OYO business model is a mixture of platform and brand, where the company started primarily as an aggregator of homes across India, and it quickly moved to other verticals, from leisure to co-working and corporate travel. In a sort of octopus business strategy of expansion to cover the whole spectrum of short-term real estate.
Aspect
Description
Franchise and Lease Agreements
OYO primarily earns revenue through franchise and lease agreements with hotels and property owners. Under these agreements, hotels partner with OYO to use the OYO brand and access the company’s technology, marketing, and distribution network. In return, OYO earns a portion of the revenue generated by these properties. The terms of these agreements may vary, but they often include a combination of upfront fees, recurring fees, and revenue-sharing arrangements.
OYO Wizard Membership
OYO offers a subscription-based loyalty program called OYO Wizard. Customers can subscribe to different tiers of the program, which offer benefits like discounts, complimentary breakfast, and priority customer service. OYO earns revenue from the subscription fees paid by members who join the program to access these exclusive benefits.
Booking Commissions
OYO operates as an online travel agency (OTA) and earns booking commissions on reservations made through its platform. When travelers book accommodations at OYO properties through the OYO app or website, OYO charges a commission fee to the hotel owner. This fee is typically a percentage of the booking amount. Booking commissions contribute to OYO’s revenue.
Additional Services and Upselling
OYO offers additional services to guests, such as in-room dining, transportation, and travel packages. The company can earn revenue by upselling these services to guests staying at OYO properties. These ancillary services provide an additional source of income for OYO.
Advertisement and Marketing Services
OYO may offer advertisement and marketing services to partner hotels and property owners. This can include promoting partner properties through OYO’s marketing channels and featuring them prominently on the OYO app and website. Hotel owners pay fees for these marketing services, which help them increase their visibility and bookings.
Property Management Services
OYO may offer property management services to partner hotels to help improve their operations. These services can include staff training, property renovations, and technology integration. OYO charges fees for these services, and the revenue generated contributes to its income.
Challenges and Competition
OYO faces challenges related to competition in the hospitality and hotel booking industry, both from traditional hotel chains and other online travel agencies. Ensuring consistent quality and standards across its properties, addressing customer concerns, and expanding its global presence are ongoing challenges. Maintaining profitability amid varying property occupancy rates can also be a challenge.
Future Growth Strategies
OYO’s future growth strategies may involve: – Property Acquisition: Increasing the number of properties under OYO’s brand. – Technology Investment: Investing in technology to enhance the guest experience and property management. – Service Diversification: Expanding into related services, such as vacation rentals and coworking spaces.
Octopus strategy: OYO multi-brand and multi-product strategy in action
OYO, thanks also to its $2.4 billion in fundings, managed to keep expanding its business strategy to comprise more products (to cover several markets, from traditional rental to vacation and co-working) and brands.
This sort of octopus strategy has seen the company quickly expanding over the years, by splitting its arms in several directions, to cover all the possible facets of the short-term real estate market.
OYO Townhouse: 25% Hotel, 25% Home, 25% Cafe and 25% Store
It gives us great pleasure to introduce you to OYO Townhouse. Operating as 25% Hotel, 25% Home, 25% Cafe and 25% Store, these hotels are slated to become to the social hotspot of their neighbourhood. Every single element – from the breakfast menu to the booking process – has been re-engineered to deliver higher quality and better value. Also, unlike the lego-brick approach of traditional hotel chains, every OYO Townhouse is designed to complement its neighbourhood. The tastefully done properties are staffed with highly trained managers to deliver world-class and modern hospitality specially designed for millennials.
Thought for the higher end of the market OYO Townhouse, is steered toward a boutique hotel format. The company purchases real estate and tranforms it into boutique hotels, branded OYO Townhouse, which the company likes to call “‘the friendly neighborhood hotel’ or “a unique combination of a hotel, home, merchandise store and café and is targeted at millennial travellers aspiring premium economy accommodations.“
As the company pointed out this is the part of the business targeting higher-income millennials, with six features that make those Townhouses different from the other products (OYO emphasizes them as “6 leayrs of innovation:”
Smarter Rooms,
Smarter Spaces,
Smarter Menus,
Smarter Buildings,
Smarter Service,
Smarter Locations
That is how the formula, that OYO claims, improves over the old hotel formula, was used as part of the initial playbook to expand all over India.
I am excited to introduce OYO Home, our newest initiative in continuing to provide high quality living spaces at diverse locations at a range of prices. OYO is partnering with hundreds of owners across India to unlock, maintain and manage all forms of homes. Everything from villas, apartments, bungalows to farmhouses. Everywhere from Goa, Manali, Shimla, Nainital to Pondicherry.
As the company highlighted back then, there were two main pain pointes t o be solves:
Guests: “concerns regarding infrastructure quality and the check-in/check-out experience.”
Hosts/home-owners: “The lack of a trusted partner who will take over the responsibility of maintaining the home.”
