SYMBIOSIS INSTITUTE OF MANAGEMENT STUDIES

Assignment on

OYO ROOMS

SUBMITED BY
Baharul D-27
Ritu Pal D-42
Shivangi Singh D-51

Under the Guidance of

Prof. Amit Kumar

SYMBIOSIS INSTITUTE OF MANAGEMENT STUDIES (SIMS)

(CONSTIUENT OF SYMBIOSIS INTERNATIONAL UNIVERSITY)
January-2017
 OYO ROOMS Ritesh Agarwal

INTRODUCTION
OYO Rooms is one of the successful start-ups in India. It is the countrys largest budget hotel
chain with about 50,000 rooms in 500 hotels all over India. This startup doesnt own hotels, which
means it works on asset light model, it ties up with certain hotels which includes small hotels also
and acquires some rooms to be given out to people who want to avail OYO services. It concentrates
on standardizing the hotels in the non-branded hospitality sector. OYO Rooms provide affordable,
clean and budget hotels across all tier-1 and tier 2 cities in the country.

About the man behind OYO Rooms:

In 2013, Ritesh Agarwal, then a 19-year-old boy from

Odisha, came up with the OYO Rooms concept of
working with small, unknown hotels and traditional
hoteliers. Initially they rejected him and his model but
later on he was able to convince a lot of them.

The market

In Asia Pacific, Hotel industry in India success story is only second to China. It is estimated by
the World Travel and Tourism Council that India which sits on 18th in business travel as of now,
soon will be among top 5. The hotel industry in India thrives mainly because of the growth in
tourism and travel. Due to this, hotel sector is bound to grow. There is an emergence of budget
hotels in India to cater to the majority of the population who seek affordable stay.
India has an estimated 1,70,000 hotel rooms and that the Indian Hotel Industry will grow at a
robust CAGR of over 12.2%. Further, a total investment of Rs 448 billion is expected in the next
five years. As per ICRAs report, the domestic hotel industry is estimated to touch US$ 1.8 billion
by 2016, from US$ 0.8 billion presently.

The Idea

Ritesh Agarwal was born to a business class family in Bissam Cuttack in Orissa and attended the
Sacred Heart School in Rayagada, Orissa. During the growing up days, it was all fun and
learning for him but his ways were rather unconventional from those of other kids. When he was
in Kota, he used to travel a lot due to the leverage of the free time there and stayed in PGs,
budget hotels, etc. He often used to take a train to Delhi choosing to stay at odd bed & breakfast
(B&B) places and attend events & conferences to meet entrepreneurs and because he couldnt
afford the registration costs, he would often just sneak in.
And then it all started. In 2011, he moved to Delhi to start something of his own and also to
prepare for SAT. But, SAT never happened. During his free time he used to do nothing but read
about entrepreneurs, start-ups, especially Airbnb.
Now, Ritesh during his days had seen and always felt that budget hotels in India didnt even
meet the very basic needs of a budget traveller. Hence, capitalizing on this opportunity, he
started his very first venture in 2012 Oravel Stays! It was an aggregator of bed and breakfast
stays across India.
With sufficient money in his pockets, he started working on his new found interest and at the
same time, he also presented his idea at the Thiel Fellowship a global contest intended for
students under the age of 20. He managed to reach amongst the top ten winners who received a
sum of $100,000 as well as guidance and other resources from PayPal co-founder and Facebook
investor Peter Thiel.
With this confidence, he started working even more rigorously but his business model didnt
seem to be picking up. He also tried replicating the Airbnb model but that didnt work out too
and thus he realized that the biggest pain on this earth while travelling was to find good,
affordable and most importantly available hotel to stay in but like always majority of people
ended up staying in a crappy place.
This got him motivated thus leading him create an online yet social community to bring
information about all such hotels on one platform and as a last resort, in 2013 he re-launched
Oravel as OYO Rooms.
TRENDS OBSERVED AND PROBLEMS IDENTIFIED

Ritesh has travelled all over the country and during such travels, discovered the problem
of non-standardization and branding with budget and small hotels. At the age of 17, he
launched Oravel travels, modelled after Airbnb, which later branched out to become OYO
Rooms. Soon he discovered that the problem with budget hotels was bigger than just
perceived, so, to counter other issues like availability, remodeling and branding he
launched OYO.
Patu Keswani, the maverick founder of Lemon Tree, stated, there are approximately
400,000 Indians travelling every day (250,000 train travellers and 100,000 air travellers
plus those travelling by road). They all need some place to rest and stay. But in 2012-13,
the supply was barely 90,000 branded rooms.

