The tough reality of a startup entering a growing online travel market that was previously dominated by a major player is born out in India.
Budget accommodation platform Oyo Rooms has made a name for itself in its reasonably short history (it's two years old), primarily because of the youthful age of its CEO and founder, Ritesh Agarwal (21), and the large sums of money it has raised.
Earlier this year the company picked up $25 million in funding, followed by another $100 million in August in a deal led by Softbank, the Japanese conglomerate that owns Sprint.
Oyo Rooms puts its brand on hotels to bestow a marketing boost of sorts that comes with a promise of consistent quality. For a hotel to be accepted it must offer certain amenities, such as air conditioning and free breakfast.
The company said it has now branded dozens of hotels covering 3,000 hotels in 140 cities.
So what's the problem?
Incumbent online travel agency MakeMyTrip has been including properties from OYO Rooms for a while, but in a rather sudden about turn it has decided to de-list the entire portfolio it currently holds on its system.
Another company in the same vein as OYO, Zo Rooms, has suffered the same fate.
The move could be considered as a highly defensive one by MakeMyTrip as it looks to grow its own budget service, known as Value Plus, where it hopes to have around 26,000 properties by the end of the year.
Talking to analysts last week during a call for its Q3 earnings, MakeMyTrip founder and CEO Deep Kalra says the move in response to its own analysis and customer feedback, in that a rapid aggregation of budget properties is "not positive".
- I think what we need to bear in mind is that, in this segment, which we call budget or ultra-budget, customers are not really brand conscious, they are really looking for value and therefore what we've responded with out here and we've got with our curated list of properties that we call Value Plus.
- "...these are properties which through really deep market knowledge of our market managers, over a 100 of them out there in the market for the last several years, they have the knowledge which are the properties who are very particular about providing value at that price point and have consistently done so."
In other words, MakeMyTrip believes the mass branding of budget accommodation by OYO and Zo is eroding some sense of quality assurance.
Others might argue that the OTA is worried about losing market share to a young upstart which creates its own brand via an intermediary's platform, so the easiest thing to do is wipe them out as best as it can.
Kavikrut (uses only a single name), the chief growth officer at OYO Rooms, tells Tnooz the company has worked closely with OTAs since its inception two years ago.
"With OYO listings, OTAs had enabled a wider set of choices for customers who book hotels online. The move will limit this selection for their customers. OYO has seen strong growth in customers booking OYOs via our channels such as the mobile app, website and reservations helpline.
"The experience on these mediums is faster, direct and more convenient. Only 10-15% of our customers today choose to book OYOs via OTAs."
NB:David Goliath image via Shutterstock.