Oyo, India’s largest hospitality company has been creating waves in the South East Asia for a few years now. With operations in Nepal, Malaysia, Thailand, China, Singapore, Indonesia, Philippines, Sri Lanka and now Japan, Oyo has expanded has scaled up and expanded at a speed rarely never seen before.
With complete leadership of the India market, it has already broken into the Top 10 in China with massive investment plans in Indonesia and Philippines along with plans for dominating the rest of the South East Asia market.
Starting out with a focus on budget hotels, the shift to the “Manchise model” turned out to be the catalyst to explosive growth. It’s a combination of management of the property and turning it into a franchise. Here Oyo upgrades the property, property managers are directly hired and managed by Oyo along with strict quality control, marketing and inventory management etc.
But the most important and intriguing part of the whole enterprise is Ritesh Agarwal. The first Asian recipient of the Thiel Fellowship. Other recipients include a co-founder of Ethereum, youngest person to produce nuclear fission, founder of UnCollege among other highly accomplished, young and incredibly unique individuals.
And now, Ritesh Agarwal, with his team of incredibly well qualified and experienced individuals have set their sights on gaining market leadership in South East Asia market.
The biggest weapon they have in their arsenal is the Oyo OS. The AI supported, full stack hotel management system which has helped the organisation drive efficiencies through various business functions in the organisation. One of the lowest staff to guest ratio in the industry, instant AI managed changes in prices and availability based on seasonal, local patterns, previous data, weather, events and activities in the area etc.
This is supported by massive investments across South East Asian market. The key markets being Indonesia, Philippines followed by Malaysia based on the funds allocated for investment. 2019 is going to be an exciting year due to the 2020 targets announced by each market by the company.
With expansion in western markets such as UK, US, Middle East among others which have not been officially announced, there are obvious dangers of over-extending themselves. The manchise model is a capital heavy model along with an expensive management team has made sure the burn rate for Oyo remains high. The company has already been in operation for 5 years now with revenue a fraction of total expenses. Also with the focus on turning China, a traditionally difficult market to crack for foreign players, into a home market like India will require incredible capital, luck, hustle and work.
But there is a reason why this full stack hospitality company has to beat investors off it with a stick. Softbank, the majority shareholder cannot stop boasting about the business model and the inbound customer demand which as per Softbank stands at 98%. Unrealistic as that number sounds, if it’s even close to real number, is a major achievement since the expensive third parties and travel agents have been removed from the equation. Another positive sign is the 29.3% of repeat customers for Oct-Dec 18 from the pool of customers in July-Sep 18 which are record breaking numbers in the Industry. Another major improvement is the margin numbers where the average has improved to 15% from 11-12% with plans to improve it to 20%.
But these are just internal struggles for the company. They have competition too. Plenty of regional and local players vying for the piece of hospitality pie. Zenrooms, GoHotels etc are a few but the most serious competition is RedDoorz. Started by fellow Indian, Amit Saberwal with over 20 years of hospitality experience and now based in Singapore. With a recent funding round of $50 million and focus on only 4 markets, Indonesia, Phillipines, Vietnam and Singapore, can prove to be tough competition for Oyo.
This is going to be an exciting watch with the future of the company going either way. With such high stakes at play and one of the first truly Indian model being replicated at the International stage, has the whole world watching.