OYO rooms

All about OYO! 1. Introduction

OYO Rooms is India’s fastest growing branded network of budget hotels founded by young entrepreneur Mr. Ritesh Agarwal on 2013. Within a short span of time, OYO Rooms currently operating in more than 100 Indian cities including Delhi, Gurgaon, Mumbai, Bangalore, Hyderabad, Goa, Chennai, Kolkata are few to name. Similarly, OYO has been trying to be present in major Metros, Regional hubs, leisure destinations and pilgrimage towns. According to a research carried out by CB Insights, a US based business analytics firm, for The New York Times, OYO Rooms is among the companies that may be the next start-up unicorns. As it provides standardized rooms at budget hotels with features such as an air condition, complimentary breakfast and Wi-Fi with 24 hours customer service support number of guests using OYO Rooms App for booking hotels has been increasing exponentially. Since, the services are fully IT enabled guests can also order beverages and request room service through the OYO Rooms app. Hotel owners who partner with OYO Rooms are connected via world’s first tablet based property management App and become part of the OYO brand. 1.1 Vision and Values Vision: To change the way people stay away from home. Standardized OYO Rooms promises to provide the same amenities and the same awesome experience across all its rooms.

Affordable OYO offers rooms at prices that no other player in the budget segment offers today. Technology Driven OYO uses technology to link all its functions and provide the customer a seamless awesome experience. 1. Business Model

OYO Rooms is an online aggregator of budget hotels. OYO Rooms partners with hotels with the aim of standardization on various measures in each room including free Wi-Fi and breakfast, flat screen television spotless white bed linen of a certain thread count, branded toiletries, 6-inch shower heads, a beverage tray and so on. The quality standards of rooms are audited every few days so that the guests are assured quality services of OYO Rooms. The per night costs of OYO’s budget stays range from Rs. 999 ($16) to Rs. 4000 ($66). In order to maintain consistency in quality services, OYO provides property owners with support such as quality standardized supplies and service training. Initially, OYO Rooms reaches out to prospective hotels to partner with them. However, as time has changed due to technological advancement in general and mobile based apps in particular, a hotel owner can also reach out to OYO through their webpage. The OYO team then contacts the hotel and audits the hotel to understand the changes needed to standardize the property as per OYO standards, and shares other details of the partnership agreement. 2. Evolution and Funding

The journey of OYO Rooms was started when Ritesh Agarwal dropped a college and launched his first start‐up Oravel Stays Pvt. Ltd. in the year

2012. Oravel was designed as a platform to enable listing and booking of budget accommodation. Being an enthusiastic entrepreneur, he soon realized that the budget hospitality sector lacked predictability. Therefore, he converted Oravel to OYO Rooms in 2013 with an aim of offering affordable and standardized accommodation. In 2013, Ritesh was selected for the Thiel Fellowship- a twoyear program started by Paypal founder- which granted support of USD 100,000 to pursue his start-up idea. The company has raised multiples rounds of funding, the last one being an impressive USD 25 Million funding from Lightspeed Ventures, Sequoia Capital, Greenoaks Capital and DSG Consumer Partners in March 2015 and provides the same amenities and the same experience across all its rooms at prices that no other player offers across so many locations. As Ritesh's story had been widely covered by the Indian media, he has won Business World Young Entrepreneur Award and the TiE-Lumis Entrepreneurial Excellence Award; investors like the Softbank Group, Greenoaks Capital, Sequoia Capital and Lightspeed India have started to fund OYO Rooms. Table-1: Funding of OYO Rooms

Year

Amount

Funding Source

2012-December

$ 5 million

Venture Nursery

2013

$0.1 Million

Thiel Fellowship

2014-Febreury

NA

Lightspeed Ventures

2015-March

$ 25 Million

Lightspeed, Sequoia and others

2015- July

$100

SoftBank

Source: www.oyorooms.com

1. Growth

OYO Rooms started with one city and one hotel (OYO Rooms Huda City Centre) in Gurgaon in May 2013 and has seen a tremendous growth. With whopping budget hotels under its branded network across the India, OYO Rooms‘growth has been nothing short of phenomenal, and the rapid expansion has meant that the funded start-up now owns India’s largest branded network of hotels. The company as of August 2015 has more than 2000 hotels with more than 20000 room capacity spread over 100 cities of India. Moreover, the company has planned to add more than 50 cities by the end of 2015. Now, OYO Rooms has been named India's largest budget hotel chain. Continuing with its rapid expansion drive, OYO Rooms today crossed an important milestone as it became India’s largest budget hotel chain. Backed by the funding from various sources and strong consumer partners, OYO Rooms also has set itself a revised target to expand its network. Ritesh Agarwal, Founder and CEO of OYO Rooms are quite hopeful that India’s budget hospitality market is ripe for disruption and as the market leader; OYO is best poised to lead this change. Strong customers’ feedback and loyalty encourages the company to redouble its growth efforts to bring the OYO experience to as many Indian travelers in as many different cities as possible and at the earliest. As a leader, OYO Rooms has created a new paradigm in the hospitality sector through an asset-light managed marketplace model. This innovation coupled with sound execution has been recognized by several national and international accolades including TIE Lumis Business Excellence Awards, India International Travel Mart Award and Lufthansa ET Now Runway to Success Award. Now the company has more than 1000 employees including 10-20 people from IIMs, more than 200 people from IITs, HBS and Ivy.

