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Oyo Rooms: Major Events to $5 Billion Valuation

Introduction

Oyo is an acronym which means on your own. It is an online platform for hotel room booking. Traveller and tourists can book their room in just 1 minute and with 3 clicks on the platform. Booking is available on the website and mobile app. Not just providing hotel room booking, it is into various other business segments as well. Ritesh Agarwal established Oyo is in 2012 in Gurgaon, Haryana. Ritesh actualized this idea when he was of the age of 18. Oravel Stays Pvt. Ltd. is the parent company. Oyo is now 3rd largest hotel chain in the world. It is one of those few startups in India achieving more success in other countries than in India.

Current Geographical Structure of Oyo

  • In India, Oyo has presence in more than 1,73,000 rooms and 8,700 hotels and homes in 259 cities
  • China: Present in 320 cities, having more than 10,000 hotels and 4,50,000 rooms
  • Indonesia: Present in 80 cities with 720 hotels and 20,000 rooms
  • Malaysia: Oyo has 150 properties in 13 cities
  • UK: Oyo has 85 hotels at 25 destinations
  • UAE: Oyo has presence in 12 cities
  • Saudi Arabia: 50 properties, 3000 rooms across 7 cities
  • Vietnam: Operates in 6 cities with 90 hotels
  • USA: Present in 35 cities with 50 properties
  • Philippines: Present in 4 cities with 21 hotels
  • Other than the above, Oyo has presence in Sri Lanka, Japan and Nepal.

About the Founder: Ritesh Agarwal

Ritesh Agarwal was born on 16 November 1993 in Bissam Cuttack, Odisha. He was only 8 years old when he learnt coding by reading his elder brother programming books. Entrepreneurship ability in Ritesh could be seen in him from his childhood as he was selling SIM cards at the age of 13.

He got the idea of starting an online hotel booking platform while preparing for IIT entrance exam in Kota, Rajasthan and stayed at hostels. With lots of travel in different parts of the country, he realized that there is lack of availability of budget hotels with good quality rooms. So after researching the market and on analyzing Airbnb model he launched ‘Oravel Travels’ in 2012.

Ritesh also enrolled in Indian business School but he left the college after attending for just 3 days to pursue his dreams. With college Dropout tag he put his entire focus on his startup.

Ritesh is an author as well. He wrote a book ‘A Complete Encyclopedia of Top 100 Engineering Colleges’. He also became the youngest chief executive officer (CEO) in India. At 16 years of age, Ritesh was one of the 240 children selected to be part of the Asian Science Camp held at the Tata Institute of Fundamental Research (TIFR) in Mumbai. The camp is an annual forum for pre-collegiate students for promoting discussion on the betterment of science in the region.Just at the age of 17, he took charge as a CEO of a company called Worth Growth Partner.

Major Events of Oyo Story

2012:

Oravel Stays Private Limited launched for listing and booking of rooms and for which received Rs. 30 lakhs funding from Venture Nursery, an accelerator which brought together a bunch of storied investors to nurture start-ups.

2013:

Pivoted Oravel to Oyo Rooms for providing affordable and standardized accommodation. The company started taking rooms on lease from the hotel owners and redesigned them so that the customer feels no problem while staying at hotel.

2014:

Made the services available with 65 hotels and 1200 rooms. Oyo was operating in five cities Delhi, Gurgaon, Mumbai, Noida and Bengaluru by 2014.

2015:

As growing with technology updates, Oyo launched its mobile app for hotel booking. The company added Goa, Hyderabad, Jaipur, Manesar and Pune cities and in the first four months increased the reach to 200 hotels.

2016:

Introduced ‘Early Check-In facility – sunrise’ and ‘Oyo Captain’ for providing city guidance and personalized assistance to customer. Oyo made available 6500 hotels in 220 cities for booking. The company became the largest budget hotel chain in India. Also, it went for internationalization by starting operations in Malaysia.

2017:

After starting operations in Malaysia in last year, they expanded operations in Nepal. Oyo launched a new business called ‘Oyo Homes’ for short term rental apartments. The locations selected for rental apartments and homes are holiday destinations.

Further, the company changed its business model from aggregation to franchise model or operating hotels under its brand.

In addition to above, during the year Oyo launched ‘Oyo Townhouse’. Besides it is available to residents staying in the vicinity who can use these properties as an alternative workspace. Can access them for their cafe, lounge and retail store. The properties offer exclusive merchandise like apparel, toiletries, and stationary.

