Indian budget hotel chain OYO has only been in China for a little over a year, but it already considers China its second home. And with good reason. While it has spread across 250-odd cities across India, with over 8,000 hotels and 173,000 rooms in its half-decade-long existence, its growth in India is almost sluggish compared to what it has achieved in China.
That’s the number of rooms that OYO currently claims it has in China. Nearly double its Indian inventory. And this despite only landing in China as 2017 was drawing to a close. The number of rooms in China may seem astronomical, but, as OYO’s China CFO Wilson Li explains, scaling is relatively easy as the Chinese market is 10X the size of India’s. It’s growth, he says, that is hard.
OYO, though, will not be deterred. If the SoftBank-backed hotel chain is to achieve founder Ritesh Agarwal’s stated goal of 2.5 million rooms by 2023, China will be key. And it took yet another step in this direction with its first acquisition in China this past week, snapping up its smaller rival, Qianyu.
Qianyu, which loosely translates to ‘Thousand Islands’, is a mid-range hotel chain with a similar model to OYO. It targets individual hotel owners, bringing them on board its platform and linking them under one cohesive brand. Launched in August of 2017, the company has nearly a thousand properties across more than ten cities in China, according to its website. An OYO spokesperson, however, told this reporter that Qianyu’s operations will remain independent. Interestingly, for a company that practically infests India’s larger cities, 80% of OYO’s properties in China are in Tier 3 or smaller cities.
OYO intends to continue its brisk and unrelenting march across China. Swallowing up individual hotels and small chains as it looks to recreate its omnipresence in India in a foreign market. But how did OYO get this far in China? And how does it intend to conquer a market that, as Uber and Amazon can testify, is notoriously hard to break into for outsiders?
OYO doesn’t try and hide its Indian origins. However, the way it’s run makes it seem completely local on the ground. “I couldn’t quite believe it when they told me the company was Indian,” said a security guard at a newly-branded OYO hotel in the port city of Tianjin. He had worked at the same hotel for decades before the owner decided to join OYO in August of 2018. OYO has about 6,000-odd employees in China, the vast majority of whom are local.
“I believe we are a Chinese company,” says Li. “There’s no hierarchical relationship between us and India. The decision-making is completely separate.” Structurally, the company is completely separate from the Indian entity.