OYO's Journey in the Hospitality Industry - A business case study

Hello Lions,

I am doing alright and hope all of you are fine and enjoying the summer with your family and friends! In this post, I will discuss a business case study of an Indian-origin company OYO, its business model and style, how it has become so popular in our country, and my thoughts about the company. So sit tight and have a read until the end.

Introduction of OYO

OYO is an Indian hospitality company that operates a network of hotels, homes, hostels, and living spaces. It was founded back in 2013 by Mr. Ritesh Agarwal and since its launch, it has grown rapidly and successfully become one of the largest hotel chains not only in India but in the whole world. The name of the company is also very quite intriguing and catchy - OYO, which stands for "On Your Own" and I bet after hearing or viewing the name to 3 - 4 times, it is difficult to forget about it, so undoubtedly they have done a tremendous job with the logo and name.

Business Model

OYO's business model is simple, yet it become popular rapidly in our country because it added true valuation to its customers by covering a service area without any existing competitors. OYO is an online hospitality-based company that focuses on turning low-cost hotels and accommodations into consistent and affordable places to stay. They work mainly with independent budget hotels and property owners and give them technological support and standards to enhance the service quality and thus better experience for guests. They help their customers to find available hostels, homestays or hostels online very easily and also make their stays better and more reliable. OYO owns their own in-house built application and website and they worked well to make it easy for people to find and book these places. It helps you well especially when you are traveling to a new place and don't know much or anything about the place, you can just visit their app or website to find all the hotels or homestays available along with their rating and feedback from previous customers who stayed there in the past. They also provide online payment transaction and lucrative offers or cash rebate on payment or even free perks for using their app to book certain hotels and their price is very competitive and sometimes even lower than the original fee of that particular stay. For all these reasons, They have grown quickly and right now operate in many countries. By January 2020, OYO had over 43,000 properties and 1 million rooms spread across 800 cities and 80 countries. These countries include India, Malaysia, the United Arab Emirates (UAE), Nepal, China, Brazil, Mexico, the United Kingdom, the Philippines, Japan, Saudi Arabia, Sri Lanka, Indonesia, Vietnam, and the United States. OYO has also partnered with some well-known global companies and also received funds to raise capital from them which include Lightspeed India, Hero Enterprise, SoftBank Group, Didi Chuxing, Greenoaks Capital, Sequoia India, Airbnb and China Lodging Group etc. Yes, OYO has a collaboration with AIRBNB which literally opened the door of the international market for it and helped it grab global attention in a short span of time. But, OYO hasn't stopped there and it is trying constantly to expand its business in more sectors as well. Nowadays it also offers holiday homes and apartments through OYO Homes and a brand new concept called OYO Townhouse.

The man behind OYO

The founder of OYO is Ritesh Agarwal, an Indian entrepreneur. Ritesh was born on November 16, 1993, in a small town called Bissam Cuttack in Odissa state, India. Ritesh became interested in starting his own business at a young age when he was only 17 years old. He created a website called Oravel Stays and the foundation of OYO started with this initiative. He created this website with the sole aim to help people find affordable places to stay while traveling in India. This early venture laid the groundwork for what would eventually become OYO.

In 2013, Ritesh officially founded OYO with the goal to change the budget hotel industry in our country, India. He noticed that many budget hotels lacked consistency and quality standards, and it was difficult for travelers to book rooms reliably. Ritesh saw an opportunity to solve these problems by using technology and offering support to improve the quality of budget accommodations.

Behind the Success

Ritesh started small by living and analyzing in the hotels he partnered with on his own. This practice allowed him to understand the real challenges faced by these cheap and budget-friendly hotel owners and guests that are mostly used by travelers. He worked very hard for a long time and traveled extensively from state to state, meeting with hotel owners personally and listening to their needs while educating them about hospitality services and rectifying their service quality. Over time, he grew OYO's network of partner hotels by providing them with training, technology, and brand standards to make the guest experience better than ever. Ritesh Agarwal's determination and innovative ideas helped the OYO to become one of the largest hotel chains in India and later expand globally. Today, he continues to lead OYO as its CEO, working towards the mission of providing affordable and reliable accommodations around the world.

Challenges OYO faced

• Competition and Market Saturation:
  Dealing with intense competition in the hospitality industry with other hotel chains, online travel agencies, and home-sharing platforms.

• Quality and Standardization:
  Ensuring that all properties under OYO meet its brand standards and provide a consistent guest experience has been a complex task.

• Regulatory and Legal Issues:
  Facing restrictions on short-term rentals and compliance with local regulations regarding short-term rentals, tax obligations, and addressing concerns related to safety and guest welfare.

• Partner Relationships:
  Dealing with unfavorable contract terms, sudden changes in pricing, or lack of transparency and maintaining positive and mutually beneficial relationships with partners have been crucial for OYO's long-term success.

• Financial Sustainability:
  Balancing growth with profitability aggressive expansion strategy pursued by OYO, including entering new markets and acquiring other companies ensuring a viable long-term business model has been a critical challenge for OYO.

• COVID-19 Pandemic:
  Being in the travel and hospitality industry, OYO faced significant disruption due to the global COVID-19 pandemic because of Travel restrictions, lockdowns, a decrease in travel demand and a decline in bookings due to the pandemic.

But not to mention that OYO has been actively working to overcome all these challenges continuously by improving quality control, enhancing partner relationships, streamlining operations and adapting to the changing hospitality industry landscape.

I hope you had a good read and if this business case study is able to bring some value to you, I will be very happy to know. Please let me know your thoughts about the business strategy of OYO and if you have ever heard of this company or used their service in the comment below and I will be seeing you all in my next post.

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