OYO Gets $10 Mn From Chinese Hotel Franchisor China Lodging Group

Just a week after raising $250 Mn in a Series D funding round led by SoftBank, budget hotel booking marketplace OYO has raised $10 Mn from China Lodging Group Limited.

The Gurugram-based hotel marketplace has signed a MoU with China Lodging Group to facilitate and strengthen collaboration to build a global hospitality business. The investment is a part of the partnership and is a follow-on to OYO’s $250 Mn round.

Ritesh Agarwal, Founder & CEO – OYO said, “Addressing consumers in India and China – two of the world’s fastest-growing markets – through our combined strengths opens up a very large and significant growth opportunity.”

OYO recently announced its financial results for the years 2015-2017. However, as per the recently disclosed statement, the company claims to have incurred a loss of $3.27 Mn (INR 21 Cr) in FY 2014-15. This increased to $77.35 Mn (INR 496 Cr) in FY 2015-16. However, the budget hotel aggregator in FY 2016-17 has, till date, incurred losses of about $50.6 Mn (INR 325 Cr).

China Lodging Group – Hotel Operator And Franchisor

China Lodging Group is a hotel operator and franchisor in China. China Lodging Group has about 3,541 hotels and about 359,530 rooms in operation in 369 cities. The group has a focus on the economy and midscale hotel segments. Its brands include Hi Inn, HanTing Hotel, Elan Hotel, JI Hotel, Starway Hotel, etc. China Lodging Group also has the rights as master franchisee for Mercure, Ibis and Ibis Styles, etc.

China Lodging’s business includes leased and owned, manachised and franchised models. It operates 24% of its hotel rooms under lease and ownership model, 76% under manachise and franchise models.

Speaking about the partnership, Jenny Zhang, CEO – China Lodging Group said, “The partnership will draw on the strengths of China Lodging Group’s visionary and experienced management team, market leadership through a multi-brand strategy, extensive hotel operations expertise and strong loyalty program and OYO’s advanced technologies in the hospitality industry that enable transformation of hotel operations.”

Is OYO Setting Sights On China?

Under the terms of the MoU, China Lodging Group and OYO will explore initiating knowledge and technology sharing projects of mutual interest. A company statement says that this may comprise of exchange programme for employees, sharing of technology and intellectual property, etc.

As stated in the company statement, China and India are among the fastest-growing travel markets in the world. According to Deutsche Bank, nearly two-thirds of India’s rooms supply in 2020-21 will comprise of budget hotels. In this regard, OYO estimates mid-market accommodation alone to be worth $20 Bn by 2020.

The company ventured into the international market in January 2016. The marketplace forayed in the Malaysian market. In May 2017, after a year-and-a-half OYO ventured into Nepal. The company claims that its current GBV run rate has touched the $400 Mn mark. Therein, it claimed that OYO’s quarterly realised room nights and revenue (net of discounts, cancellations and future bookings) have grown by about 12x in the last two years. OYO is operating in more than 230 cities across India, Malaysia and Nepal.

The partnership with China Lodging Group may give OYO an entry into the Chinese market. At the least, the company will definitely be able to gather data and consumer behaviour patterns in the hospitality market in China.