.exploringstartups.com/challenges-in-room-aggregation-

business-in-india// (accessed 24 September 2016).
Forbes (2015), “Why a 21-year-old is building OYO as an Uber (and not an Airbnb) for hotels in India”,
6 August, available at: www.forbes.com/sites/saritharai/2015/08/06/why-a-21-year-old-is-building-oyo-
an-uber-and-not-an-airbnb-for-hotels-in-india/#3a537c837350 (accessed 16 August 2016).

Industry outlook CMIE (2016a), “Capacity addition in hotels industry improve in June 2016 quarter”,
11 August, available at: https://industryoutlook.cmie.com/kommon/bin/sr.php?kall⫽wshreport&nvdt⫽
20160811121627446&nvpc⫽055000000000&nvtype⫽INSIGHTS&icode⫽0101040100000000 (accessed
Downloaded by CHRIST (Deemed to be University), Doctor MOOVENDHAN VELLASWAMY At 03:19 04 February 2019 (PT)

16 August 2016).

Industry outlook CMIE (2016b), “Foreign tourist arrivals to rise by 7% in 2016-2017”, 22 July, available at:
https://industryoutlook.cmie.com/kommon/bin/sr.php?kall⫽wshreport&nvdt⫽20160721130431633&
nvpc⫽055000000000&nvtype⫽ANALYSIS⫹%26⫹OUTLOOK&icode⫽0101040100000000 (accessed 16
August 2016).

OYO Blog (2015), “The making of the OYO APP”, 12 December, available at: www.oyorooms.com/
officialoyoblog/2015/12/12/the-making-of-the-oyo-app (accessed 3 October 2016).
OYO Blog (2016), available at: www.oyorooms.com/officialoyoblog/2016/07/06/understanding-
consumer-behaviour-through-data-science-at-oyo (accessed 25 September 2016).

Smart CEO (2015), “A business model for budget hotels”, 16 April, available at: www.thesmartceo.in/
starting-up/a-business-model-for-budget-hotels.html (accessed 16 August 2016).

Stayzilla (2016), “Lodging in India”, 16 April, available at: www.stayzilla.com/about/ (accessed

1 September 2016).

Thesmartceo (2016), “Lodging in India”, 16 April, available at: www.thesmartceo.in/starting-up/

bringing-budget-hotels-online.html (accessed 1 September 2016).

Yourstory (2015), “Lodging in India”, 16 April, available at: https://yourstory.com/2015/04/zo-rooms/

(accessed 1 September 2016).

Yourstory (2016a), “Lodging in India”, 16 April, available at: https://yourstory.com/2016/01/wudstay-

business-model/ (accessed 1 September 2016).
Yourstory (2016b), “Lodging in India”, 16 April, available at: https://profiles.yourstory.com/
organization/goibibo.com/ (accessed 1 September 2016).

Yourstory (2016c), “Lodging in India”, 16 April, available at: https://yourstory.com/2015/08/goibibo-

djubo/ (accessed 1 September 2016).

YourStory (2016d), “OYO founders admit, without reservations, there’s room for improvement”,
25 April, available at: https://yourstory.com/2016/04/oyo-customer-service/ (accessed 16 August
2016).

VOL. 7 NO. 3 2017 EMERALD EMERGING MARKETS CASE STUDIES PAGE 9

 Exhibit 1. Average occupancy rate in India

Table EI
Year 2011 2012 2013 2014 2015

Average hotel occupancy rate 62.1 60.9 60.4 60.4 61.3

Source: CrisilResearch (2016)

Exhibit 2. Sales data for lodging in India

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Table EII Lodging sales: value 2010-2015

INR millionm 2010 2011 2012 2013 2014 2015

Hotels 2,10,432.90 2,37,284.30 2,61,600.00 2,90,379.80 3,25,876.40 3,65,305.20

Short-term rentals – – – – – 138.50
Other lodging 49,790.90 54,883.30 59,662.70 65,634.40 71,688.60 77,161.20
Lodging offline 2,44,105.70 2,72,856.60 2,98,534.80 3,28,819.90 3,64,345.30 4,02,582.10
Lodging online 16,118.10 19,311.00 22,728.00 27,194.30 33,219.70 40,022.70
Lodging 2,60,223.70 2,92,167.60 3,21,262.70 3,56,014.20 3,97,565.00 4,42,604.90

Table EIII Lodging online sales: value 2010-2015

INR million 2010 2011 2012 2013 2014 2015

Lodging direct 8,282.30 9,753.10 11,299.30 14,051.60 17,043.30 20,598.00

Lodging intermediaries 7,835.80 9,557.90 11,428.70 13,142.70 16,176.50 19,424.80
Lodging online 16,118.10 19,311.00 22,728.00 27,194.30 33,219.70 40,022.70

