Summary: In this blog we are discussing Oyo case study. OYO company was founded by entrepreneur Ritesh Agarwal at very young age. Recently, company’s estimated revenue was over Rs 5,700 crore for FY2023. Born in 1993, Ritesh embarked on his entrepreneurial adventure at the tender age of 17, setting the stage for a remarkable story. In 2012, with the support of Patron Rajesh Yadav, Ritesh launched Oravel Stays Pvt. Ltd. However, it was in 2013 that he truly made his mark by transforming the company into OYO Rooms. This visionary move revolutionized the hospitality industry by providing affordable and standardized accommodations for travelers. However, it wasn’t easy. More discussed in this OYO business case study,
Interesting Facts About OYO Rooms
- Ritesh Agarwal, the mastermind behind OYO, once confessed that he encountered six failures before achieving the sweet taste of success in his OYO venture.
- OYO, the unstoppable force in the hospitality industry, has risen to become the world’s second-largest hotel chain and the fastest-growing provider of hotels, homes, and workspaces.
- Going Global: Today, OYO has expanded its footprint across 80+ Countries!
- OYO has a remarkable presence in China where it boasts a staggering presence in 338 cities and offers over 590,000 rooms, largest after India. (source)
- Even in Indonesia, OYO is spreading its hospitality magic to 100+ Cities with over 27,000 rooms,
- Oyo has also grown its influence in 30 Destinations of UK managing over 3,500 rooms.
- Crossing the ocean, OYO has recently set foot in the United States, leaving its mark in 60 cities, 21 states, and providing over 7,500 room service.
- Oyo has employed 20,000 dedicated OYOpreneurs on board. According to the company, OYO is not just a hotel chain; it’s a community of passionate individuals working towards a common goal.
- OYO’s growth has not only benefited its own team but has also created economic opportunities for over 300,000 local hospitality enthusiasts worldwide.
Oyo’s story is nothing short of remarkable. From humble beginnings to becoming a hospitality giant, their journey is filled with twists and turns that will leave you inspired. So without losing a moment, moving on to this OYO case study.
Full form of OYO | OYO Ka Kya Matlab Hota Hai?
As we embark on the fascinating journey of exploring Oyo through this case study, let’s first unravel the meaning behind OYO.
OYO stands for “On Your Own.”
The term “On Your Own” signifies the empowerment and independence that Oyo offers to both its CUSTOMERS and PARTNERS.
In desi language it stands for “Apne Dum Par” which represents the founder’s success story as well who founded the company On his Own.
But the brand’s name even beautifuly justify OYO’s Business Model
For example – for customers, Oyo provides a platform where they can confidently book accommodations and have a sense of ownership over their stay.
On the other hand, Oyo’s value to business partners, such as hotel owners and homeowners, lies in the opportunity to operate their properties On Their Own, yet benefit from Oyo’s extensive reach and resources.
So, as we delve into Oyo’s journey through this oyo case study, keep in mind the underlying philosophy of “On Your Own” that has propelled Oyo’s Hotel success and influenced its approach to revolutionizing the hospitality industry.
Oyo Hotel Kya Hai? What is Oyo Hotel?
Now most people are still unaware of OYO hotel, to some it is an acronym for hotel, or a local hotel’s brand name or may be an object causing a buzz in the market.
So, What is OYO Hotel? Oyo Hotel Kya Hai?
Oyo Rooms is a growing chain of hotels that’s making waves in India’s hospitality market.
Starting with just 1 hotel in 2013 in Gurgaon, today, OYO is in more than 800 cities, with more than 23,000 hotels, 850,000 rooms, and 46,000 vacation homes, worldwide.
The company is still may be limited to a few cities and towns at the moment, but they’re expanding faster than a wildfire.
Now, you might be wondering ‘how they are purchasing so many hotels in such a short time?’
Well, they don’t own a hotel.
Instead, they team up with existing hotels, make them part of their business plan and ensure that they meet Oyo’s standards.
These standards are about offering quality and standardized services like in-room WiFi, breakfast, AC, and backup power, all at budget-friendly prices.
