Hotel aggregator OYO Rooms is currently in 170 cities with 5500 properties under its banner resulting into a total room inventory of 65,000 in India. Ritesh Agarwal, Founder and CEO, Oyo Rooms talks about the company’s performance as well expansion plan.
How would you explain the current scenario of unorganised hotel industry in India? Does arrival of OYO and similar other players are going to contribute in making the Indian hospitality industry organised?
The opportunity in the online space for unbranded hotels is huge. HVS estimates that 1.8 million Indian rooms are in "unbranded" hotels, compared with 112,000 in "branded" ones. Online penetration in this sector is around two per cent so there is a lot of scope for growth.
Our idea is to provide a comprehensive Stay Management Solution that ensures predictable experience, pricing and availability for the customers. At the same time, we empower hotel owners by giving them access to modern technology to increase their overall profitability and provide better services. Definitely, the launch of OYO has given an impetus to the budget hotel category that was otherwise languishing and kind of remained untouched by the digital and technology revolution. This was not for lack of will. It is just that the task at hand and the scale of the problem was so huge that established companies were unable to tackle it. We approached this business with an innovative mindset and within a short span of time, have created huge brand and category recall with Indian travellers.
Does the emergence of disruptors like you are going to slow down the pace of development in the branded budget category? Is there any plan to foray into the mid or upmarket segment?
Our emergence and success in fact is beneficial for the category as more hoteliers benefit from access to latest technology, tools to build efficiency into operations such as revenue-management and customer-engagement and also gain from our skilling and training initiatives. On the customer side, the brand recall and trust we have built, induces more trials and drives more guests to our partner hotels. We have piloted a concept that we are currently calling Flagship – this is a project to develop an upmarket offering for discerning customers.
At the inaugural press conference, you spoke about your expansion plan? How has the journey been so far? Is the plan on track? Where do you see OYO by 2017 end?
It has truly been a phenomenal journey of growth and grit. From 300 hotel rooms in September 2014, we have today grown to offer over 65,000 rooms (5500 properties) in 170 cities across India. We have enabled over a million check-ins since inception. In January this year we launched operations in Malaysia. We plan to grow deeper in all key business and leisure cities, tripling our inventory by December 2016. We are on-track with our plans and continue to have sharp focus on profitable unit economics. A few weeks ago, we announced having hit unit-level profitability across our business in March and we continue to be profitable.
The group notched 2.3 million room nights last quarter. What sort of room nights you are expecting for the whole year 2016?
If we continue at this pace we will exceed 10 mn booked room nights in the calendar year.
There have also been negative reports in terms of services and overall experience. Established players in the industry are of the opinion that it will be difficult for you to assure the quality deliverance. How are you enforcing quality standards?
We started out with the intention of solving a problem of guest-experience and hence we take it very seriously. Hospitality is a complex business and there are so many points of interaction, and consequently “possible” points of failure. Our adoption and success is a testament to how well we have been able to manage these complexities. We started about three years ago – having enabled over a million check-ins, our TripAdvisor rating is 4.4. Our average repeat rate is among the highest in the industry.
In the last two months we have instituted measures to identify gaps and plug them. We have fixed these, and as a result built even more consistency in our operations. Partners that were unwilling or unable to deliver the OYO service standards were let go from the network. We also built tech solutions to enable more transparency and ensure compliance in the audit process. We have dedicated on-ground teams conducting extensive audits of each and every room within the network and enabling personalised support for guests. All OYOs are audited rigorously for essential standards to identify best experience hotels (OYO Star Partners) as well as purge non-compliant hotels (121 last year) from the network. We are so confident of the measures taken, that have launched a programme where our leadership is re-inviting guests who expressed unhappiness with their stay earlier, to experience OYO once again.
Can you share details on OYO Bazar and OYO Care?
OYO Bazar is an initiative by OYO to leverage our ability to generate bulk business and drive better cost-effectiveness for partners. We use our platform to provide partner-hotels access to best quality products required for day to day running of hotels. OYO Bazar offers three core benefits of buying convenience, product quality and great prices. It takes away procurement hassles enabling the hotelier to focus on core hospitality business development. The initiative has seen a good response with bulk business queries received from as far as Bhubaneshwar, Goa and Jammu & Kashmir.
OYO Bazar intends to become a one-stop solution for hotels to order any item required for smooth operations. The number of SKUs listed in the platform will increase to about 500 SKUs in the next couple of months and the category coverage will also increase to include cleaning supplies, crockery, bathroom wares, and room and kitchen appliances. This expansion of categories will ensure that our partners can fulfill all their hotel-related purchases from a single online marketplace.
Who is your closest competitor in India?
The kind of business that we are – chain hotels can be considered competition, OTAs can be considered competition, tour operators can be considered competition and of course another aggregator can be considered competition. What we focus on instead is the opportunity – any person staying out of home is a potential customer. Any option offered to that customer is competition. We want to make OYO the de-facto option when someone needs to stay out of home.