Oyo is India’s largest branded budget hotel chain. Largest in terms of funding. It was founded in 2011 (From Oravel to Oyo), and in seven years, it has grown to 200 cities. It has 70,000 rooms in 7,000 hotels. It has crushed competition in the past. And it has international dreams today. To top it all, it has a list of high profile investors on board: SoftBank, Sequoia, Lightspeed. On the face of it, there’s nothing stopping the company from winning over the haggard, budget hotel traveller.
Oravel Stays Private Limited
Name as per MCA records
Founder and CEO
Lightspeed Venture Partners
Sarovar Hotels and Resorts
What has Oyo been up to in the last year?
A lot. Oyo upgraded. It launched Townhouse. A concept where it would lease small hotels and lodges, renovate them and upgrade them. And then sell it as premium property. It even went to Nepal in an attempt to capture the Indian tourist market in the Himalayan country. It also raised money. SoftBank gave it $250 million and increased its valuation to just under a billion dollars. As an aside, Oyo also claimed that it had taken several steps towards being profitable and breaking even. In the middle of 2017, its founder, Ritesh Aggarwal, spoke to The Economic Times in great detail. The paper wrote, “In the past one year, claims Agarwal, Oyo has more than doubled its growth. Its burn rate has come down by as much as 60%, customer service rating is at the highest.” So, let’s take a look at its FY17 numbers and see how they did.
Rs 31 crore: Revenue that actually landed in Oyo’s account. Oyo technically clocked revenue of Rs 87 crore. But there were operating expenses too. Commissions paid to hotels, direct expenses, consumables and an interesting sub-section called loss from bookings, which amounted to Rs 25.3 crore. It was Rs 132 crore in the FY16.
Rs 194 crore: What Oyo spent on wages and employee benefits. It is up 60% from FY16.
31%: Decrease in ad spends in FY17 compared to FY16. This is expected to rise again once Oyo starts trying to rebrand itself as a not-just-a-budget hotel chain.
5.1 crore: Earned by Oyo as a performance-linked bonus from the hotels.
330 crore: Loss on Oyo’s books. A 33% drop from FY16. A direct result of Oyo’s decreasing marketing spend.
What to expect from Oyo in FY18?
Recently, in December (and it is not in FY17), Oyo declared that it was out of the aggregation businesses and is now completely immersed in the franchise model. It was done to have more control over customer satisfaction. There will be a bigger focus on that now. The marketing spends will increase as Oyo tries to turn the ship around and as it tries to raise its profile above the budget segment. The company is also planning to go international, especially to South East Asia, and internally, it is drawing plans to go to China as well. Expect Nepal to be a trial balloon and more to come soon. In the franchise hotel segment, it will find that it competes not just with fellow startups like Treebo and FabHotels but also other premium hotel franchise chains such as Marriott International.