How OYO Is Building An Empire, Room By Room

How OYO Is Building An Empire, Room By Room

From a single city in 2013 to five cities in December 2014 & from 20 cities in May 2015 to adding 43 more cities in July 2015. The story of OYO and how it has expanded like a ninja is known to everyone. The company hit the 100 city mark at 3 PM of 21st August.

Founded by a college dropout, Ritesh Agarwal, the journey of OYO has been a roller coaster ride for the entire team.

Of course, OYO was in news recently, when it had hit the 100 city mark and had a $100 Mn funding jackpot from Softbank and its existing investors, Lightspeed Venture Partners, Sequoia Capital India and Greenoaks Capital. Before that, it even gathered a lot of negative press after the Mint story on the founder Ritesh Agarwal.

The fact that a 21 year old Thiel fellow and tech prodigy is at the helm of this budget-hotels behemoth is an impressive one; and has amassed OYO enough eyeballs from the startup and investor community alike. After all, they’ve got more than $100 Mn in their kitty to prove it.

But behind this dazzling funding story, is the more interesting growth story of how OYO has built a chain of technology enabled budget hotels striving to deliver the same level of standardization every time a user books an OYO room “from the thickness of the mattress to the thread count of the linen to the ease of ordering room service.”

That is the story of a company built on the three pillars of process, technology and team from day one; a story which started from a single city and now stretches to 99 more; a story which envisions a seamless customer experience, where you can check in and check out without stopping at the reception; and a story where with just one OYO App, you can order room service, call for a cab and hunt for restaurants dishing your favourite cuisine.

Oyo aims to make sure that “You will stay like never before.”

As Anurag Gaggar, VP Product management at OYO says, OYO aims to make sure that “You will stay like never before.” This part of the story is called “vision”. But before that there are many others, which have made OYO offer a more and more predictable experience with greater ease.

This Part of the Story is called Discovery

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Scaling up from one city to a 100 is a journey that requires proper investment in building processes, useful technology, and building a great team and this is the order which OYO has followed, says Kavikrut, Head of Expansion at OYO rooms.

Before launching in any city, OYO looks at the supply side data and not the demand side statistics. “Are there any hotels which require us? That’s what we look at when we decided to launch in a city.” he adds.

Discovering such hotels is not an issue as today there is no dearth of online data. Their predecessors in the travel industry, such as MakeMyTrip and other online travel portals have done the groundwork of getting many such places online and most of this data is available publicly. Besides relying on public data, additionally, OYO itself has data points around prices, user amenities, ratings, cityscapes, city hot spots, says Gaggar. One could give this data to a team of people who have not even visited the city once, and they would still be comfortable in identifying such prospects.

The company has a “fleet on street”, moving from city to city, surveying 20-30 hotels in a day, and simultaneously building on the company’s internal data capabilities. Consequently, they are able to zero in on many good but hitherto undiscovered places.

For instance, Kavikrut points out that in the town of Tirupati itself, which witnesses such a huge footfall of religious crowd, OYO was able to pin down 40-50 such good but undiscovered budget hotels. Once such hotels are identified, the next step is to bring these hotels under the OYO brand.

This Part of the story is Called Transformation

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This Part of the story is Called Transformation

Post identification, starts the process of setting up an appointment, auditing, providing enabling technology, setting standards, physically transforming the hotel, auditing the fixes before it goes online, and then finally making it live on the OYO portal.

The OYO team looks at the minutest details such as the kind of dustbins to the quality of sheets to the thickness of mattresses while preparing a commercial audit for the owners. It is a standard checklist they swear by which enables them to deliver a more and more predictable experience. For instance, all OYO rooms across the country will have the same thickness of the mattress and will have the same white bed sheet of 330 thread count – that’s how precise they go to ensure a standardized experience. Once the owner is provided with a commercial estimate of fixing the hotel and the cost-benefit analysis of partnering with OYO, he has the choice of getting the transformation done by his contractors or through OYO’s empanelled vendors.

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The process of getting the hotel ready and into the system is called transformation, literally. OYO’s teams storms in with a kit to fix the designated rooms. It is monitored on the app from day one.

Since about 90% of the hotels shortlisted by OYO team do not require structural fixes, this process of transformation can be completed within 24-48 hours. According to the company, only 8-10% of the properties chosen would require 4-5 days.

On a lighter note, he adds that in this whole transformation process, it’s just the OYO board which takes the maximum time of 3-5 days to arrive at the said hotel.

Though this whole process may seem very linear and simplistic, it is hardly that!

At a given time, many specialised teams are working together to get a hotel live on OYO platform. A team will audit the hotel, another will fix it while someone else will collect photographs of the transformed rooms and then ship them off to the team that will make it live.

As technology plays a big role in enabling total synchronization of these varied teams and their processes, OYO has a savvy work tool management in place which allows these teams to interact smoothly. With varied people in varied cities working on numerous processes & problems, technology is the glue enabling them to achieve a cohesive transformation of an identified property. However, all of these are not as easy as it looks!