OYO attacked this opportunity. But unlike the others, who were looking at converting well-
known stand-alone properties, OYO did not bother with frills or management fees, instead
going in for standardization and convenience and choosing the franchise route and offering
lower rates.

To solve the problem of small hotels of not able to attract more and more customers, he
put tech, reach and branding in the hands of nondescript hotels, which could offer rooms
in great locations at discounted and reasonable rates. He brought innovation and creativity
into an industry that was steeped in ordinary thinking and became famous for Indias start-
up story, attracting funding easily. VCs and PE Funds, which never gave importance to the
hotel sector, began investing, funding and infusing the industry with capital to grow.

OYO opened the doors to not only new room supply but also unlocked new consumers. It
increased the customer base of branded hotels by making them available, predictable, and
reasonable. Suddenly, backpackers, students, people who stayed with relatives and friends,
night train travellers who just needed a shower and change but were detest to pay huge
amount of money for a hotel room, began choosing OYO. A stagnant market that was
hovering around 90,000 branded hotel rooms began growing at a fast clip.
 There are are 4.5 million unbranded rooms in the country. OYOs goal is to ensure they
will get branded and remodeled.

BUSINESS MODEL
Hotels always face a problem of discovery, recognition and unsold inventory. OYO model is built
to solve these issues.

Unsold Inventory: Oyo tells the hotel owners if they partner with them they will be able to utilise
the unsold inventory,get rooms standardized and also branding donep.

Discovery: OYO partners with the hotels. Brings it on-board by renovating the rooms (cost paid
by owner), handling its marketing activity and end to end customer support in case of booking. All
the hotels have OYO branding and are present on their website with attractive pricing (negotiated
on behalf of user by OYO).

For all of this OYO on an average retains around 15 per cent of the tariff as commission (though
it could go up or down depending on a deal) while the remaining 85 per cent goes to the hotelier
which is their revenue model.
OYO Rooms is an hotel aggregator but unlike other aggregator business models (like uber, ola,
etc.), business model of OYO is different.

They hire an inventory of hotel rooms. Make them meet their standards and offer them to
customers on their website and application. The hotel rooms are provided at a take up rate which
includes commission of OYO.
Porter 5 Force Model

1. Intensity.of.Existing.Rivalry

a. Relatively.few.competitors.(OYO Rooms) This means there are fewer competitors and

it indicates fewer firms are competing for same.customers.and.resources.

b. Fast.industry.growth.rate At this point when businesses are developing income rapidly, they
are more averse to contend, in light of the fact that the aggregate business size is additionally
developing. The best way to develop in ease back development businesses is to take piece of the
overall industry from contenders.

2. Threat.of.Substitutes

a. Substantial Product Differentiation (Oyo Rooms) - Whenever items and administrations are
altogether different, clients are less inclined to discover equivalent item or administrations that
address their issues. This is a positive for Oyo Rooms.

b. Limited number of substitutes - A set number of substitutes imply that clients can't without much
of a stretch find different items or administrations that satisfy their necessities.

3. Threat of New Entrants

a. Low barrier to entry

b. Strong distribution network required - Powerless dispersion systems mean products are more
costly to move around and a few merchandise don't get to the end client.
c. Advanced technologies - Propelled advances make it troublesome for new contenders to enter
the market since they need to build up those innovations before successfully contending.

d. Strong Brand Names Are Important - In the event that solid brands are basic to contend, then
new contenders should enhance their image esteem keeping in mind the end goal to adequately
contend.

