If you were looking for the antithesis to OYO, the controversial $10 billion giant, then RedDoorz would be it. Both are budget hotel aggregators with India-born CEOs—Ritesh Agarwal and Amit Saberwal, respectively.
The similarities, however, end there.
While OYO has aggressively expanded across the globe with the backing of VC giant SoftBank’s bottomless pockets, RedDoorz has taken a more measured approach. Founded in 2015, it raised just $25 million across the first four years of its existence, preferring to hone its business model instead. That, too, largely in its home country of Indonesia.
In fact, it wasn’t until earlier this year that RedDoorz truly made a splash, announcing a $45-million Series B round in July. One month later, it followed up with a $70-million Series C. That spree added big name investors like Japanese e-commerce giant Rakuten—which profited handsomely from an investment in ride-hailing major Lyft—newly-minted PE firm Asia Partners and Qiming, a Chinese VC that manages $4 billion across 12 funds and has over 20 unicorns in its portfolio.
Bolstered by this cash infusion, RedDoorz now stands ready to stake its claim to Southeast Asia’s budget hotel market. But while its learnings in Indonesia—the region’s largest economy and the world’s fourth-most populated country—have given the company confidence, it now has an almighty task ahead of it.
As it seeks to expand to build its budget hotel network into a bonafide brand among Southeast Asia’s 600 million-plus populace, it stands smack-dab in the path of OYO, India’s second-highest-valued tech startup. With its seemingly insatiable appetite, OYO views Southeast Asia as a key expansion market. Already, it claims to have over 1,500 hotels on its platform in the region, the same figure that RedDoorz publicises.
The battle between a deep-pocketed and ambitious overseas entrant and a wily local harkens back to the duel between US ride-hailing pioneer Uber and Singapore-based Grab. That story ended in triumph for the home team. Grab took over Uber’s transportation and food businesses, adding the US firm as a shareholder—CEO Dara Khosrowshahi sits on Grab’s board. While Uber has retrenched itself from a market far, far from its home in California, Grab has assumed a virtual ride-hailing monopoly.
Here too, RedDoorz is betting that—like Grab—it can better negotiate the complexities of Southeast Asia’s six largest markets, with their different cultures, languages and laws. By the end of 2020, it’s hoping to have increased its current inventory threefold. Already, claims Saberwal, the company’s numbers are doubling every six months.
However, with the sustainability of OYO’s business model under-fire, the viability of the budget hotel concept itself is under question. It remains unclear whether anyone can build a profitable business, let alone a challenger in a nascent market. There’s also the challenge of maintaining company culture and values as the underdog RedDoorz attempts to scale.
While the battle may not centre around taxis, the budget hotel opportunity is no less impressive.