2018:

Oyo achieved the Unicorn startup status. Also, accelerated its internationalization and added countries China, UK and Indonesia during the year. Also, added 11000+ rooms across 26 cities of these countries.

Last year Oyo launched ‘Oyo Homes’ in India and further in 2018 made this service available in Dubai also.

2018: Novascotia Boutique Homes was the first buy-out

Novascotia -Chennai based service apartment company has 350 rooms across Chennai, Coimbatore, Hyderabad, Kochi and Trivandrum. It was an integral part of our inorganic growth plan, in line with thier ambition to create beautiful and quality living spaces and adding value to every form of real estate.

Also during the year, Oyo acquired Mumbai based Internet of Things (IoT) Tech Startup ‘AblePlus’ for using tech & AI in managing hotels & assets.

Weddingz.in was the 3rd acquisition during the year. Weddingz.in is an online platform for booking wedding venues and vendors.

2019:

Oyo is now the largest hotel chain in China with 50000+ rooms in 337+ cities. Also during the year added Phillipines.

Oyo marked entry in food delivery market by starting its own cloud kitchen. It is also looking to list the brands on food delivery platforms, such as Swiggy and Zomato. Also, in April 2019, the company started a pilot of its first cloud kitchen under the Adraq brand.

In July 2019, the company entered into the co-working space business and introduced ‘OYO Workspaces’. It provides work spaces under 3 brands – Innov8, Powerstation and Workflo. Innov8 is across 6 cities of Delhi, Noida, Gurgaon, Bengaluru, Chandigarh, and Mumbai, with 16 centers hosting over 600 employees of reputed Indian and multi-national brands. Powerstation has one center in Gurgaon with a capacity of over a 1000 seats and Workflo has 4 centers across NCR, Hyderabad, Bengaluru, and Goa with a hosting capacity of over 1500 seats. Innov8 is an acquired business for ~$30 million.

Oyo also acquired mid-scale Chinese hotel brand ‘Qianyu islands’ as its first acquisition in China.

In May 2019, Oyo acquired Amsterdam based vacation rental @Leisure Group. The acquisition amount is ~$415 million (Rs. 2,885 crores). @Leisure Group offers more than 30,000-fully managed holiday homes across 13 countries in Europe.

Business Portfolio

Oyo Rooms

This is the starting business. Hotel rooms can be viewed and booked on the website and app of Oyo. It worked as a hotel aggregation and now works on franchise business model.

Oyo Homes

This business is much like Airbnb. Oyo Homes are located at holiday destinations. The customer can have the feel at home in these destinations. There are homes, apartments and villas which can be booked through the platform.

Oyo Workspaces

Oyo has also started providing co-working space. Freelancer can work without any tension. They are offering services like free Wi-Fi, Air Conditioning, Unlimited tea or coffee, quality furniture, 100% power backup and visitors’ management.

Oyo Cloud Kitchen

Oyo launched their cloud kitchen in 2019. It has 20 cloud kitchens in India listed on Zomato, UberEats and Swiggy. ‘Adraq’ and ‘O’Biryani’ are the cloud kitchen brands. Oyo is also planning to acquire Freshmenu, a startup working in cloud kitchen.

Oyo Life

Launched in October 2018, Oyo life is co-living startup where you can book PG, Hostels and Flats and can share room. Oyo Life was earlier called Oyo Living. Service is in Bangalore, Gurgaon, Pune, Noida, Mumbai, Delhi, Hyderabad, Chennai, Kolkata, Ghaziabad and Greater Noida.

Oyo B

Through Oyo B you can book rooms for corporate travelers. Oyo B has 4000+ hotels across 230+ cities and towns of 4 countries.

Oyo Township

Operating as a Hotel, Home, Cafe and Store, these hotels are social hotspot of their neighbourhood. It is just like alternative workspace.

Business Model of Oyo

Oyo business was completely different from OTA (online travel agents). Oyo started its business as a Hotel Aggregator. In Hotel aggregation, Oyo booked the rooms in hotel on a bulk and received huge discounts from hotel owners.  These rooms are redesigned according to the predefined standard set by Oyo. Then these are shown on the website and mobile. Customer can book the room at a predefined price. Price of room is comparatively lower than the price charged by the hotel owner because of huge discount availed by Oyo from hotel owner for booking in advance in bulk.

2018 was the year when Oyo changed its model to franchise model. Now the rooms are pre-booked by the Oyo and all the hotel partners of Oyo now work as franchises. Commission is charged from the hotel partners for the bookings done through the platform.

