OYO Switches From Hotel Aggregation To Franchise Model

Gurugram-based hospitality startup OYO has shifted its business model from hotel aggregation to franchise. OYO now runs pure-play franchise business allowing hotel partners to run under the OYO brands.

SoftBank-backed OYO had introduced franchise model in May last year. “In the last two years, we have evolved our business to 100% exclusive franchise, manage or operating. We do not anymore do hotel aggregation and have become a full-scale hospitality company,” OYO CEO Ritesh Agarwal said.

As per the company, the hotels that were part of the hotel aggregation model have now been converted into the franchise. OYO’s plan to shift from hotel aggregation to franchise model came mainly to reduce its operational costs and to improve serviceability, the company stated.

Founded by Ritesh Agarwal in 2013, OYO currently operates over 70K rooms in 230 cities in India, Malaysia, and Nepal. The hotel aggregation and booking platform recently raised $10 Mn from China Lodging Group, and $250 Mn from SoftBank Vision Fund in Series D funding round. The round also saw participation from Hero Enterprise and other existing investors Sequoia India, Lightspeed Venture Partners and Greenoaks Capital. The company has raised over $551.6 Mn so far.

The company has also opened a new tech development centre at Telangana to support the technical expertise.

OYO Opens New Tech Development Centre In Telangana

To leverage technology expertise in the background, OYO has also opened a tech development centre in Hyderabad. The Centre will be responsible for management and development of various verticals, including holiday packages, sales technology along with products and solutions for corporate travel and travel agents.

It will focus on building supply chain technology and transformation technology teams, growing to 300 engineers by 2018-end, read the company statement.

Ritesh Agarwal, founder & CEO, OYO stated, “OYO is at the forefront of transforming India’s hospitality experience. Technology has been the biggest driver towards our growth and expansion in the last four years. This new Centre of Excellence for Machine Learning (ML) and Artificial Intelligence (AI) initiatives will help us consolidate our technology leadership. Additionally, strategic partnerships with NITHM and TSTDC will not only impart skilling, but also create gainful value for the industry at large.”

After Gurugram, this is OYO’s second tech development centre. The facility in Hyderabad will focus on developing innovative products for customers, partners and employees. The company is also in discussions with National Institute of Tourism and Hospitality Management (NITHM) to boost employability in the hospitality sector by leveraging OYO’s expertise in the hospitality segment to develop a hybrid learning program.

Also in the works is an alliance with Telangana State Tourism Development Corporation (TSTDC) to maintain, market and promote select properties under the corporation.

Anil Goel, Chief Technology Officer, OYO added, “Technology has been a core differentiator for OYO and our investments here are to ensure we remain future-ready. Our intent is to create value for all aspects of hospitality operations. We will leverage technology across all operational channels, from recruitment to management to training, in addition to customer engagement. We are excited about using machine learning techniques to understand the behavioural patterns of customers, which in turn will enhance customer experience and drive essential business metrics such as conversion and repeat rates.”

Having raised huge funding, OYO is working on the several fronts. While the company is trying to enter the Chinese market, particularly Hongkong where Indians visit in good numbers, through its latest Investor China Lodging Group, OYO has recently also ventured into new territory through  OYO Asset Management. The service is geared towards building a nationwide network of hotels through a partnership with real estate asset owners.

The company also partnered with another online hotel and travel booking platform Yatra Online to widen its access to customers.

A couple of other startups that are currently active in hotel aggregation or budget accommodation space are RedDoorz, Wudstay Hotels, FabHotels, Treebo Hotels and GoStays. In July 2017, OYO had claimed that its GBV run rate has touched the $400 Mn mark in its financial results for the years 2015-2017. With the backing of SoftBank, the company has already made Tata Group’s budget hotel brands Ginger hotels to relook its entire pricing structure in the post-OYO era. Let’s see how the franchise model turns up for OYO.

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