OYO - A New Global Chain of Hotels Emerges

For the exclusive use of E. Escobar, 2021.
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TB0577
Kannan Ramaswamy
Ryan Hellpap
OYO: A New Global Chain of Hotels Emerges

I always had that fire in my belly to do something different so that I could look back and feel proud
about it. It was never about making it big, but about finding something that I believed in and could
commit to for years to come.
Ritesh Agarwal
In the middle of the sweltering summer of 2019 in the desert city of Las Vegas, Nevada, news broke that OYO, a
relative newcomer to the hotel business, had inked a deal in partnership with Highgate, a New York investment
company, to buy the Hooters Hotel in Las Vegas. Priced at $135 million and ofering 657 rooms, it would be
the largest property under the OYO brand in the United States, and a clear signal to its competitors that OYO
had indeed arrived in the U.S., ready to take on some of the industry Goliaths.
In fve short years since its launch in India, OYO had grown to operate 18,000 properties with 458,000
rooms in 500 cities spread across eight countries. Te United States was its latest entry. It had already accumulated
over 50 hotels across 35 cities under its umbrella, and announced plans to become one of the largest hotel chains
in the world. “We want to be, by 2023, the biggest hotel chain, not just by rooms, but by sales, franchise fees,
bottom line, rental yields, internal rates of returns (IRR), any role that you can imagine,” Agarwal had remarked.
Analysts were skeptical, however, because OYO was already feeling the headwinds of expansion, both at home
and abroad.
In India, there was widespread discontent among OYO franchisees who felt that they were getting only a
fraction of the revenues that OYO had projected. Tey revolted against the steep discounts that the company was
ofering on some of its properties just to ensure higher occupancy rates. In countries like the UK, Japan, and the
U.S., there were questions about the suitability of the OYO business model to settings where conditions on the
ground were remarkably diferent from the emerging market landscape that OYO was more used to addressing.
Would its competitive advantages, honed in emerging markets, be efective in the developed world where it was
looking to compete? Would it be able to quickly access the deep knowledge of local markets to provide the high
level of customer centricity it had developed in India and similar countries? Would it be able to scale its oferings
in the developed world while maintaining it central ethos of cost control and efciency? Tese were the questions
that loomed large as plans for the U.S. expansion gained momentum.
India: Te Land of Opportunity