How OYO Started?
In the year 2012 Ritesh Agarwal (currently the founder of OYO) made his first enentrepreneur attempt by launching Oravel Stays.
Being a travel-freak guy, Ritesh observed a bigges issue with hotel sector “BUDGET ACCOMODATION.”
By that time it wasn’t easy to find a budget hotel.
This is where Ritesh Agarwal brought the idea of Oravel Stays Ltd to life with an aim to make it easy for people to find and book budget-friendly accommodations.
But that was just the beginning of Ritesh’s entrepreneurial journey.
In 2013, Ritesh Agarwal’s vision took a leap forward which resulted into the rebranding of the company Oravel Stays Ltd to OYO.
This move marked a turning point, as OYO began partnering with hotels to offer a consistent guest experience across various cities.
Ritesh’s determination to provide quality stays at affordable prices began to shape the hospitality landscape.
However, it wasn’t easy, without funding it was difficult to build a billion dollar company,
But, Ritesh successfully jumped above this obstacle as well.
A $100,000 Award that Helped OYO To Sprout
The real journey of OYO starts from here. Soon after launching Oravel Stays, Ritesh Agarwal caught the attention of Peter Thiel, the founder and former CEO of PayPal.
As part of the prestigious Thiel Fellowship in 2013, Ritesh received a generous grant of $100,000.
One of the notable parts of this oyo case study is that Ritesh Agarwal stood out among thousands of applicants, earning his place as one of the ten winners of the Thiel Fellowship.
Some says he was the only Indian to have won the Thiel Fellowship Award and recieved $100,000 funding.
The Thiel Fellowship, initiated by PayPal’s former CEO Peter Thiel, encourages young entrepreneurs under 20 years of age to skip college and dive headfirst into entreprenuriship.
Ritesh Agarwal proved himself as a prime candidate for this esteemed opportunity and the rest is the history. He was awarded with $100,000.
However, Ritesh had the option to have use this big amount to complete his all fantasies.
But he chose to fund his new business OYO Rooms which was indeed an upgraded version of Oracle Stays ltd.
Initial Business Model of OYO
OYO Rooms first business model was “Aggregator”. As per this model, Oyo Rooms established partnerships with property owners to showcase a portion of their lodging inventory under the OYO brand.
However, there’s a catch in this OYO business case study.
These owners had to ensure that their rooms met specific quality standards to be eligible for the OYO network.
Actually, OYO adopted a strategy of pre-booking a portion of hotel rooms at a mutually agreed price. As per this strategy,
Oyo would list these rooms on the OYO platform, branding them as their own (often at a higher rate).
Company revenue was the difference between the negotiated price with the hotel owners and the selling price to customers.
For example – Oyo rooms get a discount on the bulk reservation, let’s say 50%
Cost to OYO rooms = 3000*50/100= Rs. 1500
Oyo resells it at Rs. 1800 to customer
Profit to customer= Rs. 1200
Profit to OYO is Rs. 200/room.
By carefully managing the price differentials and leveraging their own branding, they created a win-win situation for both the property owners and the end customers.
But unfortunately this wasn’t a WIN for OYO.
Problems Faced By OYO as An Aggregator
Ah, the journey of OYO rooms, filled with challenges and hurdles at every turn. Let’s dive into some of the major roadblocks they encountered along their path.
High Cash Burn
The hotel aggregator business model involves a substantial cash burn rate due to the need for upfront investments in hotel room bookings and the heavy discounts offered during the expansion phase.
Since Oyo was focusing on its expansion, it tried to attract customers through attractive discounts. Company did this by booking hotel rooms for the entire year in advance. But this cut down company’s profit.
Standardization
OYO had lots of non-branded hotels in its network. Company found that these hotels lack uniformity and professionalism which posed a risk on the OYO’s brand value.
OYO faced the challenge of satisfying their customers at every interaction point. It was no easy task, given the varying standards and quality across the non-branded hotels they partnered with.
Competition
OYO’s dominant position in the industry has paved the way for other competitors. They’ve created opportunities, inspired innovation, and encouraged healthy competition.
