Softbank backed OYO said that it has become the world’s 2nd largest hotel chain in terms of the number of rooms as of December 2019 within 6 years of launching the company. The company has tremendously expanded to 44,000 OYO hotels with 1.2 million rooms on four continents.
It claims to have around 50,000 rooms in China alone and also counts Indonesia, UK, and the US among its top markets today. Oyo’s founder and CEO Ritesh Agarwal have said the budget hotel chain will be the world’s largest hotel chain in revenue, scale, and margin by 2023, with over two million rooms in Southeast Asia alone.
The company remains committed to diverting 40 percent of the funds towards China, of which $100 million will be toward customer experience, quality, and system improvements, and the balance to fuel further growth, talent development, competency building, and infrastructure development in the country.
Recently, In an interview Founder Ritesh Agarwal said, ” We change our prices worldwide about 60 million times daily, maximizing revenue per room based on demand. Three years back we were growing at 60%. This year it will be 300% or more. In Tier 2, 3, and 4 cities in China, you can’t miss the OYO hotel sign. When you drive around Jakarta or London—and, increasingly, Dallas, Houston, or Las Vegas—it’s hard to miss the sign.”
Business Model Of OYO
In a recent interview, Ritesh Agarwal explained the business model of OYO-
- All are optimized for customer occupancy and repeat. Occupancy generally goes from 30% to 40% before OYO to 60% to 80% afterward. We have an owner-retention rate of 99 percent. We spend around $500 in India to renovate a room. It’s $500 in the smaller cities in China; it’s $750 in the bigger cities. It’s $1,000 in the United States. On an average of about six months, we are recovering our money globally.
- Before designing interiors, we predict what kind of design will give us the best returns for the lowest capital expenditure. For example, we found that Marilyn Monroe’s portraits increased a property’s RevPAR[ revenue per available room] by 10% to 11% on average. Consumers classify hotels like this as “boutique.” It started when one of our Wichita Falls, Texas hotels saw RevPAR improve by 25 percent after we put portraits of Marilyn Monroe on the walls. Then we began to copy this.
- More than 50% of our hotels in India are full-service, which means you can order room service. Imagine doing this at a $25 per night price point. We don’t have full-service hotels outside India for that cost. When a guest checks into a full-service hotel, the staff in the lobby knows that on a previous visit the guest ordered pizza to the room and will proactively ask whether the guest wants a pizza. He gets a bonus if a receptionist offers additional services. Our institutes of OYO training are grooming employees. In housekeeping, front desk, repairs, and so on, we have generated 300,000 workers..
OYO is rising at a great pace and we hope they continue to dominate the market