Softbank-backed, budget hotel chain, Oyo, is on an international expansion spree, and next on its list are Thailand, Indonesia and Vietnam. This is not Oyo’s first flirtation with the international market.
Currently, Oyo is in Malaysia in the Southeast Asian market, and in Nepal in the sub-continent. But sometime late last year, the company had almost completely withdrawn from Kuala Lumpur (within 12 months of launching) after facing a cash crunch. It called back its Indian employees and let go of those in Kuala Lumpur.
Fast forward to now, Oyo is relaunching its Malaysia operations. The company is in the process of hiring a country manager and local talent. Once that is done, Oyo will launch in Bangkok and Thailand in the first half of 2018. If things work well, it will go deeper into the country and then expand out to Jakarta, Indonesia and eventually, Vietnam.
Oyo, for its part, denied that there were any plans to launch soon but did admit that it was examining those markets closely. But current and former employees with knowledge of the company’s plans say localised apps are currently in development.
But why is Oyo going international now? “We have matured and built certain capabilities, and through our research, we know that in these markets [Southeast Asia] there is no large chain hotel brand. All this lends itself to our business model,” says Maninder Gulati, chief strategy officer, Oyo.
One of Oyo’s earliest investors has a slightly different reason. He asked not to be identified as he is not allowed to speak on behalf of Oyo. He says it’s capital. After the latest round of funding, Oyo now has the cash to aggressively expand outside the country. “You have to realise, Oyo also has to justify its valuation. After the last round it is valued close to $750 million,” he says. If any of its investors need to make an exit in the next four years through an IPO, the company will need to be valued “at least $4 billion and you can’t justify that valuation by being a regional player. You need to be international.”
On the face of it, there is scope for growth in Southeast Asia. The hospitality market, valued at $16 billion in 2015, continues to grow every year. Mobile penetration has been on the upswing, with internet connectivity growing by 10% in 2016. International tech companies such as Uber (US), Deliveroo (UK), Foodpanda (Germany), Line (South Korea), and WeChat (China) have all found Southeast Asia a happy hunting ground. Add it all up and you realise that this is a market ripe for Oyo’s entry.