OYO Rooms: The Pitfalls of

Expanding Too Fast

A Case Study
 Introduction
• Ritesh Aggarwal, the CEO of OYO Rooms was a
college dropout and decided to do something on his
own. In the zeal of starting his first venture, this 19-
year-old roam places for months staying at budget
hotels, attending customer calls daily and tried to
indulge himself in every possible experience that
will teach him about budget hotels, customers and
their expectations. This on-the-ground learning
certainly has helped him pivot Oravel to Oyo
Rooms.
• With more than 450,000 listings spread across 5,000
cities in India, China, Nepal, Malaysia, Indonesia
and UAE, OYO Rooms is one of the biggest • To sustain its leadership position in
network of hotels chain in the world. the market, OYO is focusing on
• The company managed to raise a sum of 4 Cr from digital as well as mass marketing
LightSpeed Venture partners and DSG Consumer techniques very aggressively for
Partners at a money evaluation of 14 Cr. lead generation and customer
• Later in 2015, OYO’s mobile App went live to acquisition.
customers and since then it gained popularity.
 Case Analysis
• A recent flurry of accusations has raised • Some hotels have filed lawsuits
serious doubts in the mind of investors against the platform for wrongfully
about the business model and very vision charging them with extra fees, citing
of the company. the vague.
• OYO, since its inception, has solely been • Further, to make matters worse, the
focusing on its rapid expansion plans, company is on a mass layoff spree
without addressing the pile of issues that
from last few months, which they
has plagued its business operations.
called as ‘rightsizing efforts’ after the
• Several major business clients and
period of relentless growth.
corporates have already pulled back
from OYO Hotels and Homes.
• Industry experts says, that this is done
• OYO has to deal not only with the
under the pressure of investors,
discontent of its corporate clients, but
especially the Softbank group,
also with the resentment of its partner Whatever the reasons might be, the
hotels and employees. decision has definitely hit the
reputation of the company.
 Conclusion
• To address the growing discontent in the
partner community, OYO has recently
opened its first partner support center in
Gurgaon, where partners can walk-in if they
have any issues. The company has also
launched programmes - OPEN and
Sambandh programmes to ensure
transparent payment protocols under which
asset owners will receive 18% interest on
delayed payments and resolution.
• OYO has realized that profitability should
be their number one priority going forward,
because if they want to sustain in the market
and achieve a successful IPO, they must be
profitable. But becoming profitable is next
to impossible, if they do not take measures
to address the deeply rooted problems in
their business operations and work culture.
• The problem was here was a bad
strategy of expanding very fast
and ignoring all the problem in
the path which was pilling up
together and caused them a lot of
trouble later.
• The solution for this was that
they should slow down the
expanding process and gain the
trust of partners, investors and
stakeholder by solving the
problems and making a strategy
of gain its lost reputation.