OYO was born in India in 2013, when Ritesh Agarwal decided to drop out of college and set up an aggregator
to serve the mid-tier hotel market in the country. Te opportunity appeared immense. Reports suggested that
this segment of the market spanned over one million rooms and was largely unorganized, with most operators
running single properties that were unconnected to any large networks. Te budget hotels faced the same challenges
that confronted every other business in India, ranging from inadequate access to risk capital, relative dearth of
professionally trained talent especially in semi-urban and rural locations, and infrastructure shortcomings that
stifed business growth (see Exhibit 1).
Copyright © 2020 Tunderbird School of Global Management, a unit of the Arizona State University Knowledge Enterprise.
Tis case was written by Professor Kannan Ramaswamy and Ryan Hellpap, for the sole purpose of providing material for class
discussion. It is not intended to illustrate either efective or inefective handling of a managerial situation. Any reproduction, in
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This document is authorized for use only by Emmanuel Escobar in INB 5822 Summer 2021 taught by RAMDAS CHANDRA, Nova Southeastern University from May 2021 to Jul 2021.
Exhibit 1. Proportion of Branded Hotel Rooms to Total Rooms Available
Source: “Softbank Looks to Oyo after WeWork Setback. Financial Times, Sept. 18, 2019; India: http://
www.portal.euromonitor.com.ezproxy1.lib.asu.edu/portal/analysis/tab.
Given the diversity of owners and locations, the segment lacked uniform service standards, resulting in
an uneven customer experience. Many of the hotels were family-operated with varying standards for comfort,
hygiene, and convenience. Since they were fairly small ventures operating on shoestring budgets, they also lacked
the requisite capital to refresh their oferings periodically. Teir relatively remote locations also hobbled their
ability to get the sort of customer mindshare that established, branded hotels in the cities were able to leverage.
Tis segment of the hotel industry seemed ripe for testing new ideas. Exhibit 2 provides comparative data on
country-specifc attributes in locations where OYO hotels were located.
Ritesh Agarwal developed an intimate understanding of the formidable challenges facing the small and
medium-scale hotel entrepreneurs in India from an early age. In contrast to the majority, who saw disarray and
fragmentation, he saw a golden opportunity to launch his own venture. He had nurtured an entrepreneurial
streak right from childhood when he started selling SIM cards for mobile phones as a teenager. His father owned
and operated a small grocery store in rural India. Upon graduating from high school, Ritesh moved to a larger
city that had a reputation as a hub for coaching and cram centers that trained young aspirants who wanted to sit
for the entrance exams to the Indian Institutes of Technology. Although Ritesh was enrolled in one such center,
he spent most of his time sharpening his skills in computer programming, while at the same time writing an
encyclopedia on Indian engineering colleges and coaching institutes. Te encyclopedia eventually became a
bestseller and generated enough money to allow Ritesh to travel to Delhi to explore the world of entrepreneurship.
During these frequent trips, he chose to stay in budget motels and paying guest accommodations, and soon
started to develop keen insights about the mid-tier, unbranded hotels that catered to cost-sensitive travelers. He
eventually moved to Delhi to start a company of his own, one that would target bed-and-breakfast stays that he
had grown to understand quite well. Oravel Stays was born as an aggregator platform for short to mid-term stays
targeting budget travelers who preferred private rooms, serviced apartments, and bed and breakfasts.
Given the fragmented market, diverse geographic locations, and the lack of recognizable national brands
in the budget and mid-market range of hotels, Ritesh fgured that discoverability was the key obstacle that stood
in the way of success for the owners of such properties. In short order, he obtained venture capital funding and
was hoping to generate enough revenues through referrals by building a two-sided platform where hotel owners
could list their properties, and travelers could discover an array of properties at various price points that would ft
their budgets. However, Oravel Stays was a fop because there were several other aggregators who were ramping
up with more extensive portfolios of available hotels that squarely addressed the discoverability problem. It
was only then that Ritesh realized that predictability was a far greater stumbling block than discoverability. He
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reasoned that although platforms could make it easier for potential hotel guests to fnd properties, the platforms
themselves could not promise a reliable customer experience at the property that they were listing.
Exhibit 2. Country Rankings on Institutional and Contextual Dimensions
Simply put, travelers who booked properties based on the information available on an aggregator’s platform
could not rely on a predictably acceptable standard of convenience, comfort, and service at each location. It was
at this critical juncture that fortune intervened, and Ritesh was selected for a Peter Tiel scholarship, the frst
Asian entrepreneur to receive the much-coveted honor. Te scholarship came with seed money of $100,000 and
the opportunity to be mentored by Peter Tiel, the founder of storied companies such as PayPal. Launching at
scale and ramping up quickly were the lessons from his mentorship experience that infuenced Ritesh the most.
When he returned, he was determined to recalibrate his platform approach and launch a new company. OYO
Rooms was born.
OYO Rooms: Te Modus Operandi