Table-2: Detail of OYO Rooms’ Properties

Year

Number of Property (Hotels)

2013 January

1 Property

2013 June

3 Properties 13 Properties

2014 July 2015 August

2000+ Properties

Source: www.oyorooms.com

1. OYO App

OYO Rooms had also launched its mobile app, which promised a hotel room booking in less than 10 seconds, has now been at the heart of what the company does, it has been able to provide its customers with a seamless experience from booking to check-out. The OYO Rooms mobile app is also the world’s first personal room service app that allows guests staying at an OYO to order room service directly from their smart phones. The app has already crossed more than 100,000 downloads within

a month of its launch. Available on Android and IOS platforms, more than 15,000 bookings have been made through the OYO Rooms mobile app within a week. According company statement, OYO Rooms started its mobile app segment and is ahead of other players who have recently entered this space. OYO is the pioneers in bringing the comfort and experience of an expensive hotel at a really affordable price and use technology to enhance customer experience. That is why most of the branded hotels associated with OYO witness more than 80 per cent occupancy, which indicates a huge success of business and customers satisfaction. It is what that made the company confidence to continue to grow at such a rapid pace. OYO Rooms tried to redefine the meaning of a budget stay and provide our guests a truly seamless experience with the app which allows customers to book an OYO in just a few clicks. The app has been a real hit among users, with over 3 lakh downloads in just three months. The company gets almost half of its bookings through the app as of today, which just goes on to show how techenabled utilities are truly the way forward. 2. Future Prospect

Tech-enabled, branded hospitality network OYO Rooms, which went live with its website oyorooms.com in April 2013, is set to become India’s largest branded hospitality network of budget hotels in the near future. Of the 60,000 branded hotel rooms in the country, the largest inventory is held by the The Taj Group with 9,000 –10,000 rooms. Pointing out that there are 350 million budget travelers in the country who are looking for high quality, standardized rooms are 1.5 million unbranded budget rooms in the country which are priced between Rs. 2500 to Rs. 4000. However, very few of them offer the budget traveler a

standardized, predictable experience with assured facilities, services and amenities. OYO Rooms are priced between Rs. 999 and Rs. 1499 inclusive of taxes and are equipped with comfortable beds, air-conditioning, TV, free unlimited Wi-Fi, clean attached washrooms and complimentary breakfast service. Therefore, there are high potentials of OYO to be the largest hotel chain of the country. Although currently OYO’s largest market is Delhi NCR region in the next three to six months, Bengaluru will take the lead and hold that position for the next three years, reads the company’s website. OYO has a plan to expand its Bengaluru offering from 300 rooms in 30 hotels in MG Road, Brigade Road, Koramangala, Whitefield and Indiranagar to 2,000 rooms in 150 hotels over the next 12 months. The city attracts a diverse customer base; repeat rate of customers is very high. While hotel stays are always planned, the capability of these customers of making an impulse decision to stay in OYO hotels is also high. According to company source, the OYO brand will offer 50,000 rooms in 200 cities by the year-end and grow to 500,000 in the next two to three years.

OYO Rooms in Blue Ocean – A strategy

Oyo brings ‘predictability’ as a key value that is usually missing with budget hospitality sector. For prices as low as Rs.1000 per night, one gets free wifi, breakfast, flatscreen TVs, spotless white bed linen of a certain thread count, branded toiletries, 6-inch shower heads, a beverage tray, etc., Oyo also have room recommendations for solo travelers, couples, business travelers, women, etc. Most of what you see in 3 star hotels such as fancy lobbies, elegant lounges, superior spa, etc. are often not the reason one chooses such hotels. Instead, basic hygiene, descent environment and predictable service drive customers to such branded hotels. The core to Oyo’s value innovation is to eliminate fancy aspects but retain aspects such as hygiene and predictability. As a result, Oyo is able to drastically reduce the price per room (in comparison to 3 Star) and simultaneously but disproportionally increase the value to customer. Oyo unlocks disproportionate business by attracting 3 star customers to trade down while non-star customers trade up to Oyo Rooms. Thus Oyo is capturing the both segment of customers! Strategy Canvas is one of the simplest, yet most powerful tools of Blue Ocean Strategy to visually identify the factors that any given industry is competing on. It helps to strategize how differentiation can be carved out as against

competition. Each factor in the graph that unlocks value to customers is rated in the 10 point scale and compared against competition or industry strategic groups. Oyo is a evident case of Blue Ocean because in comparison to either the existing star hotels or non-star hotels, Oyo has chosen to differentiate themselves by Eliminating some existing features, Reducing some features, Raising some and simultaneously Creating few new features. Traditionally companies focus on outserving the competition but Blue Ocean advocates differentiation through Elimination, Reduction, Raising and Creating. I should confess that Oyo Rooms isn’t the first hotel ever to try this. There are many such as Formula1 Hotels, Ginger Hotels, etc. which have attempted to create a differentiation. I should credit Oyo not only for their excellence in execution, but also in striving to find innovative ways to keep the financials intact. For example, Ginger Hotels unsuccessfully tried to target the same segment despite having own/leased properties. On the other hand, Oyo Rooms has positioned itself as an aggregator brand rather than a traditional hotel chain. This has helped them to stay fit on capital and operational costs, and more importantly, ramp up in no time. In order to create Blue Ocean in your own industry,

consider the steps involved in creating Blue Ocean are illustrated in the below

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You can learn more about the 6 paths to create exceptional buyer utility here. Oyo Rooms is already facing the heat of competition of me-too brands. In order to sustain position, Oyo will have to constantly refine its offering to unlock value for customers. For example, I found that none of the 3 Oyo Rooms I stayed in has overnight laundry or iron box on the house. I can’t land up for client meeting in wrinkled outfit J. Similarly none of them have tea bags and kettles in the room and room service didn’t start before 8 AM. Super imposing the Blue Ocean Strategy and its framework is only an attempt to learn how innovations can become predictable rather than a chance of luck or brilliance of

genius. If you are now tickled to create a blue ocean, this article has achieved its purpose and so would I.