Ritesh Agarwal, Founder and group CEO
OYO launched in 2013 in India but has rapidly expanded to the U.K., China and most recently to mainland Europe through the acquisition of @Leisure. The company has also raised significant funding rounds including $1 billion led by Softbank in 2018.
What began as a budget hotel platform by then 21-year old Ritesh Agarwal has grown to encompass holiday homes and corporate accommodation. OYO has made no secret of its ambition to become the largest hotel chain in the world.
Barely a week goes by without an announcement from OYO about growth in a country or segment. Can you outline your vision for the company?
We started on the belief that everyone deserves a beautifully designed, chic and comfortable living space. And everyone deserves a better life. We knew we could change the way people live. We did that by upgrading bland, generic spaces and places and designing them with next‐gen chic and design moxie and offering them at hard‐to‐ignore prices, in Europe and the U.S.
We are currently present in 800 cities across 80+ countries globally including UK, US, India, Malaysia, Nepal, UAE, Indonesia, Saudi Arabia, the Philippines and Japan. Currently, we have over 850,000 rooms across over 23,000 hotels and over 46,000 homes globally.
OYO has revolutionized the fragmented and legacy‐driven budget hospitality space by empowering small and independent asset owners with the operational capabilities and technology that enables them to compete with big hotel chains and achieve high occupancies and therefore yields.
We are proud that every country we have opened OYO hotels in, we have increased the occupancy from 25% to 65% in less than three months on an average with as high as 90%+ consistent occupancies.
OYO attracted huge funding last year from investors including Softbank and Grab. Tell us about the pressures this puts on the company and its plans and the opportunities it opens up.
We have never looked at funding or valuation as a measure of success. We look at the impact we are making, and measure it by the scale of having over 850,000 keys under management and over 500,000 heads on OYO pillows every night and the 200,000‐plus jobs we created worldwide. That is the measure of our success.
Having said that, I have a fiduciary duty towards our shareholders to ensure we create more value for them. The world’s largest hotel chain, which OYO will eventually become, with millions of rooms under management should be highly valuable. We leave that for the financial investors to decide. We remain focused on execution to create great quality‐living spaces and that is what we enjoy the most.
We foresee an enormous opportunity for an Indian hotel chain to become the largest hotel chain in the world in the years to come. It is still Day 0 for us, but we are on the right path.
Were you surprised at Airbnb coming on board in that last round?
As the sixth largest hotel chain operator in the world, we at OYO Hotels & Homes, are committed to offering our guests and travelers around the world, great quality living spaces. We are happy to have Airbnb as our partner in this vision.
Strong global strategic relationships that support this mission, help drive collaborative efforts in the right direction. Airbnb’s strong global footprints and access to local communities will open up new opportunities for OYO Hotels & Homes to strengthen and grow while staying true to our core value proposition.
We’re excited by the possibilities and committed to bringing benefits to the millions of travelers who can now rely on Airbnb and OYO Hotels & Homes to find a home away from home.
What were the common bits of negative feedback you faced from investors in the early days?
During the past six years, I’ve learned innumerable lessons that have helped me in shaping OYO’s growth trajectory for the future, along with my leadership team.
We have never looked at funding or valuation as a measure of success.
During the initial days, I was advised by one of my investors about the importance of building a strong team, and until today, it’s one of the most invaluable lessons I’ve learned.
After starting up, I was joined by some of the brightest minds in the industry who continue to fuel OYO’s mission of creating beautiful living spaces. In the history of OYO, the leadership team has remained unchanged, and I count this as a crucial factor behind our growth.
We are glad to have leading global investors such as Airbnb, SoftBank Vision Fund, Greenoak Capital, Sequoia Capital, and Hero Enterprise, amongst others.
Some in the industry are skeptical of OYO’s rapid expansion and huge funding rounds, what would you say to those dissenters?
We respect everyone’s opinion, even though we may not necessarily agree with it.
The way we look at it is globally, the world’s accommodation market stands at ~160 mn rooms and is a ~$3.6 Trillion opportunity and growing. With us capturing just over 5% of the larger pie, we are just scratching the surface. We foresee an enormous opportunity for us to build a truly world class brand out of India.
We are aggressively moving ahead to not only become the largest hospitality brand but also become the most‐loved hospitality brand in the world.