This Part of the Story is called Challenges

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You can walk in with all the technological prowess in your kitty but it will still be a herculean effort to bring about change in archaic processes. OYO’s path has been no different.

Way back when they started in 2013, one in ten hotels they approached for becoming an OYO partner would agree for a second meeting. Hotel owners were obviously reluctant to make the investment in transformation, training of resources, and applications. Many were still sticking to archaic systems of property management. Kavikrut states that if one asked them how technologically updated their systems were, they only had inventory management systems, accounting systems such as tally, and some only a website to show for that!

On top of that, many hotels had employees working in the night shift who were not very computer savvy. This is where OYO filled in the gap by equipping them with useful technology-an end to end property management system on a single app. They demonstrated to them how with a single tablet, a hotel owner could integrate his sales channels, inventory systems, central management systems and housekeeping in real time with a few clicks. What helped them at this juncture was the increasing penetration of smartphones in India.

Not all people working in the hotel might be computer literate but nearly everyone today can  use a smartphone with ease. Hence, the tablet offered a one stop solution to all the people involved right from the booking process to the housekeeping process. The tab enabled them to keep track of customer requests, providing them with a kind of to-do list, thus helping them deliver a better customer experience.

It eased the gap between intent and delivery, enabling them with useful technology which helped them do a good job. The tab is connected to the consumer app, thus forming a better channel of communication between the consumer and the hotel. Gone are the archaic days of first finding the number for housekeeping, then trying to get through to their rickety intercom phones to order your coffee!

As brilliant as it may sound, it wasn’t easy for OYO to get the tablet accepted in the first go. If net savvy Bangaloreans asked for chrome based application, then some Gurgaon hoteliers were content with a register based system too!

However, the tablet was such a hit that some hotel owners even requested if they could just keep the tablet without becoming a partner! Today of course, there is no hotel they approach which says no to them. Many hotels now wait for them to launch in their cities, often requesting them to launch a new city with their property.

No wonder, OYO now boasts of a network of more than 1,800 hotels, made possible by the robustness of their processes manifested by just a few clicks on their app.

This part of the story is called Vision

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Technology is the most important tool that has enabled OYO to script its story and going further, its future. It has enabled OYO to seamlessly integrate all channels of property management and customer service through a single app, thereby offering a more and more predictable experience to its consumers.

On the supply side, it has put many such undiscovered hotels on the map, equipping them with the right tools to increase their revenues, maximizing productivity of resources and delivering an amazing customer experience.

In terms of further plans for the product, Anurag says that OYO will also focus on building the “OYO Premium Brand Hotels”, that will strive to offer more than the OYO basic brand. Also, the app will work to ensure onwhat all things the customer can do at the hotel , be it ordering a cab, or locating a particular food joint, to ordering his favourite cuisine, Oyo aims to deliver a seamless travel experience.

Imagine walking into a hotel without stopping by reception and imagine a pan-India network of such hotels, where you can just enter any of these hotels once your data is in the OYO system. One would hardly rate this experience as a budget one, “futuristic” is the right word for it!

Talking about the future from a different perspective, there have been talks about OYO making its foray into South East Asian markets. Kavikrut points out that it is a possibility as South East Asia as a region has similar problems with respect to the budget hotel ecosystem, though of course, right now their hands are full with enough work to do in India alone.

He points out that there is already an OYO like product in Thailand and they feel proud to be imitated. But right now, they are completely focused on scaling up in India. No wonder the budget hotel segment is receiving increasing attention from other players as well. From Yatra planning to launch Travelguru rooms in this space to Ibibo also venturing into this space with a new portal, and MakeMyTrip, Cleartrip, and Ezeego scaling up their inventories to include as many locations as possible, the budget accommodation space will be a hotbed of activity in the coming times.

A Quick Look Into The Market

As per industry estimates, the budget accommodation space has nearly 1,00,000 accommodations and a market size of one million room nights per day.

And there is increasing competition in this market with newer entrants. OYO’s closest competitor Zo has expanded to 35 cities and was funded by Tiger Global Management and Orios Venture Partners recently. The company is adding 5 hotels every day and launching in 2 new cities every week. Recently, Awesomestays, a offline budget marketplace was acquired by Wudstay, another player in this segment for an undisclosed amount.

A look at the following table points out to the increasing no of players jostling for this space.’

With so many players aggressively fighting for the budget hotel pie, clearly, OYO has its hands full, as it scales up from the 100 city mark, building an empire, room by room.

Author

Shweta Modgil

Inc42 Staff
Passion for writing and interest in the start-up space brings Shweta to Inc.42. She has prior experience as a Research Analyst in the venture capital/ private equity space and the auto industry. Fiction writing is her other forte and her first book titled One Hundred Days published by Tara Press debuted in 2014.
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