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BUSINESS MODEL OF OYO

ROOMS
AND HOW THEY WORK

PRESENTED BY
MR. JOSHUA A
USN NO 33
DEPARTMENT OF MBA
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INTRODUCTION

 Ritesh Agarwal is an Indian entrepreneur, the founder and CEO of OYO Rooms -
the fastest growing Branded network of hotels online & offline.
 He started his entrepreneurial journey at the age of 17 and is considered to be one
of the youngest CEOs in India.
 Oravel Stays Pvt. Ltd was his first startup in the year 2012. Oravel was designed as a
platform to enable listing and booking of budget and premium accommodations.
 In simpler terms, it was meant to be destination for short and midterm rentals for
bed and breakfast joints, private rooms and serviced apartments.
 Soon, Agrawal realized that just a combination of bed and dinner would not fulfill
the expectations of budget travelers in India so he transformed Oravel stays to OYO
ROOMS, 2013 with the key proposition of offering affordable and standardized
accommodation.

Department of MBA 2/4/2020

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INDUSTRY OVERVIEW

 Global Scenario: The hospitality industry is a broad category of fields within service
industry that includes lodging, event planning, theme parts, transportation, cruise
line, and additional fields within the tourism industry. The hospitality industry is a
multibillion-dollar industry that depends on the availability of leisure time and
disposable income. A hospitality unit such as a restaurant, hotel, or an amusement
park consists of multiple groups such as facility maintenance and direct operations
(servers, housekeepers, porters, kitchen workers, bartenders, management,
marketing, and human resources etc.).

Usage rate, or its inverse "vacancy rate", is an important variable for the
hospitality industry. Just as a factory owner would wish a productive asset to be in
use as much as possible (as opposed to having to pay fixed cost while the factory is
not producing), so do restaurants, hotels, and theme parks seek to maximize the
number of customers they "process" in all sectors. This led to formation of services
with the aim to increase usage rate provided by hotel consolidators. Information
about required or offered products are brokered on business networks used by
vendors as well as purchasers.
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Contd..

 In looking at various industries, "barriers to entry" by newcomers and competitive

advantages between current players are very important. Among other things,
hospitality industry players find advantage in old classics (location), initial and
ongoing investment support (reflected in the material upkeep of facilities and the
luxuries located therein), and particular themes adopted by the marketing arm of
the organization in question (for example at theme restaurants).

Also very important are the characteristics of the personnel working in
direct contact with the customers. The authenticity, professionalism, and actual
concern for the happiness and well-being of the customers that is communicated
by successful organizations is a clear competitive advantage.

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ORGANIZATION STRUCTURE

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ORGANIZATION STRUCTURE

CEO: RITESH AGARWAL REGIONAL HEADS

COO: ABHINAV SINHA North Head: Gaurav Ajmera

CTO: ANIL GOEL South Head: Burhauddin Pithawala

CFO: ABHISHEK GUPTA East Head: Prasun Chaudhary

CPO: DINESH RAMAKRISHNAN West Head: Shreerang Godbole

CGO: KAVIKRUT

CSO: MANINDER GULATI 2/4/2020

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BUSINESS MODEL OF OYO ROOMS

Oyo Rooms business model was similar to the usual aggregator business model (Uber
for x business model) but had the essence of the franchise business model as well. The
company used to –
 Lease a part of Hotel’s inventory beforehand,
 Organize those hotel rooms under their brand name – Oyo Rooms
 These partner hotels provided standardized service to customers of those rooms as
it was decided in a contract with Oyo
 Bookings were made through the Oyo Rooms website and mobile application.
The current operating model of Oyo Rooms is similar to what it was before. It’s just the
company doesn’t lease the hotel rooms anymore, but ask the hotel partners to
operate them as franchise. They have good brand equity and boasts a 100% increase

in revenue to their partner hotels . 2/4/2020

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Contd..

 Partnership Model
 Oyo Rooms provide visitors with quality hotel room stays at different places around India. They
have partnered with hotels and made them work with them under their name.
 Services Provided By Oyo Rooms
 Oyo Rooms, started and famous as branded hotel rooms aggregator, provides many more services than just
hotel rooms to visitors.
 The services included in the Oyo Rooms business model are –
 Hotel Rooms
 Oyo’s earlier strategy was to book a part of the hotels’ inventory, to maintain it as per the quality standards, and
to hold it captive exclusively for Oyo customers. That is, they used to lease some rooms every month and provide
them to their own customers at profits.
 The only thing that has changed is that the rooms are now not leased but operated as Oyo Rooms franchise.
Since the hotels and place owners act as the franchisee, they are bound to operate as per the pre-determined
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standards. The company even offers plans where it runs the place instead of the hotel staff or owner.
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Contd..