OYO Rooms was founded to solve a problem that I personally experienced as a traveler. While
travelling extensively across the country on a minimal budget, I always had unpredictable, less-than-
satisfying experiences, all the way from booking to check-out. I felt that there was a huge need for
quality hotels in the budget segment in our country. Therefore, the idea of offering a standardized
experience to a guest at an affordable price was born and OYO Rooms was set up.
Ritesh Agarwal
Te launch of OYO Rooms (OYO stands for “On Your Own”), unlike its predecessor Oravel, was focused more
on the predictability challenge rather than discoverability. Ritesh realized that the company could go much
farther by ensuring a predictable service experience to its customers. However, a major change in predictability
would require an equally major change in the way OYO approached the owners whose properties it was listing.
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Since the main touchpoint was the staf at the property itself rather than OYO personnel, Ritesh had to convince
the owners to adopt service standards that he could promise to OYO customers. As the frst step, he set out to
convince property owners to bring their hotels under the OYO platform.
Te initial value proposition that OYO ofered the budget hotel owners included a guarantee to increase
occupancy, enhanced user experience that would increase customer loyalty, and access to a larger pool of customers
because of increased discoverability. On the customer side of the platform, OYO was obsessed with delivering a
predictable customer experience that was consistent with the budget price point. Despite its obvious attractiveness
to mom-and-pop hotels, owners were quite reluctant to sign up with OYO.
OYO wanted owners to guarantee availability of rooms at a fairly low room rate, and also to invest in raising
the appearance and comfort standards of the physical premises. Owners were reluctant to make the additional
investments, especially given the fact that OYO did not have much of a track record in the business. Ritesh
eased some of those concerns by ofering an upfront payment for hotel rooms that would be set aside for OYO
customers, and subsequently arranged for fnancing of hotel upgrades as well. Te basic standards that were
mandatory for an OYO room included amenities such as air conditioning, comfortable beds and linens, television
sets, clean restroom facilities, adequate toiletries, and free Wi-Fi access. A stickler for process, Ritesh developed a
protocol of standards that was used to audit facilities and their readiness to be listed for use by OYO’s potential
customers. “Standardization is our core ofering. We have left no stone unturned to ensure that it is adhered to
across all properties. Tis has been made possible by the detailed processes and technologies developed in-house.
For instance, we have a detailed 200-point checklist which the partner hotels need to fulfll before they can
come on board as an OYO hotel. Tis phase is called transformation. Tis covers points as granular as changing
the lighting in a room to a particular color/lumen, to changing the thickness of mattress, to even adopting a
particular quality for all the linen,” Ritesh observed in an interview about OYO operations. OYO soon secured
a stable source of suppliers who were capable of implementing its standards across the country, and therefore
could more accurately price the cost of the upgrades. Te company fashioned an e-bidding program that allowed
hotel owners to procure supplies at much lower prices since they were able to access the scale benefts that OYO
had created for owners through its platform. Tese benefts spread to construction costs as well, and ofered
owners the ability to solicit competitive bids for their upgrading projects that could be delivered at a fraction of
the cost and often in a much shorter time frame than they would have been able to accomplish independently.
In parallel, the company mounted a massive efort to harness the power of its superior platform capabilities,
including its data analytic capabilities, digital experience capabilities, and customer relationship management
(CRM) acumen. Ritesh realized the crucial role that technology could play in uniting the hotels into a coherent and
standardized ofering for budget-minded customers. Right from the start, investments in technology targeted four
key stakeholders—the hotel owners, the customers, OYO property managers, and OYO management—because
Ritesh believed that superior analytical capabilities would be vital to uncovering non-intuitive insights, especially
in a disparate market such as India. Te team grew to encompass data scientists, computer programmers, as well
as AI experts. Deep analytical capabilities in real time allowed the company to spot trends that were emerging
with booking rates and browsing behaviors associated with specifc locations, thus providing the company the
ability to dynamically price its properties much the way airlines priced seats on their planes. Routine functions
such as cash operations, check-ins, and physical payments were replaced with technology solutions that ofered
greater degrees of freedom, both to the users as well as the property managers. Not only did these advances save
operating expenses, they also allowed owners to track the performance of their properties in real time.
Piggybacking on India’s boom in wireless internet access and the pervasiveness of smart phones, OYO
launched a mobile app that allowed customers to book a hotel room in three basic steps, complete with
automated confrmation and a payment completion process. Accomplishing this in the midst of an emerging
market challenged by spotty telecommunication and banking infrastructure was no mean feat. Te OYO app,
it was claimed, could complete a booking for a customer in four seconds, compared to an online marketplace
that took about a day. OYO then moved very heavily into advanced technologies, such as machine learning and
natural language processing, to further its competitive prowess. “Trough AI and machine learning, we look at
multiple metrics from time of day, weather, location to local events, to be able to learn more and more about
what kind of a room a customer prefers, and what are the search results the customer is most likely to appreciate,”
said OYO CTO Anil Goel, underscoring the potential for extracting greater value from the volumes of data that
the company was capturing.
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Amidst the furry of the initial expansion years, Exhibit 3.