It was a constant push and pull, with each player striving to outshine the other. Some of its famous competitor were trivago.in, agoda.com, fabhotels.com, airbnb.co.in, and more.
Malpractices
In this oyo case study, the most annoying cause which had shaken up the company’s business was the malpractices which was on rise. Most hotel owners were not loyal with OYO.
They would book the hotel at lower prices and benefit from OYO’s discounted services. However, this was the time when OYO owner realized the need for a change.
Second/Current Business Model of OYO
Oyo Rooms strategic steps to shift its focus from being a mere aggregator to managing entire hotel properties on behalf of the Hotel Owners had led the business to a right direction.
“Company has evolved its business to 100% exclusive franchise, manage or operating. We do not anymore do hotel aggregation and have become a full-scale hospitality company.”
In 2017, Oyo CEO Agarwal announced
In this oyo case study, we discovered that OYO emerged as a popular name in the hospitality sector so far. As company switches to Franchise Model, it proven to be a game-changer for both Oyo and the partnering hotels.
By forging exclusive tie-ups, Oyo now manages the entire inventory of hotels under its own distinctive branding. This approach has proven to be mutually beneficial for Oyo and the hotels involved.
The partnering hotels reap the benefits of this collaboration since being listed on the Oyo platform gives them increased visibility and exposure.
Similarly, hotels attract more customers and generate additional business opportunities by leveraging Oyo’s established brand name.
Earlier OYO was paying to hotels to acquire rooms on lease, but now hotels were paying to OYO for bringing guests to them and assisting them through business standardization.
When it comes to the franchise model, Oyo Rooms levies a commission of 22% on its partners.
However, it’s worth noting that this commission can vary based on the specific services offered by the brand. So, it’s not a one-size-fits-all scenario.
Now, Let’s shift our focus to the customers.
When booking a hotel room through Oyo, customers pay a reservation fee as a commission to OYO. This fee typically ranges from 10% to 20% of the total booking amount.
Additionally, Oyo provides customers with the option to purchase a membership, which comes with its own set of perks. The membership fee can vary, ranging from 500 RS to 3000 RS, offering customers access to exclusive benefits and discounts.
There were some good reasons about Oyo franchise business model which gave this oyo room case study a positive turn.
Reasons Which Made OYO Franchise Business Successful
Oyo’s strategic move to manage the complete hotel properties brings numerous advantages to the business. The four main benefits were –
Reduced Operational Cost
Firstly, OYO witnessed a significant reduction in operational costs. By adopting the franchise model, they streamlined their operations and found smarter ways to manage expenses On Its Own.
The result? A leaner, more efficient business model that maximized profitability.
Improved Serviceability
Moreover, the switch to franchising brought about a remarkable improvement in serviceability. OYO was able to expand its reach and provide quality accommodations to more travelers.
The franchise partners (means hotel owners) were now more loyal towards the brand, services were standardized, which propeled customer satisfaction, and building of strong brand reputation.
Comprehensive Hospitality Solution
Furthermore, OYO’s embrace of the franchise model offered a comprehensive hospitality solution. It provided the company a complete control over their hotel networks.
This resulted into the standardization of the OYO rooms. Guest were now recieving complete services including Wi-Fi facility, TV, clean bed sheets, meals and many other things.
Competitive Benefits
Lastly, let’s not forget the competitive benefits that OYO gained through franchising. By empowering local entrepreneurs as franchise partners, OYO created a network of dedicated individuals who were invested in the success of their properties.
This collaborative approach enabled OYO to swiftly adapt to market changes, stay ahead of the competition, and deliver top-notch experiences to customers.
Read More: How You Can Start a Hotel Business Like OYO?
Owned Hotels & Co-Living Spaces: Two Other Business Models of OYO
During this OYO case Study, we found that apart from the two of the business models discussed above, OYO is actively engaged in its two additional model ‘OYO Owned Hotels’ and ‘OYO Co-Living Spaces.’