 Oyo Flagship
 The partners used to book their own hotels when they used to see less prices on the Oyo’s platform and this became
malpractice benefiting the partners while burning holes in Oyo’s pockets. To curb this, and to expand the business,
Oyo Rooms has started leasing of hotels and places where it has full control over the day-to-day operations of these
establishments.
 Oyo Townhouse
 The company has recently launched the Oyo Townhouse to hone its value proposition and stand out of the
competition when it comes to standardized hospitality. Oyo Townhouse is based on the needs of the millennial
traveler. These hotels are planned and built based on the needs and wants of the millennials. They have –
 Smarter Rooms – with specially designed beds, showers, sockets, and internet infrastructure. Even TVs have Netflix
installed.
 Smarter Spaces – common spaces designed to have meetings. Free printer, business services, magazines, coffee and
tea in the common area.
 Smarter Menus – 24 x 7 Kitchen which lets you order from the mobile application and many more smart services.
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 Revenue Model of Oyo Rooms

 The revenue model has also transformed as the business model changed from aggregator to franchise. Earlier
the brand used to lease hotels at a predetermined price and offered them to the users at a take-up rate. This has
been changed to a commission-based revenue model.
 Oyo rooms charges a commission of 22% from its hotel partners. However, this commission does vary according to
the services provided by the brand.

 Future of Oyo Rooms

 Oyo is growing. Though this growth is at a cost, it will be worth it afterwards. According to a source, Oyo Rooms
has delivered a 15x annual growth with 2.3 million booked room-night transactions in the first quarter of the
calendar year 2016 while its GMV continues to grow substantially every month. This shows the increasing brand
equity and demand of Oyo.
 Oyo has set its name as the high-quality budget hotel network, which might change in the near future as the
prices might increase. But since Oyo has come up with a new franchise model, there are chances that the prices
might be kept as they are now. 2/4/2020
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COMPETITION FROM FAB HOTELS AND
TREEBO
 Budget hotel chain OYO's strong investor backing and rapid growth appear to have locked out
competition from rivals Treebo and FabHotels. Simply put, a three-way contest is now a thing of the
past as OYO cements its status as top dog.OYO is by far the best-funded startup in the space. Since
setting up shop in 2013, its parent Oravel Stays Pvt. Ltd has received nearly $450 million (around Rs
3,000 crore) in investment from marquee investors such as Japan's SoftBank and venture capital firm
Sequoia Capital.
 In comparison, Treebo and FabHotels have raised less than $100 million between them despite
funding from prominent investors such as Accel Partners, SAIF Partners and Goldman Sachs.Generous
funding aside, it's the financial year 2016-17 that may have been a turning point for OYO. The Ritesh
Agarwal-led venture's revenue grew more than seven times to Rs 125.3 crore in that fiscal, leaving its
less-funded rivals in the shade.
 Although Treebo and FabHotels, which target the same customer segment, increased their revenues,
they managed considerably lower growth compared to OYO. FabHotels, in fact, had recorded a
higher operational revenue than OYO in the financial year 2015-16.

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 A common factor was that expenses grew exponentially. Losses widened for Treebo and
FabHotels and though OYO managed to reduce its losses, the figure still remained alarmingly
high. "The RoC [Registrar of Companies] numbers are dated and come with such a lag," said
Treebo co-founder Sidharth Gupta. "It is not the right metric for me to comment. There is no
standardisation on how each of the players mark their revenues."
 FabHotels did not comment on this story. OYO chief executive Ritesh Agarwal told TechCircle in
an emailed statement that the company's provisional revenue for 2017-18 stood at Rs 423.2
crore, which would represent more than a three-fold growth.What is certain, though, is that the
trio has carved a niche for itself in the bracket offering hotel rooms for Rs 1,000-3,000 a night.
(The likes of Lemon Tree Hotels, which recently went public, and Keys Hotels operate at a slightly
higher price point.)The question now is whether OYO is too far ahead of the pack and whether
FabHotels and Treebo can catch up.

Department of MBA 2/4/2020

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The End
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