OYO Gets $250 Mn Funding From SoftBank, Hero Enterprise, Others

Budget hotel booking marketplace OYO has raised $250 Mn in a Series D funding round led by SoftBank through SoftBank Vision Fund. The round also saw participation from existing investors Sequoia India, Lightspeed Venture Partners and Greenoaks Capital. With this round Hero Enterprise has also joined OYO as a new investor.

Commenting on the investment, Justin Wilson, SoftBank’s Board representative on OYO said, “OYO has solidified its position in India as the leading accommodation brand for consumer affordability and high-quality standards. We’re excited to continue to support OYO as they further expand their position in India and bring the OYO promise of affordability and elevated hospitality to other markets around the world.”

The newly raised funds will be used to support expansion to newer markets in India and abroad. The company in an official statement said it will also enable the budget hotel marketplace to bring additional resources to accelerate enhancement of customer experience and strengthen its technology stack.

The Gurugram-based company was founded by Ritesh Agarwal in 2013. It currently operates over 70,000 rooms in 230 cities in India, Malaysia, and Nepal. The company has raised more than $291.6 Mn funding till date apart from this funding round.

The company recently announced its financial results for the years 2015-2017. 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.

Talking about the development, Ritesh Agarwal founder & CEO, OYO said, “We are now focusing on further accelerating network coverage to consolidate our leadership in the economy through OYO Rooms and mid-market category through Townhouse brands. We will also deploy fresh capital to take our made-in-India business model to international markets which are characterised by a similar supply-demand imbalance in real-estate and hospitality.”

The SoftBank Vision Fund-backed entity offers standardised hotel rooms across the country, available for booking via app, web, call centre and channel partners. The company operates through OYO Rooms – the economy brand in the marketplace model and Townhouse – a managed hotel brand that combines experience and value for mid-market customers.

Sharing more details on the growth strategy, Ritesh elaborated, “We are developing capabilities to add 10,000 rooms to our network each month. Over 95% of OYO’s demand comes through our own channels with no commissions to pay, and the business has a solid growth outlook.”

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).

In August OYO 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. In April 2017, it was reported that SoftBank is in talks to invest about $250 Mn in OYO Rooms, at a valuation of around $850 Mn.

Another player that is active in this space, online budget hotel brand and booking platform RedDoorz raised $1 Mn venture debt from InnoVen Capital in April 2017. Startups like Wudstay Hotels, FabHotels, Treebo Hotels and GoStays also operate in the budget hotel booking space like OYO. With the backing of Softbank’s Vision Fund OYO will look to expand its footprint in the budget hotel aggregator space in Southeast Asia.