OYO Rooms is an Indian start-up that was founded in 2013 and is currently operational in more than 80 countries and 800+ cities. The company was built on the idea of providing quality stays to middle-class people at highly affordable rates. Soon after the launch of the business, the company received a grant of $100,000 as part of the Thiel Fellowship from Peter Thiel. This pushed the business strongly as at that time there were not many competitors.
The company tried its hands on multiple products but apart from the classic OYO Rooms, others didn’t really benefit the company much. The company faced a major challenge in 2016 when they were adding new rooms very quickly but wasn’t focusing on maintaining their promised USP. This led to the downfall of the company with their app’s google rating reviews coming down to 3.2 stars (S Sharma, 2020). The company acknowledged the mistake and focused on the standardization process and maintaining quality from a new perspective. The company received good feedback after and was expanding quickly in other nations also, however, with the pandemic, the business got majorly hit. They are shutting down many hotels and canceling contracts. The hope and opportunity for OYO Rooms lie in post covid period and how they can utilize this opportunity will majorly depend upon the strategy which they will follow.
About the Business:
OYO Rooms is an Indian worldwide accommodation chain of rented and diversified inns, homes, and living spaces (TG Sharma, 2017). It was founded in 2013 by Ritesh Agarwal when he was only 20-year-old. OYO rooms were built on the idea of providing easy access to quality budget hotels and initially consisted of budget hotels only. Nonetheless, with the range of time, OYO rooms remembered new items with numerous for the semi-extravagance and ultra-extravagance sections like OYO Townhouse, Capital O, etc. (S Sharma, 2020). Currently, OYO Rooms guarantees its client to offer admittance to city inhabitants in more than 80 countries and 800+ cities throughout the planet.
The startup extended around the world with a great many inns, getaway homes, and a large number of rooms in India, Malaysia, UAE, Nepal, China, Brazil, Mexico, UK, Philippines, Japan, Saudi Arabia, Sri Lanka, Indonesia, Vietnam, the United States and that’s only the tip of the iceberg. So far, many giant companies like SoftBank Group, Didi Chuxing, Greenoaks Capital, Sequoia India, Lightspeed India, Hero Enterprise, Airbnb, and China Lodging Group have invested in OYO Rooms and currently the company positions as the world’s third-biggest and quickest developing accommodation chain of rented and diversified lodgings, homes and living spaces (M Guruprasad, 2019).
OYO Rooms has been a serious competitor to all hotel chains around the world because of its lucrative offering. What started as a city in India is now valued at 9 billion dollars (S Sharma, 2020).
Primary Market Segment and Offerings:
OYO Rooms strategies on quality service at affordable price. They target the middle-class people who do not want to spend much but prefer living a quality stay.
OYO Rooms offer hotel owners standardized services and also provides basic amenities and supplies. They allow the hotel owners to get the reservation of their rooms booked through the brand name of “OYO”. They use the website and mobile application for this purpose. The part of the earning goes to the owner and some portion goes to OYO.
People trust OYO more than a normal hotel at a new location whose name they have never heard of. OYO Rooms have been very successful in identifying properties at key locations and renovating them under their brand name (A Devang, 2017).
With time, OYO Rooms experimented with more products. For example, OYO Life, which offered a ‘paying guest’ style of leaving for people preferring to stay for a longer duration. However, the major offering is the classic OYO Rooms of OYO.
OYO Rooms take multiple routes to reach out to the customers and their strategy varies from country to country. Since they are majorly an online intermediary between the hotel owners and the guests, they make use of extensive internet marketing. Online ads and coupons are attractively marketed to customers. They also take the help of TV ads especially in the peak traveling and holiday seasons to promote their offerings.
To reach out to OYO for any booking or complaint/support is very simple. One can simply go to their website or mobile application and do the needful. This is what really differentiates OYO from other competitors as their customer-centric offering is what is appreciated everywhere, something which misses in other budget hotels and chains (S Kesharwani, 2016).
OYO Rooms SWOT Analysis
Strengths of OYO Rooms:
- Strong brand equity and brand awareness: OYO Rooms has built a significant brand equity and awareness among its customer in a segment where the margins are very low which has helped the company in its growth and operations.
- Standardization of Quality: OYO Rooms guarantee a basic standard service equipped with promised amenities in all the rooms which they offer.
- Ever-growing network: OYO Rooms has expanded exponentially from one city of India – Gurgaon to more than 130,000 properties. They always look for new locations as per the customer’s demand and grow their hotel chain network.
- Innovation: OYO Rooms have been highly innovative with their offerings. They conceptualized the ‘budget stays and implemented it in a very successful manner across the globe.
- Young-spirited leader: Ritesh Agarwal, the founder and CEO is still only 28 years old and views the hospitality industry from a new direction. The innovative mind has been one of the key reasons for the growth and success of OYO Rooms.
Weakness of OYO Rooms:
- Apart from OYO Rooms, other products of the OYO chain have not been very successful.
- Since the concept of OYO is based on budget hotels, the profit margins on every booking are very low.
- The standardization service and quality of OYO have always been in question.
- Apart from the peak seasons, the bookings of OYO rooms are normally low.
- Poor in resolving issues with hotel owners leading to many canceling their contract with OYO.
- OYO Rooms has been in operations for 8 years now but overall, the company is still making losses.
Opportunities for OYO Rooms:
- Focus on the budget segment: The problems for OYO started when they started trying hands in different luxury and ultra-luxury segments. OYO has built a brand image of providing quality rooms at affordable prices and they should focus on this.
- The surge in the number of travelers and emerging economies: The target market of OYO rooms has been mostly India and other south-Asian developing nations. There is enormous potential in these emerging economies with which the number of travelers and guests will also increase.
- Post-Covid opportunity: People all over the world would like to travel and visit places again once the pandemic is over. This will be a great opportunity for OYO to expand its operations.
Threats for OYO Rooms:
- The threat of Competitors: The major profit of OYO rooms comes from the budget hotel segment and there are many emerging players like Yatra, Fabhotels, Treebo, MakeMyTrip, and ClearTrip which poses threat for the company.
- Concerns of Safety: The stays are sold to customers under the brand name of OYO, which is why when anything happens wrong at a hotel, then OYO Rooms get blamed. There had been many incidents in the past where harassment, theft, and exploitation of guests have taken place which is why many people consider OYO stays as ‘unsafe stays.
- Different laws of different countries: Since OYO is expanding quickly to other nations, there is always the pressure of following the local rules and complying with them.
- Finance: The operations of OYO got majorly hit because of the pandemic which is why they had to shut many hotels which were not profitable.
- Squeezing middle class: The finance of the general public has also squeezed in this pandemic. There is threat and uncertainty that whether they would prefer traveling and visiting new places after the pandemic or not. Since this middle class is the major target audience of OYO, this poses a major threat to the business.
A Devang, C. K. (2017). The next wave of business models in Asia. MIT Sloan Management.
M Guruprasad, V. T. (2019). Progress and performance of OYO Rooms-A research-based case study. International Journal of Current Research.
S Kesharwani, V. K. (2016). On your own: An OYO story A case study. International Journal of Engineering.
S Sharma, N. N. (2020). OYO Rooms: Their Hospitality and Customer Satisfaction. Journal of Tourism.
TG Sharma, R. J. (2017). OYO Rooms: Providing affordable hotel stays. Emerging Markets Case.
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