Page 35 - Forbes - Asia (April 2019)
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The company has Gurgaon-based company at $5 billion, allowing says Jesper Palmqvist, Singapore-based area di-
amassed 515,000 Oyo to plan an aggressive expansion to tap Asia’s rector for Asia-Pacific at STR.
rooms, making it
the world’s eighth- fast-growing tourism sector. Oyo will quintu- Despite such growth, Oyo will remain in the
largest hotel chain ple its rooms in the next four years to over 2 mil- red. Last year it had losses of $55 million. Yet its
by rooms under
management. lion—which would be more than the world’s larg- investors are optimistic that Oyo will eventually
est hotel chain Marriott’s 1.3 million rooms. Oyo turn a profit as it scales up. “There’s a huge op-
is tapping into a large and growing market, as the portunity in budget hotels around the world,”
World Tourism Organization projects that tour- says Bejul Somaia, partner at Lightspeed India
ist arrivals in Asia will grow 66% to 535 million Partners, a New Delhi-based venture capital
tourist arrivals by 2030, from 323 million in 2017. firm that’s one of Oyo’s early investors.
Agarwal, who joined the 30 Under 30 list in Agarwal’s business model is to bring un-
2016, came up with the idea for Oyo while stay- branded hotels across the globe under the Oyo
ing in crummy hotels in New Delhi during his umbrella. Once a new hotel signs up as an Oyo
11th and 12th grades. He’d moved to the north- franchisee, a construction crew renovates it
ern Indian state of Rajasthan in 2010 to get within 14 days using Oyo’s designs. Only then is
coaching to enter the prestigious Indian Insti- Oyo’s distinctive red-and-white logo put up out-
tute of Technology and would travel to near- side the hotel. Oyo claims to increase average oc-
by Delhi over the weekends. While he didn’t get cupancy from 25% to 65% within three months.
into IIT (he enrolled in a college in Delhi in- With the rapid growth of Oyo, some hotel own-
stead), the experience inspired him to create an ers across India have been boycotting the com-
affordable hotel brand that would be both clean pany, alleging breaches in contract and price
and safe. He started Oravel Stays—which later gouging. “We can’t afford to do business with
became Oyo in 2012. When his concept won Oyo,” says Gurbaxish Singh Kohli, vice president
him a $100,000 Thiel Fellowship for budding of the Federation of Hotel and Restaurant Asso-
entrepreneurs in 2013, he dropped out of col- ciations of India, a trade group. It charged in a
lege to focus on building Oyo. letter to Oyo in December that 40% of the rooms
Today, Oyo’s franchise covers 18,000 proper- on Oyo’s network, some in residential buildings,
ties in 500 cities around the world. Oyo has ear- were operating without proper licenses.
marked $950 million to bankroll a multipronged Agarwal rejects the charge. “We are 100%
expansion across Asia over the next five years. compliant,” he says. “These are vested interests
Of that amount, about $600 million will be who have come up with unsubstantiated claims.”
spent in China, the world’s fourth-largest tourist Oyo also has to contend with intensifying com-
destination and where Oyo already has 270,000 petition around the region from no-frills start-
rooms. The rest of the funds will be spent in In- ups such as Home Inn, Han Ting Express and
donesia, India and the Philippines. 7Days Inn in China; Fab Hotels and Treebo Ho-
Oyo, which operates primarily in the no-frills tels in India; RedDoorz and Zen Rooms in In-
segment with rooms averaging $25 a night, is also donesia and Go Hotels in Philippines.
going upmarket with offerings like Palette Re- “Oyo is underestimating the complexity in
sorts (around $100 per night). It also launched Southeast Asia because these are large compli-
weddingz.in in 2018 to help consumers find ven- cated markets,” says Amit Saberwal, founder of
ues, caterers and events managers for wedding four-year-old RedDoorz, which operates in In-
banquets across 15 cities in India. Its Oyo Home donesia, Philippines, Vietnam and Singapore.
division, launched in 2017, offers short-term leas- “Oyo’s testosterone-driven, high-decibel ap-
es of homes and villas for property owners, while proach will not work here. It has to fight the bat-
Oyo Life is expanding its long-term home rental tle on the ground, city by city. These markets
business in Japan with partner Yahoo Japan. cannot be built sitting in a boardroom.”
To drive Oyo’s growth strategy, the compa- Oyo, however, is led from the front by its
ny has beefed up senior leadership, roping in globetrotting CEO Agarwal, who travels to
Aditya Ghosh from IndiGo Airlines as CEO
five to 20 cities a month, staying in Oyo ho-
NAMAS BHOJANI FOR FORBES ASIA ecutives drawn from Google, Uber and Wanda property owners through hundreds of Whats-
for India and South Asia. In China, senior ex-
tels along the way. He remains connected with
App groups. His focus is clearly on carving a
manage the business. Oyo expects revenues to
triple to $200 million in the year ended March
niche in what he estimates as a $1.2 trillion
global hospitality market. “We want to become
31, 2019 from $65 million last year. “Its pace of
the most-loved hotel chain in the world,” he says.
growth is unparalleled, fueled by the growing
—Anuradha Raghunathan
middle class in markets like India and China,”
APRIL 2019 FORBES ASIA | 31