Ritesh also realized that OYO was going to have to
contend with imitators and copycats. Te margins
were sizable and there was a wide swath of the market
in the mid and low tiers that was quite fragmented (see
Exhibit 3 on market share above). Te more established
chains were uninterested in expanding out of their top-
tier focus despite the booming demand at the mid-tier
and budget segments. Soon, new entrants appeared.
Companies such as GoStays, Zip Rooms, Treebo,
Red Doorz, Wudstay, among others, launched almost
identical services in other regions. Sensing the rising Source: 1 Bhushan, Sudhanshu. “Economics of the Indian
intensity of competition, Ritesh started pushing for a Hotel Industry—An Overview: A Global Benchmarking
franchise and management model (called “manchise”) Across Diferent Segments of Hotel Oferings and Mapping
under which OYO would take operational control of the Growth Trajectory of the Industry.” Te Indian Hospitality
Industry, 2017; 2 Income and Expenditure: India 2019. https://
the hotel and provide the owner a guaranteed rate of www-portal-euromonitor-com.ezproxy1.lib.asu.edu/portal/
return. In contrast to the concept of branded chain analysis/related.
franchises prevalent in developed countries where the
franchisee gets branding privileges and know-how in exchange for franchise fees, OYO ofered a hands-on,
technology-assisted operation with guaranteed occupancy rates. Tis aforded OYO a bit more control and went
a long way in ensuring that its properties delivered a standardized customer experience.
Soon, OYO was ofering to take over the entire kitchen operations of its franchised and leased operations and
was generating roughly 25% of its revenues from food. When the number of its franchises started to grow, OYO
launched its own OYO Skills Institute where it provided training for frontline staf so that a readily deployable
talent pool was available. It designated service captains, well-trained staf with superior customer-facing and
problem-solving capabilities, to oversee clusters of hotels that were located in close proximity to each other.
Tese captains often provided oversight and assistance to the regular staf who were deployed at each property
and were primarily geared towards solving bigger customer issues as and when they arose.
By 2017, OYO had distanced itself from the competition,

Exhibit 4. Annual Room Growth
established a good brand reputation in India, and was attracting
many owners who were migrating from online travel agencies such
as Makemytrip and Yatra, which were huge aggregators in the hotel
business in India, ofering services on par with U.S. peers such as
Kayak, Expedia, and Travelocity. Ritesh believed that OYO had
Source: https://www.oyorooms.com/ofcialoyo
tuned the model enough to be confdent in ofering a 100% increase blog/2019/02/05/annual-report-card-2018-2.
in revenues and at least 70% occupancy to owners who wanted to
commit to a franchise agreement. It had over 52,000 rooms in its network, marking a 11x increase in rooms over
the prior year (see Exhibit 4 on room growth). It had attracted investments from some of the leading venture capital
companies such as Lightspeed, Sequoia Capital, and Softbank. Te stage seemed to be set for global expansion.
OYO: Going Global

OYO tested international waters by launching in Malaysia in late 2015 and found the experience quite positive
and rewarding. “Many travel markets across the world have the same characteristics as here in India—trust
defciency, unorganized supply, and the love for travel,” Ritesh observed at the time. Harshit Vyas, a member of
the launch team in Malaysia observed, “…we had a fair number of challenges—starting from understanding and
adapting to a new cultural and social environment, fnding the right talent, understanding travel patterns of a
new demographic, and trying to overcome language barriers while still building the local team. Te consumer
behavior in Malaysia is quite diferent from India. But the team had a great time customizing product features
to suit the local demand without digressing from the core product.” In retrospect, the foray into Malaysia and
neighboring Nepal seemed to be more a testing of the waters with respect to global expansion. Focused global
expansion started getting underway in 2018 with the company launching OYO in China, Indonesia, Japan,
UK, and the UAE.
