Let’s start today’s story with a question.

What is the easiest and sure-shot way for a startup to enter the exalted “Unicorn” club consisting of companies valued at over a billion dollars?

Why, raise a billion dollars, of course.

According to reports, OYO Rooms, the SoftBank-backed hospitality startup, is poised to do exactly that in a new funding round of up to $1 billion that may value the company at a mind-boggling sum of over $4 billion.

If that isn’t enough, now that SoftBank has exited Flipkart and written off Snapdeal, OYO seems to have emerged as the behemoth’s favourite child in India. A considerable part of SoftBank’s recent earnings call was dedicated to OYO. Masayoshi Son, SoftBank’s mercurial founder, made the following statements on it (lightly paraphrased for easy reading):

  • OYO is a completely new type of hotel, a next-generation type of hotel management. It is not a travel agent but manages hotels comprehensively with its own management, IT, booking technology and quality control method. It’s like a franchise.
  • Taj Hotels is the biggest hotel chain in India with 15,000 rooms. In just two years, OYO grew the number of rooms from 1,000 to 100,000. By the end of the year, it will add 150,000 to 200,000, which will be 10x more than the Taj group’s rooms.
  • OYO started in China as well and in less than 12 months, 25,000 rooms were created every month.
  • The world’s biggest hotel chain in the world is the Marriott, and they added 8,000 net rooms in the last three months. In contrast, OYO grew 10x faster, adding 81,000 rooms in the same period —34,000 in India and 47,000 in China.
  • With OYO, the occupancy grew from 30% to 78%. So from a hotel owner’s perspective, the occupancy rate grew dramatically with OYO. In return, the profit will be shared with OYO and hotel owners.
  • OYO’s business and management are being more efficient through AI. They use heat maps with AI for demand prediction and to dynamically decide pricing. 43 million micro-optimisation takes place per day by looking at the weather, looking at day or week, looking at what kind of campaign is ongoing. Without AI, you can’t do such micro-optimisation.

Son also claimed that OYO is already profitable at a unit level, and would become profitable at the company level as it scales further. “The cost of acquisition and development are considered early proactive investments, but since the volumes are huge, growth margin should exceed such fixed costs. Once it exceeds, you will see a dramatic improvement in profitability, similar to what Google, Microsoft and Facebook have proven”.

AUTHOR

Sumanth Raghavendra

Sumanth is a serial entrepreneur with more than eighteen years experience in running startups. He is currently the founder of Deck App Technologies, a Bangalore-based startup attempting to re-imagine productivity software for the Post-PC era. Sumanth’s columns appear regularly in leading publications. He holds MBA degrees from the Indian Institute of Management, Bangalore and Thunderbird, The American Graduate School of International Management, USA.

View Full Profile

Available exclusively to subscribers of The Ken India

This story is a part of The Ken India edition. Subscribe. Questions?

MOST POPULAR

Annual Subscription

12-month access to 200+ stories, archive of 800+ stories from our India edition. Plus our premium newsletters, Beyond The First Order and The Nutgraf worth Rs. 99/month or $2/month each for free.

Rs. 2,750

Subscribe
 

Quarterly Subscription

3-month access to 60+ new stories with 3-months worth of archives from our India edition. Plus our premium newsletters, Beyond The First Order and The Nutgraf worth Rs. 99/month or $2/month each for free.

Rs. 1,750

Subscribe
 

Single Story

Instant access to this story for a year along with comment privileges.

Rs. 500

Subscribe
MOST POPULAR

Annual Subscription

12-month access to 150+ stories from Southeast Asia.

$ 120

Subscribe
 

Quarterly Subscription

3-month access to 35+ stories from Southeast Asia.

$ 50

Subscribe
 

Single Story

Instant access to this story for a year along with comment privileges.

$ 20

Subscribe

Questions?

What is The Ken?

The Ken is a subscription-only business journalism website and app that provides coverage across two editions - India and Southeast Asia.

What kind of stories do you write?

We publish sharp, original and reported stories on technology, business and healthcare. Our stories are forward-looking, analytical and directional — supported by data, visualisations and infographics.

We use language and narrative that is accessible to even lay readers. And we optimise for quality over quantity, every single time.

What do I get if I subscribe?

For subscribers of the India edition, we publish a new story every weekday, a premium daily newsletter, Beyond The First Order and a weekly newsletter - The Nutgraf.

For subscribers of the Southeast Asia edition, we publish a new story three days a week and a weekly newsletter, Strait Up.

The annual subscription will get you complete, exclusive access to our archive of previously published stories for your edition, along with access to our subscriber-only mobile apps, our premium comment sections, our newsletter archives and several other gifts and benefits.

Do I need to pay separately for your premium newsletters?

Nope. Paid, premium subscribers of The Ken get our newsletters delivered for free.

Does a subscription to the India edition grant me access to Southeast Asia stories? Or vice-versa?

Afraid not. Each edition is separate with its own subscription plan. The India edition publishes stories focused on India. The Southeast Asia edition is focused on Southeast Asia. We may occasionally cross-publish stories from one edition to the other.

Do you offer an all-access joint subscription for both editions?

Not yet. If you’d like to access both editions, you’ll have to purchase two subscriptions separately - one for India and the other for Southeast Asia.

Do you offer any discounts?

No. We have a zero discounts policy.

Is there a free trial I can opt for?

We don’t offer any trials, but you can sign up for a free account which will give you access to the weekly free story, our archive of free stories and summaries of the paid stories. You can stay on the free account as long as you’d like.

Do you offer refunds?

We allow you to sample our journalism for free before signing up, and after you do, we stand by its quality. But we do not offer refunds.

I am facing some trouble purchasing a subscription. What can I do?

Please write to us at [email protected] detailing the error or queries.