Owned Hotels
Firstly, OYO offers its hotel partners a choice: they can either manage the property themselves or hand over the operations to OYO. It’s all about flexibility and finding the best approach that suits their needs.
Moreover, OYO goes the extra mile by providing financial support to its partners. Through collaborations with financial institutions, OYO has facilitated loans for over 100 properties.
These loans can be utilized for various purposes, such as upgrading the space, managing working capital, and fulfilling other operational needs.
Co-Living Spaces
According to a combined report by Jones Lang LaSalle (JLL) and the Federation of Indian Chambers of Commerce & Industry (FICCI), Co-Living market is projected to experience a robust compound annual growth rate (CAGR) of 17% over the next five years.
OYO tried to keep pace with this evolving market and made its entry into CO-Living market in 2018 with Oyo Life, an integral part of its fully-furnished rental housing arm.
In coliving spaces by OYO, co-residents not only share the rent at affordable price, but also enjoy a range of add-on services together make life more convenient, including daily housekeeping, laundry facilities, on-call resident facility management, and curated meals, among others.
Oyo collaborates with prominent developers and independent asset owners, taking over entire buildings, towers, or independent houses. It’s important to note that Oyo Life is not just an aggregator; they take full responsibility for the end-to-end management of these spaces.
This includes leasing entire buildings, furnishing them, ensuring cleanliness, transforming them to meet the highest standards, and maintaining them impeccably.
OYO Business Case Study | Strategy Used By OYO
Oyo’s business strategy has been instrumental in its rapid growth and expansion in the hospitality industry. And as we are heading towards the end of this OYO business case study, here is a break down of all the strategies used by OYO to succeed:
Business Standardization
Unlike Airbnb, where the connection is established between the visitor and the host in a specific location, Oyo Rooms takes a different approach. They take full responsibility for delivering all the services promised to their customers.
Such as :
- Bedsheets
- TV
- AC
- Room Cleaningess etc.
With Oyo’s standardized hospitality, customers can rest assured that their experience will be consistent experience at every location where OYO rooms are available. This level of accountability builds trust and fosters customer loyalty. Because almost every customer wants comfortable and hassle-free stay.
Pricing Strategy
OYO mastered the art of luring customers with their low prices, offering a significant discount compared to the original hotel rates. It’s like a magnet that pulls in budget-conscious customers, making them feel like they’ve hit the jackpot.
Meanwhile, Oyo Room’s competitors might scratch their heads, wondering how they manage to strike the right balance between quality and affordability.
The secret lies in OYO’s Smart Pricing Algorithm with the help of it determines the price value based on factors like geographics, inputs from hotels, promotions etc.
At OYO, both Engineering and Data Science teams, work very closely to keep its hotel cost less than others.
Promotional Strategy
When it comes to promotional strategy, Oyo Malik (means Ritesh Agarwal) know the power of social media. Through platforms like Facebook, Twitter, and more, Oyo strategically promotes its unique services and budget-friendly prices on these platforms
But that’s not all; Oyo takes customer loyalty seriously and goes the extra mile to keep them hooked. How, you may ask? Well, Oyo constantly introduces new discount offerings, slashing prices and big offers even further.
Leveraging the vast potential of these attractive offers, Oyo successfully captures the attention of new customers, enticing them with their irresistible offerings.
Customer Relationship Strategy
When it comes to customer relationships, the oyo case study found that OYO takes multi-faceted approach to stay connected. They have various means of communication, whether it’s through their hotel staff or their user-friendly app. Customers have the convenience of reaching out for assistance at any time, day or night, ensuring round-the-clock support.
Oyo understands the importance of keeping up with the ever-evolving digital landscape. Hence, they actively engage with their audience on multiple social media platforms. The OYO case study even found the company employing diverse marketing techniques, leveraging the power of social media to effectively communicate with the public.
A customer posts a query or shares feedback on Oyo’s social media page. Soon after, Oyo’s dedicated team jumps into action, responding promptly and providing the necessary assistance. They ensure that every customer interaction is handled with care, leaving no stone unturned in delivering top-notch service.
Oyo’s commitment to maintaining strong customer relationships is evident in their 24/7 assistance, user-friendly app, and active presence on social media.