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Voyage to China
China had proven a very tough nut to crack, even for well-established frms such as Uber, Amazon, and Google, to
name a few. Te typical challenges ranged from difculties in navigating regulatory hurdles, the rapid emergence of
local rivals, and the ubiquitous cultural diferences that seemed to stymie the eforts of even the hardiest of global
companies. Undaunted, OYO set its sights on China with a launch strategy ready for execution in December of
2017. Ritesh reasoned that OYO would treat China like its home market and focus on a hyperlocal approach
to establishing itself in that country. Te company had a capital base of between $150 million to $200 million
at the time when he discussed his China plans with Masayoshi Son, the legendary venture capitalist behind
Softbank, OYO’s primary investor. While Ritesh suggested that they should consider expanding into China in
a few years, Son advised that OYO could take about $50 million and craft a China strategy a lot sooner. Ritesh
decided to follow his advice and craft the China strategy.
China had close to 52,000 budget motels in 2017 (see Exhibit 5 hotel statistics by country), and a large
number of them were unbranded properties that were owned and operated by local owners. Only 19% of the
hotel rooms available were controlled by large hotel chains, a very small proportion compared to Europe and the
U.S., where the number varied from 40% to 70%. Te market was wide open to those who could navigate the
infrastructure issues that limited growth in the towns and villages that were far removed from the main cities.
Ritesh decided to enter like a local would by asking how a Chinese-based OYO equivalent would attack the
Chinese market. Tis approach helped focus the company’s attention on the basics of the business model that
had already been tested in India. OYO decided to hire local staf and did not insist on English profciency the
way many foreign companies had. As of 2019, only 20 of its staf of 6,000 in China spoke English. Local OYO
captains managed between three to ten hotels, much like they did in India. Te fundamental model still required
that all properties conform to stringent décor and convenience standards that the company had established before
they were fully operational franchisees. Much of its addressable market looked very much like it did in India, so
much so that Ritesh started to refer to both India and China as OYO’s home markets. Sam Shih, the COO for
OYO in China observed, “Tere is a large blue ocean market beneath the iceberg, which is undoubtedly exciting
for us. Tese small independent hotels with fewer than 80 rooms are scattered around lower-tier cities in China.
Tey are not branded; they lack experience in operations, and display low-proft margins. Tose are the major
long-standing pain points for owners but represent an opportunity for OYO to add value.” OYO targeted the
frst-tier cities to begin with, while at the same time planting some roots in the second and third-tier destinations
that were seeing an explosion in middle-class travel.
Exhibit 5. Trends in Growth of Luxury, Mid-Market, and Budget Hotel Population by Country
Source: Euromonitor.
Te customer segment that it pursued was the same as in India—middle-income wage earners who aspired
to travel in reasonable comfort albeit on a modest budget. To owners, OYO ofered an end-to-end array of services
that included procurement services, upgrading and rehabilitation of properties, management of operations, and
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multi-channel distribution, both as a platform as well as an online travel agency (OTA). Te impact of OYO’s
strategy was quite visible even before it completed its frst year in the country. It discovered that even a minimal
amount of standardization of quality oferings, along with consistent branding eforts, allowed it to diferentiate
itself in a supply market that was overfowing with inexpensive, unbranded hotels. Within a year, OYO was ofering
well over 180,000 rooms in 4,000 hotels under an assortment of formats ranging from franchises, manchises, and
leases in 285 cities, making it the ffth largest chain in China. Te number of rooms that were OYO branded in
China far exceeded what the company had to ofer in India, thus truly making China its home away from home.
Indonesia, Philippines, UAE, and Saudi Arabia