Oyo Home and Oyo Township are the other businesses from where Oyo earns revenue by booking homes, apartments and villas. For the co-working space provided by Oyo, Charges vary from 6990 INR to 8000 INR per seat. Booking wedding Banquets and halls is also a source of revenue.

Oyo Wizard is a hospitality paid loyalty subscription scheme under which subscribers are given guaranteed discounts, cash backs and discount coupon. Oyo has 1.5 million subscribers under Oyo Wizard scheme and 25% of total bookings are done through this. Subscribers of the scheme are given 5% instant discount on current bookings and 10% discount on future bookings.

Funds Raised by Oyo

June 2012:

Oravel Stays received Rs. 30 lakhs as seed funding from ‘Venture Nursery’ for starting their operations.

2013:

Received a sum of $100000 under Thiel fellowship program started by Peter Thiel, Co-founder of PayPal and Early Investor in Facebook. Ritesh Agarwal was the first Asian to receive this.

2014:

‘Lightspeed Venture Partners’ (LSVP) and ‘DSG Consumer Partners’ provided seed funding of $650000 (₹ 4 Crores). Oyo valued ~Rs. 14 crores at that time.

Feb 2015:

New investors, global investment firm ‘Greenoaks Capital’, American venture capital firm ‘Sequoia Capital’ along with existing investor ‘Lightspeed Venture Partners’ invested $25 million in Series A funding.

Aug 2015:

Oyo Rooms raised $100 million in a Series B funding round led by Japan’s SoftBank Group. Existing investors Greenoaks Capital, Sequoia Capital and Lightspeed Venture Partners also participated in the round.

April 2016:

In April 2016, raised $100 million in its C round of funding from existing investors – SoftBank, Sequoia Capital, Lightspeed Venture Partners, Greenoaks Capital and DSG Consumer Partners.

September 2017:

Existing investors ‘Softbank’, ‘Greenoaks’, ‘Lightspeed Venture Partners’ and ‘Sequoia Capital’ raised their stake by investing funds of $250 million under series D round of funding.

New investor and multi-billion dollar hotel management firmChina Lodging’ also known as Huazhu Hotels provided strategic investment of amount $10 million under the ongoing series D funding.

September 2018:

‘Softbank’, ‘Greenoaks’, ‘Sequoia Capital’ and ‘Lightspeed Venture Partners’ invested a large amount of $1 Billion for acquisition and expansion. With this funding Oyo became a Unicorn startup and valuation reached around $5 Billion (₹ 363 Billion).

Feb 2019:

Beijing based Transportation Company ‘Didi Chuxing Technology Company’ formerly known as Didi Kuaidii and existing investor ‘Softbank’ funded $100 million under Series E funding round which started in Sept 2018.

April 2019:

Airbnb, a new investor invested amount between $150M-$200M under the ongoing series E funding making it the third successive strategic investor to buy a stake in Oyo. 

Ritesh Agarwal is looking to buy back a part of equity holdings of Lightspeed Venture Partners and Sequoia India. The transaction will take up his stake from nearly 10% to 30%. Oyo’s valuation may raise to $10 billion post this transaction. Currently ~45% of the shareholding is with Softbank.

Financial Performance

The loss of Oyo is ₹ 355 Crores and ₹ 360 Crores for FY17 and FY18 respectively. So, there is a little increase in loss. Revenue increased by more than 3 times in one period of time. Revenue is ₹ 120 Crores in FY17 which increased to ₹ 416 Crores in FY18. Expected loss and revenue for the FY19 is ₹ 511.8 Crores and ₹ 1,400 Crores.

Competitors

Online Travel Agents (OTA) like MakeMyTrip, Goibibo and Yatra are competitors in the field of travel and room booking. But Oyo Rooms also got listed on these OTA when it changed to franchise model. Before that Oyo was delisted by these platforms.

FabHotels is also an online aggregator for hotel rooms. Adarsh Manpuria and Vaibhav Aggarwal founded FabHotels in 2014. FabHotels is a network of 3-star budget hotels in India.

Treebo; another startup working in hotel franchising model. Kadam Jeet Jain, Sidharth Gupta and Rahul Chaudhary founded this startup in Bengaluru in June, 2015. Treebo has presence in 133+ cities in India. 

Founder’s Vision

Founder Ritesh Agarwal predicts that his startup shall be world’s largest hotel chain by 2023. This would be done by expanding into newer countries in the Middle East, South East Asia and Europe. The company is also planning to launch its own Coffee chain in India under the brand name ‘The French Pree’ much like Starbucks in USA.

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References: News Publications, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews.

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. The report & references mentioned are only for the information of the readers about the industry stated.

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