At OYO Vacation Homes, we are utilizing the power of data to understand our customers better. Carefully analyzing customer behaviour has given us insights that are significant for business growth. With the help of data analytics, we are able to solve some of the biggest hurdles faced by homeowners, for example, seasonality or low bookings during certain times of the year. It’s data that has helped us understand the impact of a swimming pool or sauna on the occupancy of a particular home. It is also data that highlights that pet-friendly homes witness higher occupancy!
The brands part of the OYO Vacation Homes varying from self-service to full-service.The services offered by OYO Vacation Homes
This segment of the business primarily comprises brands dealing with vacation renal management services, and here OYO expanded also in Europe.
SilverKey: for corporate travelers
The key features of the SilverKey corporate accommodations as recounted by OYO (source: OYO Official Blog)
Back in April 2019, OYO highlighted “At OYO, our mission is to provide the perfect space in every place. Corporate travel segment is a key engine of our growth for the year and we are stepping up engagement in this segment.”
OYO Workspaces: co-working segment
After the acquisition of Innov8, OYO entered also the co-working industry with three main products:
Innov8 – “Premium Workspace Designed To Help You Create and Innovate“
Powerstation– “Vibrant yet professional Coworking Solutions” (fully managed by OYO
This brand targets “new age corporate travelers who are in search for quality and affordable accommodations while meeting their professional and personal requirements.“
Other products in leisure, corporate travel, and student housing
Other products comprise:
Palette primarily covering the leisure segment.
Collection O as the product focusing on the higher-end of the corporate travel space.
OYO LIFE, targeting millennials and student housing.
OYO end-to-end experience
OYO objective is to cover the hospitality experience end-to-end. Image Source: Official OYO Blog
A lot goes into delivering what we promise and we never shy away from going the extra mile to give the guests an unforgettable experience.
The OYO Team
The process of standardization of the experience starts with what OYO claims to be a 150 point checklist that goes from the booking experience to the support center and the on-ground Cluster Managers, ready to solve any problem it might arise during the experience of guests.
Up to other initiatives like the “Captain.”
OYO and the era of Hyper Agile
Ajay Shrivastava, former head of technology at OYO, back in 2016coined the term “Solver Team” as a sort of Hyper Agile approach based on his experience at OTO.
As he highlighted:
Early last year at OYO, we experimented a new model of collaboration in software development called the “Solver Teams”. Over the year we shipped dozens of products and hundreds of features using this methodology. It’s an impactful execution mechanism, that churns out multiple features every week at a very high speed, while having a positive synergy and camaraderie in environment across business, product, design and technology teams.
As he highlighted in the old model, the starting point of a product development would start from the business going down product, design, engineering and testing/release.
The issue with this sort of approach is well explained in the graphic below by
Source: Ajay Shrivastava, on “Solver Teams — Hyper Agile & Well Oiled Execution”
In a Solver Team approach (or hyper agile) self-sufficient teams come together, so that different functions are comprised in the same team:
Solver Team (ST) = Business + Product + Design + Tech members. Self-sufficient group of experts from different functions who work together on a specific problem end-to-end.
As highlighted by OYO engineering team back in 2018, they launched an important update related to the Hotel Rating:
When a user visits the OYO Mobile App, Mobile or Desktop Website, hotel ratings are displayed alongside all the properties with essential details on the hotel listing page and hotel details page. If the total count of rating is less than 10, then a ‘New’ tag appears on the hotel. Upon clicking on a hotel rating, it expands to show a more detailed review and displays a happiness index (out of 100) on amenities and core promises. Hotel ratings are collected post check-out via mobile app, customer care and emails.
For aggregator websites like OYO, mechanisms like Hotel Ratings are crucial as they flipped the market upside down. Where conventional rating mechanisms, in the previous era (where digital business models didn’t take over yet) were primarily top-down.
Large scale algorithms and platforms made consumers the raters, thus enabling a bottom-up approach, with a social-media mechanism, and user-generated content, repackaged in the form of synthetic ratings (what OYO calls the happiness index) that enable the platform to show hotel ratings at scale.
OYO in numbers
OYO has been using over the years an aggressive playbook in terms of expansion. First, in India, then globally. This aggressive expansion calls for substantial growth in revenues, but also a growth in net losses (as we’ll see). And as the pandemic hit, while the company still had over a billion in cash at the bank as of 2019, it will have to cut more and more on expansion plans to fit the current market scenario.
OYO growth channels
Total demand and how it was broken down in 2019. (Source: OYO Official Blog)
Among the key channels the company uses to growth, and to make its business stable over time we have repeat customers, organic and paid.
OYO revenue generation
In 2019, revenues increase 4.5x over 2018, reaching over $951 million:
The OYO Rooms Revenue Growth from 2018, to 2019 (Souce: OYO Official Blog)While Gross margins increased from 2018 to 2019, as you’ll see also net losses escalated (Source: OYO Official Blog)OYO Recorded $335 million in losses as of 2019, as it continues with its aggressive expansion playbook, across the world. (Source: OYO Official Blog)
Consolidated net losses increased from 25% in 2018 to 35% in 2019. The increase in net loss was primarily due to OYO global expansion plans.