Indonesia, one of the more populous markets in Asia, was another target that OYO pursued in late 2018. Te
country was characterized by a growing middle class, and an imbalance in demand v. supply, especially in the
budget and medium-priced range of hotel options. OYO entered the market targeting three key cities—Jakarta,
Surabaya, and Palembang—with about 30 properties under its umbrella to start with. In three months, it had
grown operations fve-fold and committed to investing $100 million towards expansion to other major cities
in the country. It was increasing its presence by about 70 hotels each month using much of the same business
models, leasing or franchising, that it had honed in India and China. Te combined power of its information
architecture and platform was targeted at both the discoverability as well as predictability elements that made for
a seamless customer experience. True to his fundamental philosophy, Ritesh ensured that Indonesian operations
were also localized with local management and staf vested with the responsibility to make all the key decisions.
Te same entry template was deployed in the Philippines when OYO entered in 2018 with a combination
of franchises and leases targeted at the population centers in Manila, Cebu, and Boracay. OYO COO Abhinav
Sinha observed, “It’s very important for us to build a strong local leadership team and very important for us to
learn how to do business the right way and how to solve problems which are unique to the country,” underscoring
the importance of localization as a key driver of OYO’s success.
Entering the United Arab Emirates in mid-2018 suggested a modifcation of the core strategy that OYO
had adopted elsewhere. It launched a luxury version of hotels that targeted business travelers under a separate
brand name, Capital O, charging up to $80 per night inclusive of all amenities. By the end of the year, OYO
had 105 hotels and 1,800 rooms across the UAE. All eyes in the region were on Expo 2020, a massive event that
was bound to bring hordes of tourists and business travelers to the region, and OYO wanted to get a head start
by establishing a core of reliably operated properties to position itself to take advantage of the event.
OYO expanded into Saudi Arabia at the end of 2018, thus cementing a strong portfolio in the Middle East.
Te entry into the country was partly infuenced by the fact that the Saudi Arabian Public Investment Fund and
the Softbank Vision fund in which Saudi Arabia was an investing partner had both taken ownership positions
in OYO. Its entry was also eased by Saudi Arabia’s General Investment Authority (SAGIA) that licensed foreign
investment in the country. Te Saudi Arabian operations were run by a cadre of young Saudi professionals, and
the company planned to create over 5,000 jobs by 2020. As part of its entry commitment, OYO also planned
to establish two OYO Skill Institutes, in Jeddah and Riyadh, to train local citizens for jobs in the hospitality
industry. Te market appeared poised for signifcant growth, especially since the government had unveiled plans
to issue tourist visas to attract leisure travelers to a country that had been closed to tourists in the past. Te
common cultural bonds between India and Saudi Arabia were expected to pay rich dividends. Since India was
home to the second largest population of Muslims worldwide, a substantial number of pilgrims from the country
travelled to Saudi Arabia for the Hajj each year.
From Emerging Markets to Developed Markets: Japan, USA, and Beyond