The biggest differentiating attribute is OYO’s technology driven approach to building efficiency in the hospitality space with its full‐stack fulfilment led model. We are investing heavily on strengthening our capabilities both in the form of technology, talent and network, while creating an ecosystem of efficiency through which we are able to deliver higher yields for our asset owners.
We have invested thousands of crores in capex, appointed hundreds of GMs to oversee operations and customer experience, created job opportunities for over 100,000 people in India alone and set up 26+ OYO Skill institutes for hospitality enthusiasts.
On an average, over 75% of hotel owners associated with OYO Hotels has seen an increase of 20‐30% in occupancy, a 2.5X jump in RevPar and significant jump in profit, for every asset operating as an OYO branded building. Also, currently one out of six asset owners has more than 1 asset with OYO – this is a testimony to the confidence of our asset owner community on the brand.
The churn rate we see is less than 1% on an average annually which is by far the highest retention rate in the hospitality industry. In the last five years, we have seen a 4.3X Y‐O‐Y growth with realised value run‐rate of $ 1.8 billion (annualised). We have made this possible by investing in four key competencies in the last five years:
- Sophisticated onboarding process:
At OYO, we have developed the ability to scientifically identify and onboard strategic buildings within a shorter time period (vs. others). The approach and strategy of our business development team is powered by an app that builds efficiency and transparency in the system.
The app is equipped with multiple features including route planning, meeting management, deal prediction and learning and Quiz Sections to continuous disseminate knowledge and upgrade the skills of our BD managers.
- Best‐in‐class renovation capabilities:
Our deep renovation capabilities have empowered us to add 80,000 exclusive keys to our chain every month at a global level. We have set a new benchmark in transforming and renovating assets in a record time of within 14 days ‐ a stark contrast to the industry standard of upto 90 days. We also have a 1,200 OYOpreneur‐strong team of civil engineers and designers in India, China and other international markets, We utilize AI‐led design approach while evaluating guest feedback and identifying their most‐preferred designs.
Our efforts are supported by in‐house design labs ‐ OYOXDesign and Townhouse Design Team. Our full‐scale, capability‐led model allows us to undertake a 360‐degree transformation and renovation while upgrading the existing structure of an asset ‐ from flooring, plumbing, air conditioning, painting, electrical fixtures to utilities upgrade.
We focus heavily on service quality and invest in it, both in the form of technology to help run day to day operations through multiple apps like Keep, Property Manager etc and talent. We also have over 26 OYO Skill Institutes where we train hundreds of hospitality enthusiasts every month.
- Higher yields for asset owners:
All the above mentioned facets come together and create an ecosystem of efficiency through which we are able to deliver higher yields for our asset owners. Every hotel or asset that becomes a part of OYO’s chain, witnesses an increase in average occupancy from 25% to 65% in a brief span of three months. We have a team of revenue managers who are able to derive and drive the best pricing mechanism in the industry with the help of advanced machine learning and AI tools, so as to optimise for best outcomes for customers and hotel owners alike.
OYO acquired @Leisure in May, how much is acquisition a part of the expansion strategy and are you going after particular segments such as private accommodation or branded/non‐branded hotels, both? Does OYO eventually just become another platform?
At OYO, we genuinely believe our mission is to bring better living spaces for the Indian who comes out of a train, the Chinese who comes in a flight or in a bus, or the European who goes skiing. It doesn’t really matter who that individual is. But they deserve a better living space.
Let me share the two broad opportunities we see within Europe.
The one opportunity we see is the vacation rental opportunity. Worldwide, the largest vacation rentals opportunity exists in Europe. There are at least 24 million potential vacation homes in Europe which translates to 50 million homes across the markets.
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@Leisure is the third largest group but even if you merge the top three or five largest players, they wouldn’t even have 5% of the overall vacation rental opportunity.
So there is a huge opportunity for somebody to come in and make a significant difference in managing vacation homes especially when people across the world are starting to move to houses as against hotels (traditionally) when they travel to Europe.
The second thing is that Europe has one of the most fragmented hotel markets in the world. If you take London for instance, there are hundreds of unbranded building that have existed forever near Bayswater near Hyde Park. These were called the friendly neighbourhood hotels earlier. Now the big chains have come in and have made it hard for the neighbourhood hotels to even survive.