Table EIV Hotels’ online sales: value 2010-2015

INR million 2010 2011 2012 2013 2014 2015

Hotels Direct 7,655.10 9,028.70 10,464.00 13,067.10 15,967.90 19,361.20

Hotels Intermediaries 7,522.20 9,206.60 10,987.20 12,486.30 15,316.20 18,265.30
Hotels Online 15,177.30 18,235.30 21,451.20 25,553.40 31,284.10 37,626.40

Table EV Other lodging online sales: value 2010-2015

INR million 2010 2011 2012 2013 2014 2015

Other Lodging Direct 627.20 724.50 835.30 984.50 1,075.30 1,234.60

Other Lodging Intermediaries 313.60 351.30 441.50 656.30 860.30 1,157.40
Other Lodging Online 940.80 1,075.70 1,276.80 1,640.90 1,935.60 2,392.00
Source: Euromonitor International (2016)

PAGE 10 EMERALD EMERGING MARKETS CASE STUDIES VOL. 7 NO. 3 2017

 Exhibit 3. The online budget room aggregator (OBA)

Table EVI
Aggregator Founded Cities Hotel Funded Funded by

OYO 2013 149 4000⫹ $125m SoftBank, Sequoia Capital, Lightspeed Venture
Zo 2014 54 800⫹ $47m Tiger Global and Orios Venture
Stayzilla 2010 4000⫹ location 30,000⫹ properties $20m IAN, Matrix, Nexus
Treebo 2015 8 24 $6m Matrix Partners
Fab hotels 2015 29 200⫹ $5m Accel Partners
WudStay 2015 2 40 $3m Mangrove Capital
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Source: Exploring Startups (2016)

Exhibit 4. Competitor pricing–OBA

Table EVII
Hotel aggregators Pricing

Online budget room aggregator OYO $15 to $90.2

WudStay $15 to $68
Treebo $15 to $45
Zo Rooms $15 to $60
Stayzilla Min $22.6
Source: Created by authors from many sources, www.business-standard.com/article/pf/how-to-
choose-a-hotel-115110100735_1.html/ (accessed 24 September 2016)

Exhibit 5. Online travel agency– details about major players

Table EVIII
Aggregation model Company Founded Cities Hotels Funding

Value ⫹ Make My Trip (2000) 2015 35 1,000 IPO/Stock

TG Rooms and Stays Yatra (2006) 2015 60 1,000 Funding received–$105m
Go Stays Goibibo (2009) 2015 99 1,384 Subsidiary of Ibibo Group
Source: Exploring Startups (2016)

Exhibit 6. Competitor pricing-OTA

Table EIX
Hotel aggregators Pricing

Online travel agency

MakeMyTrip $5 to $451
Cleartrip $3 to $225.6
Goibibo $3.7 to $207.5
Source: Created by authors from many sources, www.business-standard.com/article/pf/how-to-
choose-a-hotel-115110100735_1.html/ (accessed 24 September 2016)

VOL. 7 NO. 3 2017 EMERALD EMERGING MARKETS CASE STUDIES PAGE 11

 Exhibit 7. The timeline of evolution of OYO

Table EX
Year Month Details

2012 February Ritesh Agarwal, First Asian resident to become a Thiel Fellow-founded
Oravel Stays
2013 May Oravel pivots to OYO Rooms with 1st hotel in Gurgaon
2014 March OYO crosses 100 rooms
2014 August Series A funding received
2015 March Series B funding received
2015 April OYO launches its app and allows guests to book a room in mere 5 s
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with 3 taps on their mobile screens

2015 July OYO crosses 10,000 rooms
2015 July Series C funding received
2015 August OYO expands network to 100⫹ cities
2016 January OYO crosses one million hotel check-ins
2016 January OYO launches in Malaysia
2016 January Featured at “Start Up India” policy launch
2016 February OYO expands network to 50000 rooms
2016 February Ritesh Agarwal features in Forbes global 30 under 30 Consumer
Technology List
2016 March OYO is India’s most responsive brand on Facebook with a 93 per cent
queries resolved in ⬍30 min
2016 June OYO featured in LinkedIn’s Top Attractors List
2016 June OYO grows to 70,000 rooms in 200⫹ cities
Source: Company’s document

Figure E1 The timeline of evolution of OYO

2016
Ritesh
2013 2015 included
Oyo 2015 2015 New OYO 2016 in
launched Series B Series C logo and OYO hits Forbes’
in funding funding look 1 million 30 under
Gurgaon received received launched check-ins 30 list

2014 2015 2015 2016 2016

Series A Oyo app OYO OYO OYO
funding launched forays launched partners
received into in with
100th city Malaysia IRCTC