OYO decided to turn its attention to the developed world and targeted market entry into Japan, the UK, and
ultimately the U.S. to spread its wings and become a truly global player in the industry. It entered Japan in April
2018 with an ambitious plan to ofer 75,000 rooms in two years. Te entry into Japan was spearheaded through
a joint venture with Softbank, the venture capital company that already owned a substantial piece of OYO. Te
intent was to target budget-minded business travelers, as well as foreign tourists on a budget who were looking
for basic comfort and convenience in a spartan setting. Experts in the hospitality business believed that Japan
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was at a crossroads after it had chosen to regulate the use of private accommodations for room rentals. Te
2020 Olympics in Japan was another signifcant event that was bound to accentuate the demand for budget
accommodations in an already crowded city. Combined with a shortage in staf, analysts envisaged an ideal set
of conditions for OYO’s business model that relied on technology and standardization to reduce the incidence of
labor in their operations. Upon OYO’s entry into the country, Ritesh Agarwal observed, “We are thrilled to now
be able to ofer Oyo’s afordable, hassle-free, and quality living experiences to guests across Japan. And to empower
Japan’s independent hoteliers with the latest technology innovations like AI and machine learning-powered hotel/
ryokan management system, predictive analytics-led pricing and revenue management, and seamless operational
expertise that will help them focus on customer experience and thereby generate increased, sustainable income.”
Te initial reports from Japan were less sanguine, however. Press reports suggested that OYO had signed
up only 4,000 rooms by September 2019 against a target of 75,000 it had expected to achieve by March 2020.
Tis led to signifcant cutbacks in its labor force, and local unions claimed that OYO had violated employment
contracts in terminating a substantial number of its staf. Te unions also claimed that continuing employees were
asked to take pay cuts in the range of 40%. Te Japanese entry was also colored by the additional complexity of
having SoftBank as the joint venture partner. SoftBank was itself dealing with the fallout from the failure of the
Initial Public Ofering (IPO) of WeWork, an American company that was involved in the shared-ofce-space
market. SoftBank had backed WeWork and was facing intense pressure from the failed IPO, which some believed
raised unreasonably high expectations of OYO, another SoftBank portfolio company.
Te entry into the UK market was indeed a remarkable move for an Indian company that had been in
existence for less than a decade, since the UK was widely seen as one of the most sophisticated and demanding of
hospitality markets globally. It had a very well-established range of operators across a wide spectrum of properties,
ranging from ultra-luxury brands to B&B chains that dotted the countryside. Amongst the most visited cities
in the world, London, for example, had close to 160,000 rooms. Te country had between 35,000 to 40,000
independent hotel operators as well. Despite the obvious dissimilarities between OYO’s biggest markets, India
and China, compared to the UK, Jeremy Sanders, the head of OYO UK remarked, “….when OYO, which has
had such success in Asia, looks West—this is where we want to be. We want to challenge ourselves in this market,
to run at the pace of this market, to innovate within this market. Because if we’re successful here—which we
are proving to be—then we know we can apply that anywhere.” Te business model, as Ritesh explained it in
an interview, seemed to be the very same one that had worked in India, China, and elsewhere in the developing
world. “In London, think of Paddington and Bayswater (two popular areas in the west of the city). Tere are lots
of small, unbranded buildings. Tey are good buildings, but if you go inside, they are not good at all. Tey are
out there, but nobody is working to fx them. So Oyo came in and said that we want the small neighborhood
hotel to survive. In fact, we want it to be the hero of the neighborhood, and make it into the chic hotel of the
neighborhood…. We use innovative technology to facilitate standardization of services, amenities, and in-
room experience, thereby helping maintain service standards…. We go in, invest the capital to make the hotel
beautiful, put in dynamic pricing via new-age revenue management systems and better service, and can expect
a threefold jump in occupancy. We have this worldwide.” Tere were skeptics for sure. “Seven out of ten hotels
are currently unbranded, so on the supply side, the concept could have legs. But, given its diverse geographical
markets, Europe is too fragmented on the consumer side. So, I think it would be too difcult, and expensive,
for them to build awareness,” said one.
From the UK to the U.S. was just a hop across the Atlantic and, by 2019, OYO announced that it had
arrived in the United States. Although OYO was reportedly looking to export the salient elements of its successful
emerging market model, analysts were quite skeptical (see Exhibit 6). “Te U.S. market isn’t clamoring for
it, but the business model will be very attractive to a lot of small hotel owners who are not being well served
by the lower-tier franchise brands,” observed an analyst at Phocuswright, a hospitality consultancy. OYO’s
initial partners in the U.S. were already griping about the paltry revenues that were being generated after they
concluded franchise and lease agreements with the company. Tey were deeply unhappy over ceding control of
their inventory of rooms to OYO’s vaunted property management system. Skift, a travel and hospitality research
company, reported that, “By giving all revenue management powers to Oyo, hotel operators were left to cope
with Oyo slashing their room rates to such an extent that they sometimes trigger an infux of drug users and
prostitutes. Alleged missed payments from Oyo, a lack of cash fow for property owners, and unresponsiveness
in dealing with technical or customer service issues were likewise high on the complaint list.” Te technological
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advantage that OYO was banking on seemed to have become a disadvantage, given its centralized nature. Ritesh
pushed back at the suggestion that things seemed to be going askew in the U.S. He told Skift that the property
management system “is one of the world’s most sophisticated hotel management systems.” After all, it had been
deployed in several countries before coming ashore in the U.S.
Exhibit 6. Total Number of Rooms (Millions) and % Branded Rooms