Loss Prevention Strategy
In the face of the Corona Virus impact, strategies were crucial to overcome the challenges that engulfed the hospitality sector. Among the players in the industry, Oyo took proactive measures to ease the burden for its customers.
Recognizing the need for flexibility, Oyo implemented a customer-centric approach by making cancellations easier. They understood that circumstances were unpredictable, so providing this option was a wise move in OYO case study.
Moreover, Oyo went the extra mile by offering travelers credits. This ingenious solution allowed customers to rebook their stays at a later date, ensuring their loyalty and fostering a positive relationship.
Oyo case study serves an inspiring example for the hospitality sector. Their proactive measures in facilitating cancellations and offering credits not only helped customers but also cemented their position as a trusted brand.
OYO Hotel Case Study | Services Provided By OYO
Now let’s come accross oyo hotel case study, because services provided by OYO are also fairly interesting.
OYO Hotels
In the past, Oyo’s approach involved booking a portion of a hotel’s inventory, ensuring it met their quality standards, and reserving it exclusively for their esteemed customers. Essentially, they would lease a set number of rooms on anual basis at discounted prices, reaping profits by offering them to their own clientele.
Later, instead of leasing the rooms, Oyo operates them as Oyo Rooms franchises. Acting as franchisees, the hotels and property owners are obligated to operate in accordance with predetermined standards. In fact, Oyo even provides plans where they take charge of running the place, relieving the hotel staff or owner of their responsibilities.
Oyo Townhouse
Since competition in the hospitality industry is fierce, Oyo has stepped up its game with the introduction of Oyo Townhouse. This unique offering is tailored to meet the demands of the millennial traveler, setting Oyo apart from the crowd.
Oyo Townhouse takes a customer-centric approach, carefully considering the needs and desires of the millennial generation. The introduction of Oyo Townhouse is a strategic move by Oyo, aiming to capture the attention and loyalty of millennials.
With Oyo Townhouse, Oyo has strategically positioned itself to meet the evolving needs of millennials and deliver a unique, standardized hospitality experience that sets them apart from the competition.
Our OYO case study found that the townhouse includes
- Smart Spaces
- Smart Rooms
- And Smart Menus etc.
Studio Stays
Studio Stays is a service in which Oyo Rooms case study goes beyond just hotel accommodations. They offer fully furnished rooms and flats, perfect for those embarking on long stays for internships, corporate gigs, and more.
Picture this: you can rent these rooms and flats on a single occupancy basis or share with a companion, be it a friend or a colleague. Oyo Rooms has got you covered for both options, ensuring flexibility and convenience.
And here’s the cherry on top in this Oyo case study: the rental payments are made on a monthly basis, making it hassle-free and easy to manage. No need to worry about long-term commitments or complicated agreements.
OYO Events
Let’s now delve into another aspect of Oyo services : events and other long stays. It is that section of OYO case study where Oyo shines, catering not only to studio stays but also to a wide range of occasions that require extended accommodation.
Just like studio stays, Oyo steps up to the plate when it comes to hosting family functions such as weddings and parties. They understand the need for comfortable and convenient accommodations for guests who will be staying for an extended period.
Oyo doesn’t stop at family functions. They also excel in providing accommodation for corporate events like seminars, meetings, and parties. Whether it’s a large-scale conference or a small corporate gathering, Oyo ensures that guests have a comfortable and hassle-free stay.
OYO Commercial Spaces
That’s right, Oyo is not just limited to hotels anymore. Customers can now make bookings for office spaces through Oyo as well. It’s a game-changer for those in need of a professional setting to conduct their business affairs.
Moreover, Oyo’s foray into the commercial space arena means that entrepreneurs, freelancers, and businesses of all sizes can find suitable and affordable office spaces with ease. It’s a convenient and hassle-free way to secure a productive work environment we found in this OYO case study.
OYO Wizard
Ah, let’s dive into the world of Oyo Wizard, where magical discounts, deals, and cashback offers await! In OYO Wizard, the company has conjured up a subscription model that gives subscribers exclusive access to these incredible perks.