These hotels form 70 to 80% of the hotel ecosystem in the UK. Now with OYO Townhouse, the neighbourhood hotels are becoming chic again. These are not just surviving but thriving as consumers like high street location, low cost, and chic‐looking interiors. This is a micro example of how we think.
Italy is even more fragmented than some of our Asian markets in terms of unbranded hotels. All of these need better operations, ease of management, renovation so consumers can get a beautiful living space at low cost.
With the acquisition of Amsterdam‐based @Leisure Group, OYO will offer customers around the world beautiful fully managed holiday homes, spanning from Spain to Norway making OYO a world‐leading holiday homes manager. The @Leisure group has presence across all of Europe.
@Leisure Group, through its Belvilla, DanCenter, and Danland brands, offers more than 30,000‐fully managed holiday homes in Europe. @Leisure offers high quality homes, cottages, holiday parks with breathtaking views, serene surroundings, indulging yet functional amenities. OYO now has over 46,000 homes and villas globally.
Having said that, our acquisition strategy is targeted towards acquiring entities that assist us in building capabilities rather than just scale.
Prior to @Leisure, we made a few acquisitions in India. Our acquisition allowed us to join forces with Weddingz.in and offer customers a one‐stop platform for all their needs related to organizing a wedding including beautiful and spacious venues, decorations, catering and a dedicated wedding planner.
Back in March 2018, the acquisition of Novascotia Boutique Homes was our foray into the serviced apartment category which was later christened as SilverKey.
OYO Rooms at The Phocuswright Conference
Ritesh Agarwal will speak at the 2019 event in Florida, U.S.
Do you sense other platforms (existing OTAs) will eventually take note of the broader competition and give you problems?
As the sixth largest hotel chain operator in the world, we at, OYO Hotels & Homes, are committed to offering our guests and travelers around the world, great quality living spaces. Strong global strategic relationships that support this mission, help drive collaborative efforts in the right direction.
The macro environment for OYO to operate in any country remains that majority of the hotels are unbranded and operate at sub‐25% occupancy vs the branded ecosystem at 75%.
We, therefore, have a great working relationship with all the prominent OTAs around the world. This includes Booking.com, Expedia Group.., Ctrip, MakeMyTrip, among others. We also have partnerships with Airbnb and Hotelbeds.
We are a full‐scale hospitality company and have all our buildings listed on these OTAs. Their global footprints and access to local communities open up new opportunities for OYO Hotels & Homes to strengthen our reach and help us grow while staying true to our core value proposition.
For OTAs, OYO Hotels & Homes enable them to offer their customers a wide variety of good quality accommodation choices, that come at an affordable price.
We’re excited by the possibilities of these mutually beneficial relationships, and don’t see any problems or areas of conflict.
It is almost sixty days since the European company was acquired, what are the learnings so far?
While the acquisition was announced about two months ago, we have known the company and the CEO Tobias Wann for about three years now and have been tracking its progress. The teams and organisations have been integrated with Tobias taking on the role of CEO of our Vacation Homes business globally.
We believe the opportunity in Europe is huge and @Leisure Group is a proven asset. We are very excited about deepening our presence in Europe and have laid out a near term and medium term plan for the same. The entire @Leisure management is already in execution mode.
We are also supporting them through a group of functional and technology specialists from India who have built the OYO full‐stack model. This is helping us accelerate both learning and execution.
We are ensuring that various teams across different business units of @Leisure are constantly engaging in understanding the OYO mission, and keeping the entrepreneurial energy alive and kicking. We strongly believe in the empowerment of these teams to achieve our shared goals and mission.
Maninder and I do spend time and effort in conducting regular town halls across Amsterdam, Copenhagen and Bremen. It is helping us understand the European market and its culture in a meaningful way while getting to know people and teams personally.
OYO gains headlines in the travel trade press, what are the plans to increase its awareness in the minds of consumers?
We have seen that over 73% of the business at OYO Hotels & Homes is generated by repeat customers, i.e. customers who have had a pleasant experience in one building prefer choosing an OYO over other hotels time after time. As we expand to newer markets across the globe, we continue to undertake various awareness building activities to build the OYO brand in the minds of consumers.