4. Bargaining Power of Suppliers

a. Large number of substitute inputs - At the point when there are countless information sources,
providers have less bartering influence over makers. This is because of rivalry among substitutes.

b. Low supplier switching costs - The less demanding it is to switch providers, the less dealing
power they have.

5. Bargaining Power of Customers

a. Product is important to customer - At the point when clients value specific items they wind up
paying more for that one item.

b. Limited buyer information positively - At the point when purchasers have restricted data, they
are off guard in arrangements with dealers.

c. Large numbers of customers - At the point when there are vast quantities of clients, nobody client
has a tendency to have bartering influence.

FUNDING
OYO Rooms raised Rs. 4 Cr from Lightspeed Venture Partners (LSVP) and DSG
Consumer Partners in the year 2014.
Recently, it also raised another $25 Million from Lightspeed, Sequoia and others.
OYO Rooms grabbed another $90mn from SoftBank. This is SoftBanks second round
of investment in the company. The funds will be used to take on other players who are
entering aggressively into the space like Treebo Hotels.
GROWTH
May 2013 Introduced OYO Rooms, technology based hotel booking platform from
Gurgaon with a single hotel under its network; received its first funding from
VentureNursery.
Dec 2014 - It raised around $6million from a venture capital company, used for expanding.
About 65 hotels and 1,200 rooms operated under the OYO network. Expansion strategy to
reach about 450 hotels by the end of 2015 was announced.
Mar 2015 OYO received Rs 125 crore funding from Greenoaks Capital; Lightspeed &
Sequoia Capital too contributed.
Aug 2015 SoftBank decided to invest in OYO Rooms with a funding of rs 630 crore,
funding used to enhance OYOs size to 50,000 rooms and also to make a presence in about
100 cities by year end.
Jan 2016 OYO decides to expand to south-east Asia, with the launch of its operations in
Malaysia
April 2016 OYO gets backing of $100 million from SoftBank and others
Aug 2016 Introduced a new feature wherein unmarried couples can book OYO Rooms
now.

CHALLENGES and FUTURE OPPORTUNITIES

OYO had to face a storm of opposition from traditional hoteliers. OYO came at a
particularly difficult time: it was a bad down cycle and, with demand in upscale segments
decreasing, the key players of the hotel industry were championing their mid-market or
budget brands, the only growth avenue. Taj had Ginger, ITC had Fortune, and Lemon Tree
had Red Fox etc.

Handling criticism: negative reviews on platforms like TripAdvisor which is a form of

criticism but these are handled by auditing guest experiences.
 Compliance: Regular audits done by the company ensure consistency and quality. A group
of auditors goes around with a 150-point checklist to review a hotel that has been
remodelled by OYO.

OYOs recognition with the budget category: OYO still is recognized and known for
budget hotels and not for high end hotels which could impact its expansion plans. But it is
now trying to change this perception. OYO is about to begin its transformative journey.
Its working on OYO Flagship, the internal project name for a premium offering, and has
hired the services of a creative agency, Thinkstr.

In another development, MakeMyTrip, Yatra and Ibibo dropped OYO a few months ago.
Most of them are opening their own budget hotels and would like to promote those, rather
than divert traffic to OYO or Zo. That's a loss for an aggressive player like OYO, which is
currently getting as much as 90 per cent bookings through its direct transactions via
mobilephones(online)

Going forward, OYO will be dependent on data sciences to study consumer behaviour and
deliver to users the experience they desire. OYO records more than 750,000 bookings every
month. When the analytics team plotted the geo-locations of where the bookings originated
and came from, they found out that most of the bookings were happening on highways and
road routes, implying that people often book on their way to a destination or at a
destination. So, OYO will make bookings convenient for last-minute check-ins. Similarly,
by looking at data on the cities that generate the most bookings and clusters of feeder cities,
it could offer targeted supply.

References:
1. www.indianmirror.com
2. www.equitymaster.com
3. www.yosuccess.com
4. yourstory.com
Turnitin Report