Source: Company’s Document

PAGE 12 EMERALD EMERGING MARKETS CASE STUDIES VOL. 7 NO. 3 2017

 Exhibit 8. Listing process
Table EXI
Listing process of aggregation sites
Step1 A dedicated team discovers
potential OYO properties
remotely on internet or
through the foot on the
street team which maps the
entire city typically the case
in tier 2 and 3 cities
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Step4 Oyo negotiates room rates
for the property in which it
pays the hotels and then
lists different rates for the
consumer
Field Strength: Profile Fresh Graduates from
CLOSE TO 100 B-School, Engineering
AVERAGE College or with 1-2 years of
AGE: 20-25 work experience in field
sales, preferably outside the
hospitality sector
Source: Economic Times, http://economictimes.indiatimes.com/small-biz/startups/why-executives-are-quitting-cushy-
jobs-at-large-companies-to-join-aggregators-like-oyo-zomato-and-practo/articleshow/49098497.cms
Step2 Once a property is identified
a business development
manager of that city talks to
the hotel owner. Introduces
OYO and explains the model
Step5 BD manager prepares a
transformation audit with
estimated expenses and a
list of vendors (for a 48-hour
turnaround time) at another
meeting with a hotel owner.
Owner can use own vendors
too
Step8 The relation is handed over
to the operation staff that
ensures that the standards
set are maintained
VOL. 7 NO. 3 2017
Step3 OYO conducts the detail audit
of the property that involves a
250-point check list to look for
variations to make it an OYO
room with time and work
involved. E.g.: A 6-inch
mattress, transparent bucket
and mugs in washroom,
stainless steel dustbins, etc
Step6 A transformation executive
ensures a property is trans
formed and then works
together with owner
Step7 OYO conducts a post
transformation audit through
cluster managers in each city-
one for every 20 properties in
large cities, who gets the hotel
to go live in its website. A
photographer assigned takes
picture to go along with hotel
profiles
EMERALD EMERGING MARKETS CASE STUDIES PAGE 13

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Table EXII
28% Travellers book a hotel
after arriving in the city
INDIA ON THE MOVE
294 maximum rooms night
booked by a user
Note: Recreated from OYO Blog
Source: OYO Blog (2016)
PAGE 14 EMERALD EMERGING MARKETS CASE STUDIES
Exhibit 9. Growth of internet users
Figure E2
GROWTH OF INTERNET USERS vs MOBILE
INTERNET IN INDIA 2012-16
(Figures in Millions)
500
400
300
200
100
0
Mobile Internet Total Internet Users
Mobile Internet Users In India Urban vs Rural
(Figures in Millions)
400
300
200
100
0
1 2 3 4 5 6 7 8
Urban Rural Total
Source: Daseinfo /http://dazeinfo.com/2016/02/08/
mobile-internet-users-in-india-2016-smartphone-
adoption-2015/Accessed on: 20-09-16
Exhibit 10. Customer Behaviour–OYO
Transforming travel
36% over 1/3 bookings are 36% Business Travel continues Customer preference for OYO now
driven by couples to be a top driver for hotel cuts across city limits
demand Our most avid customers have
stayed with us in 31 cities
OYO IS INCREASINGLY INDIAN HOTELS GLOBAL ON-DEMAND HAS ARRIVED
BEING USED FOR LONG- DEMAND 1 OYO booked every 3 Secs
STAYS Top countries: Malaysia, UAE,
183 days in a row USA, Nepal, Singapore, UK
VOL. 7 NO. 3 2017
 Exhibit 11. Issues of OYO

Table EXIII
Major Pain Points

Deep Discounting Offering rates lower than hotel’s published tariff

Unrealistic Promises Offering services (pick-up, complementary offers, etc.) not promised
by hotels
Customer Quality Discounting leading to day use or per our booking that is against the
hotel policy
Loyalty Frequent guest booking with the hotel were not amused on finding
lower prices on portals
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Unpaid Dues Payments for pre-purchased rooms were not made, which meant
denial for others even as the pledged rooms were unsold
Note: Recreated
Source: Economic Times (2016)

Exhibit 12. Booking through APP-3way process

Table EXIV
Book OYO in 3 taps

Open the APP SEARCH SMART BOOK ROOMS

The customers enter the name of place
where he wants to stay and gets all the
possible hotel options in its proximity
Note: Recreated from OYO Blog
Source: OYO Blog
The customer book the room of
his/her choice by tapping and
deal is made

Corresponding author
Tripti Ghosh Sharma can be contacted at: tsharma@imt.edu

VOL. 7 NO. 3 2017 EMERALD EMERGING MARKETS CASE STUDIES PAGE 15