Starting a business in Asia is one thing, but expanding to Western markets is another ‐ what difficulties have you experienced so far? And, overall, what are the greatest challenges OYO currently faces?
We are currently in 80 countries around the world with the acquisition of @Leisure including India, China, Malaysia, Nepal, The UK, The UAE, KSA, Indonesia, the Philippines, and Japan.
Our expansion across the globe is backed by sound research and localization of our model to meet the requirements of travellers and asset owners alike. We have steered successful businesses for asset owners in both our home markets India and China.
Our tech solutions are an enabler of transparent and agile processes where the asset owner has a clear window in the day‐to‐day operations at their respective building along with the cash flow.
We understand that each market is unique in its own way, so we localize the product experience and interiors of our buildings, and our overall approach. The macro environment for OYO to operate in any country remains that majority of the hotels are unbranded and operate at sub‐25% occupancy vs the branded ecosystem at 75%.
In the past years, we have invested heavily in capacity‐building and sustaining it across 10 international markets with a highly localized approach toward each of them giving us an advantage.
Our teams across the international geographies have observed local nuances with respect to the hotel industry in each of the countries we are present in. These observations help us in highly localizing and personalizing the experience for our guests. For instance, in the Philippines, as the country has a lot of devout Christians, most hotel rooms also keep a copy of the Bible in thedrawer/ on the table in the rooms for guests.
In Indonesia, Islam is the most adhered to religion hence, most hotel rooms have the Qibla sign also known as Arah Kiblat in the local language Bahasa. The arrow sign signifies the direction in which the daily prayers should be offered. As Malaysia hosts a lot of Indian tourists, the hotels provide information on the nearest Indian/South Indian restaurants as the country has several dosa points.
Moving West, in the U.K., the majority of the hotels have tea making facilities readily available for guests. This is unlike what hotels offer in other international markets. Traditionally, all hotel rooms will also contain a copy of the Bible.
A majority of these hotels also avoid having a room 13, not necessarily because the Brits are superstitious. It's equally because other nationalities would stay at these hotels and they would like to keep all guests happy.
In China, most hotels can accept payment by QR code and even pre‐book by QR code scans because of the high level of online payments in the country.
We are proud that every country we have opened OYO hotels in, we have increased the occupancy from 25% to 65% in less than 3 months on an average with as high as 90%+ consistent occupancies. Operating in multiple geographies and bringing a consistent product is both exciting and challenging. Today, there are OYO customers who actively stay with us in almost all the countries we have opened.
The company seems to have done so much so quickly, how do you prioritize?
One of the things I learned while building OYO was about creating an ecosystem of innovation by empowering people and making them partners in success. Every employee at OYO is called an OYOpreneur and we are ardent believers in empowering people and teams through distributed leadership.
We are very proud of the fact that OYO hasn’t lost a single senior leader in the past 6 years and I would like to think this is primarily because of the high level of empowerment and freedom to execute ideas provided to them.
Every morning is challenging when I have to be amidst the stalwarts of the respective fields when there are questions and tasks to be resolved. I need to be on top of my game and stay abreast of the industry scenario, and the business to be able to respond and counsel sensibly with all my stakeholders.
For me, the drive and conviction to make things happen are important while working in an environment that’s as dynamic and challenging as ours.
At OYO Hotels, I call myself the chief clarity officer. Which means that my job is to share what to do and advise what not to do. More importantly, what not to do than what to do. So setting out the principles which enable everybody to decide how they can run their jobs.
I always keep myself in the customer’s shoes and ask if it will add value to their experience. That makes it very easy for people to focus, and that focus has the means of creating value for customers and asset owners alike. At the core of it, we have to be solving a problem in a sustainable and scalable manner.
And a few questions about you ‐ what do you love about your role?
OYO has been able to make a positive impact on the world’s hospitality map. While it is still in its very early stages and there is a long way to go, I love the fact that we have been able to create quality living spaces for millions of people across the globe at affordable price points.
If you’re weren’t developing OYO, what company in or out of travel would you like to be running and why?
Well, I have never really thought about it and OYO is all I have thought and planned for.
What do you consider your greatest personal achievement to date?
I always say it is still Day Zero. I am still quite young and have a long way ahead. Each time I see an OYO in a new city across the world, it fills me with great joy and enhances the drive to keep going forward in the future.
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