The hotel company OYO Rooms has opened an office in the US and is preparing to land in southern Europe. OYO was born in India with one goal: to place thousands of independent hotels in the Asian country at the same level of quality and service to improve its marketing and business. The company, created by Ritesh Agarwal, has unified in quality and service part of the hotel plant in India and other countries in the region where it has expanded, such as China, Malaysia, Nepal or Indonesia. One of the keys to OYO is to focus on the low-cost hotel market. According to the company, OYO ended 2018 managing 458,000 rooms in all its Asian markets, with about 18,000 establishments in 500 cities.
OYO Rooms takes advantage of the chaos of Indian hospitality
In the US, the Indian company has opened an office in Dallas and is already testing its format in this city and Austin, reports the Skift.com portal. For Spain and Portugal, OYO has hired Tobias Jörk, CEO of Groupon between 2011 and 2013, who will direct its development in the Iberian Peninsula. Since September 2018, Jörk has been creating part of the OYO Spain team with professionals that come from companies such as Cabify or Groupon itself. Since January, the Indian company also has offices in the United Kingdom, led by Andrew Verbitsky, who comes from Airbnb and Kayak.
OYO has obtained financing worth 1,500 million dollars since its creation and one of its investors is the Softbank company, which is behind successes such as Alibabá or Uber. On the other hand, Airbnb is also considering investing between 100 and 200 million dollars in OYO Rooms, according to The Information, in a clear strategy of Airbnb for taking part in the Internet hotel reservation business. The Indian company is so appealing because it has managed to give a unique identity to hotels that were not under an identifiable brand. To this is added an audit to improve the quality of these accommodations and common services, such as wi fi.
The keys to OYO's business are several. In the first place, the company does not own property, but has a business model based on collaboration. In its beginnings, OYO signed brand repositioning and service agreements with hotel owners. With this, he managed to standardize the product of thousands of independent accommodations under his OYO teaching. Today, the company closes franchise agreements with hoteliers, which makes it more involved in the adequacy of the hotel.
Second, once OYO has a unified offer of accommodation comes the marketing part. Unlike other franchise businesses, OYO's main difference is that it markets its entire hotel offer directly, through its website or its mobile application. This guarantees greater returns on investment, since it does not share a percentage of income with online travel agencies and other intermediaries. OYO franchised hotels are incorporated into its sales system and are accessible through its web portal and its application.
In Spain, OYO already announces two properties in Madrid, which are not precisely hotels, since one is a bed and breakfast and the other a rural hotel, both in the Madrid mountains. However, in Salamanca, the company does offer several hotels and a hostel. Other Spanish cities where there are already accommodations under the OYO teaching are Valencia, Segovia, Toledo and Zaragoza.
That OYO has triumphed in Asia does not mean that it can replicate success in the US and Europe, since they are totally different hotel markets. The US is dominated by large hotel chains, such as Marriott, and the number of independent hotels is very low (one third of all present in the country). Unifying them under a single brand and marketing them as a single product may make sense for hoteliers if they manage to raise their business figures.
In Europe the opposite is true, the hotel market is very fragmented with a large abundance of hotels that do not belong to any major brand. To this is added that the average qualities of the accommodations are very standardized throughout the continent, so the proposal that has been successful in Asia can be a failure in Europe.
For example, in Spain, where there is a star system that guarantees quality standards, hotel rooms and the establishments themselves have a set of characteristics that make them very similar. On this side, OYO could have little work and should focus more on the commercialization of the accommodations that are integrated under its brand. The real business potential of OYO in Spain is found in lower quality hotels (one and two stars), which have an average occupancy of 38% and 47%, respectively, according to data from the National Statistics Institute.
The segment of the hostels can also benefit from the clients that OYO can provide, since the average occupancy of this type of establishment is 36% in Spain. Raising these figures would significantly improve your business. In India, accommodations of similar characteristics that joined OYO increased their occupancy from 25% to 65% in one month, according to data provided by the Indian company.