Available in Each Country Where OYO Operates
Source: Hotels NBO Company Shares: % Value 2015-2019 (by % Retail Value rsp). http://www.portal.
euromonitor.com.ezproxy1.lib.asu.edu/portal/analysis/tab.
OYO demonstrated good service recovery skills and created a microsite for owners that it called OPEN.
Tis was meant to be a forum for owners to share their concerns with OYO management, and was proving to
be an efective conduit to resolve smaller operational issues before they became bigger problems. Te company
was also experimenting with new software oferings that would allow more owner control over tarif decisions
based on the type of contract agreement that the hotel entered into with OYO. Te company also reminded the
naysayers that over 75% of its owners had seen occupancy rates increase by between 20% to 30%, along with a
signifcant jump in proft. Its franchise/lease retention rates were climbing, and client churn rates were declining,
suggesting that owners were willing to stick with OYO management when their contracts came up for renewal. It
had also honed its renovations process and was able to upgrade properties in just two weeks, while the competition
typically took 90 days. It had efectively addressed the skills gap by opening 26 OYO Skill Institutes where it
trained recruits for hospitality roles. Te overall business model of branding hotels through its franchise/lease
approach proved attractive enough for Airbnb to take an ownership position in the company in 2018.
As 2019 was drawing to a close, Ritesh Agarwal had clearly arrived in the global landscape of entrepreneurs.
OYO was being hailed as a unicorn (a startup with a market value in excess of $1 billion), and there was talk
of taking OYO public in the near future. Although OYO was expected to make a net loss of $460 million to
close 2019, the company painted a very rosy picture of good times ahead. It expected a net proft of $5.1 billion
by 2024, along with an 80X increase in contribution margins (sales minus variable costs) to $18.26 billion. Its
contribution margin stood at a mere $232 million by the end of 2019, suggesting an expected growth rate of
140% annually. Te company was projecting that the U.S. market would be its second largest earner behind
India, although its U.S. operations were unlikely to be proftable until 2023. Te Indian and Chinese businesses
were not expected to be proftable until 2022 and 2023, respectively, according to the company’s own projections.
Some ominous signs that underscored the immensity of such an ascent appeared on OYO’s horizon. With
the collapse of the WeWorks IPO, OYO’s majority shareholder, Softbank, appeared to be directing a more
aggressive growth path for the company. Tis pressure was blamed for what some believed was a perilous growth
trajectory that had negative fallouts already. In October, the Competition Commission of India, a governmental
agency, announced that it was investigating OYO for possible anti-competitive behavior. Tere were employee
strikes at the company operations in India, in addition to claims by owners that they were not receiving timely
contractual payments from the company. Tere was also the hint of a scandal when Ritesh Agarwal bought out
A09-20-0004 9
a group of early investors such as Sequoia Capital and Lightspeed at a market valuation of $10 billion, roughly
twice the valuation of OYO’s prior valuation. Te share buyback was arranged through a loan of $2 billion
fnanced by a consortium of Japanese banks, raising suspicions that the transaction was engineered to boost the
value of Softbank’s portfolio. Would the company be able to successfully transition from its emerging markets
roots to become a global player with equal prowess in the developed world? Would the Hooters hotel purchase
bring better luck, or would it turn the tables on OYO? Will OYO accomplish its goal of becoming one of the
world’s largest hotel chains, an exclusive club that counted giants such as Marriott, or fame out like many other
promising startups that had been unable to scale up successfully? Tese appeared to be the best of times and the
worst of times for the young Indian hotelier with global ambitions.
Endnotes
1
Das, H. 2019. Following their hearts. Interview with Ritesh Agarwal. India Today, June 24.
2
Chaudhary, D. 2019. Te world is not enough for OYO. Fortune (India), June 11.
3
Kumar, P. K. 2015. Te innovations in the budget segment will disrupt the traditional hospitality industry. HospitalityBiz,
August 12.
4
Ibid.
5
Mishra, P. 2015. Failing often is the reality of starting up: Ritesh Agarwal, CEO OYO Rooms. Te Economic Times,
September 4.
6
Haritas, B. 2019. How homegrown OYO leveraged technology to transform the hospitality and real-estate sector. Economic
Times CIO.com, July 4.
7
Ritesh Agarwal. 2015. https://www.oyorooms.com/ofcialoyoblog/2015/12/31/from-kanpur-to-kuala-lumpur-hello-2016.
8
Vyas, H. 2016. https://www.oyorooms.com/ofcialoyoblog/2016/12/06/open-mic-working-in-a-multi-cultural-
environment-at-oyo.
9
Agrawal, S. 2019. OYO is successful because of its business model: CEO Ritesh Agarwal. Livemint, October 3. https://www.
livemint.com/companies/people/oyo-is-successful-because-of-its-business-model-ceo-ritesh-agarwal-11570039321374.html.
10
Anonymous. 2019. Exclusive: OYO Hotels and the road to becoming China’s leading hotel brand. Asia Outlook Magazine,
October 15.
11
Anonymous. 2019.OYO Hotels and Homes launches PH operations. Philippine Primer, February 6.
12
Anonymous. 2019. OYO launches operations in Saudi Arabia with over 3,000 rooms across 7 cities. Te News Minute,
February 21.
13
Hamdi, R. 2019. OYO to food Japan with budget hotels in new deal with Softbank. Skift, April 4.
14
Sugiura, E, and Suzuki, W. 2019. Softbank-backed OYO sufers major shortfall in ambitious Japan push. Nikkei Asian
Review, October 25.
15
Ibid.
16
Jones, J. 2019. Jeremy Sanders, Head of OYO UK: “OYO is hungry. It’s always looking to take the next step. Business
Leader, May 15.
17
Kane, F. 2019. Interview: World’s fastest growing hotel comes to Saudi Arabia. Arab News, November 3.
18
Sorrells, M. 2019. Can OYO capture the unbranded hotel market in the U.S. and Europe? PhocusWire, February 7.
19
Ibid.
20
Schaal, D. 2019. Budget chain OYO can be a nightmare for US hotel operators despite its hype. Skift, October 24.
21
Hamdi, R. 2019. OYO founder describes US owner concerns as “teething issues.” Skift, November 6.
22
Philipose, M. 2019. Oyo Hotels and Homes’ bright view of itself fve years from now. Livemint. November 26.
23
Ravikumar, S. 2019. Softbank’s OYO projects losses in India, China until 2022: Valuation report. Reuters. November 25.
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OYO - A New Global Chain of Hotels Emerges

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For the exclusive use of E. Escobar, 2021.

OYO: A New Global Chain of Hotels Emerges

India: Te Land of Opportunity

Exhibit 1. Proportion of Branded Hotel Rooms to Total Rooms Available

Exhibit 2. Country Rankings on Institutional and Contextual Dimensions

OYO Rooms: Te Modus Operandi

Amidst the furry of the initial expansion years, Exhibit 3.

By 2017, OYO had distanced itself from the competition,

OYO: Going Global

Indonesia, Philippines, UAE, and Saudi Arabia

From Emerging Markets to Developed Markets: Japan, USA, and Beyond

Exhibit 6. Total Number of Rooms (Millions) and % Branded Rooms

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