Moreover, with Oyo Wizard, you can unlock a realm of savings and enjoy discounts that will leave you grinning from ear to ear. Picture this: exclusive deals, tempting discounts, and even cashback offers, all at your fingertips through the Oyo Wizard subscription.
Since Oyo knows how to treat its loyal customers, they’ve crafted this enchanting subscription to ensure you receive the best value for your money which we believe one of the best parts of this Oyo Case Study.
How OYO Makes Money?
Firstly, it’s important to note in this OYO case study that as of fiscal year 2019, Oyo reported an impressive annual revenue of Rs 6,547 crore. Later due to recession, company generated Rs 3962 crore in financial year 2021. Then generated Rs 4781.4 crore in financial year 2022. And now Oyo’s revenue for financial year 2023 is expected to be more than Rs 5,700 crore. The OYO case study unveils that the company is back on track. But the important topic of this OYO business case study is still undiscussed, “the revenue streams of OYO”. So without further ado, let’s jump straigh to the topic.
Given below are the diversified revenue stream of OYO –
Commission From Hotels
Oyo charges approximately 22% in commissions from hotels owners on a monthly basis. This percentage serves as a benchmark for the fees associated with their services.
In addition, the specific amount of commissions can differ based on the services and features offered by Oyo. This variation ensures that hotels owners pay a fee that aligns with the specific value they receive.
Room Reservation Fees
Customers are required to pay a room reservation fee based on the services they choose. This fee is calculated as a percentage margin of the hotels’ prices, ensuring fairness and transparency. Moreover, let’s take an example to illustrate this concept.
Subscription Fees
Suppose a room is priced at Rs. 1,000 per night. Oyo, for instance, earns a commission of only 10-20% from this price, which constitutes their actual revenue.
Oyo Wizard offers a range of membership tiers to its users, catering to different needs and preferences. However, keep in mind that these premium perks come at a cost.
Moreover, users who subscribe to Oyo Wizard memberships are subject to membership fees. In this oyo case study, we discovered that these fees can also vary, spanning from a modest Rs 500 to a more substantial Rs 3000.
Advertisement
Oyo cleverly charges various companies to have their ads featured on its popular app and website. This strategic move allows Oyo to tap into additional sources of revenue, creating a win-win situation for both the company and its advertising partners.
Sponsors and Partnerships
Oyo doesn’t just stop at providing accommodation; they have a smart trick up their sleeve. They charge a fee from their sponsors and key partners, leveraging the power of advertising to promote their brand on the Oyo app.
With a keen eye for business opportunities, Oyo strikes partnerships that benefit both parties. By showcasing their partners’ brand names through advertisements, Oyo creates a win-win situation.
Consulting Services
Oyo’s consulting services cater to a wide range of clients, including hotels, clubs, and organizations in need of guidance and data analysis. They tap into their extensive database, which houses information about various locations, hotels, event organizations, users, and their preferences.
You see, Oyo’s ownership of this vast database is what enables them to offer such valuable consulting services. They leverage this treasure trove of information to provide meaningful insights and strategies to their clients.
However, here one thing is worth noting that despite the fact that OYO has diverse business models and revenue stream. One thing we cam accross in this oyo case study is that 90% of OYO’s revenue still comes from its Franchise Business Model.
Final Words
Oyo is a true game-changer in the hotel industry. The brand has successfully harnessed the power of technology, sparking a revolution like no other. It’s like they’ve waved a magic wand, redefining living spaces and elevating user experiences to extraordinary heights.
Thanks to Oyo’s seamless booking process, renting a room has become a breeze. And let’s not forget about the icing on the cake – their pricing is incredibly pocket-friendly, making luxury accommodations accessible to all.
But that’s not all; Oyo’s growth knows no bounds. They are constantly expanding into new markets, capturing hearts and rooms along the way. Their dedication to providing top-notch services at affordable rates is a winning combination that keeps guests coming back for more. The OYO case study is an evidence that Oyo has truly set a new standard in the world of hospitality.