As the company moved from a growth playbook focused on India, to expand globally. The expansion in new markets also resulted and will result further in overhead costs that will be amortized over the years.
(Source: OYO Official Blog)
This expansion strategy, which worked exceptionally well in times of market expansion, and available cash for growth, it’s now backfiring as the pandemic hits, especially business models built on short-term real estate rents.
OYO offers budget-friendly accommodation options for travelers, making travel more accessible to a broader audience. Its value proposition lies in providing comfortable and standardized hotel rooms at economical prices, catering to the needs of budget-conscious travelers. OYO maintains strict quality standards across its network of hotels, ensuring that each property meets predefined criteria for cleanliness, safety, and comfort. By guaranteeing a consistent level of quality, OYO aims to instill confidence and trust among travelers, enhancing their overall experience. Additionally, OYO provides a user-friendly platform and mobile app that enables travelers to discover, book, and manage their accommodations seamlessly. With a wide range of properties available in various locations, OYO offers convenience and accessibility for travelers seeking hassle-free accommodation solutions. Leveraging technology, OYO streamlines operations and enhances the guest experience with features such as online booking, digital check-in, and in-app communication, reflecting its commitment to innovation and customer convenience.
Affordable Accommodation
Quality Assurance
Convenience and Accessibility
Technology Integration
Revenue Model:
OYO generates revenue through franchise fees charged from independent hotel owners who join its network. These fees cover branding, marketing, and access to OYO’s technology platform. The company also earns a commission on each booking made through its platform, typically a percentage of the booking value. Additionally, OYO offers ancillary services to hotel partners, such as property management and housekeeping, generating additional revenue. Revenue from OYO Rooms, the company’s branded properties, complements its franchise and commission-based income streams.
Franchise Fees
Commission on Bookings
Additional Services
OYO Rooms
Marketing Strategy:
OYO invests heavily in digital marketing channels, including online advertising, SEO, and social media marketing, to promote its brand and attract customers. Strategic partnerships with travel agencies, airlines, and OTAs expand its reach and access new distribution channels. Customer loyalty programs and referral incentives encourage repeat bookings and word-of-mouth referrals. OYO adopts a localized marketing approach to tailor its messaging to specific geographic regions and target markets.
Digital Marketing
Partnership Marketing
Customer Loyalty Programs
Localized Marketing
Distribution Channels:
OYO operates its own online platform and mobile app for travelers to browse and book accommodations directly. It partners with leading OTAs such as Booking.com and Expedia to expand its distribution reach. Collaboration with travel agents and tour operators offers accommodations as part of packaged travel itineraries. Direct sales efforts target corporate clients and event organizers, promoting accommodations for corporate travel and group bookings.
The company expanded in several verticals in the short-term rental real estate and it managed to build several products and to acquire several brands.
This stot of business strategy while working extremely well to dominate the market, might also get very risk when the market contracts, thus requiring drastic cuts to keep up with the lack of expected growth.
Key Highlights
Aggregator and Multi-Product Approach: OYO started as an aggregator of homes in India and expanded into various verticals such as leisure, co-working, corporate travel, and more. It follows an “octopus strategy” of expanding to cover various facets of the short-term real estate market.
Revenue Streams:
Product Sales: Generating revenue by selling various types of accommodations, including hotels, homes, and co-working spaces.
Platform Fees: Earning fees from property owners for listing their accommodations on the OYO platform.
Value-Added Services: Offering additional services like food, beverage, and event spaces.
Target Customers:
Confectionery Lovers: Targeting confectionery enthusiasts, families, and those seeking gift items.
Millennials: Offering boutique hotels and accommodations designed for millennial travelers.
Business Travelers: Providing corporate accommodations for business travelers.
Leisure Travelers: Catering to leisure travelers looking for varied accommodations.
Students: Offering housing solutions for students.
Key Activities:
Manufacturing: Engaging in the production of a diverse range of confectionery products.
Research and Development: Focusing on innovation to create new and exciting confectionery offerings.
Platform Management: Operating a platform that connects property owners and guests, facilitating bookings and transactions.
Property Management: Managing properties listed on the platform to ensure quality and customer satisfaction.
Key Resources:
Platform: Operating an online platform that connects property owners and guests.
Brands and Intellectual Property: Leveraging the OYO brand and various sub-brands to appeal to different customer segments.
Manufacturing Facilities: Utilizing manufacturing facilities to produce confectionery products.
Distribution Network: Operating a distribution network for delivering confectionery products.
Technological Expertise: Utilizing technology for platform management and customer experience.
Strategic Partnerships:
Suppliers and Property Owners: Collaborating with partners to source accommodations and services.
Retailers and Distributors: Partnering with retailers and distributors to ensure product availability.
Cost Structure:
Property Acquisition and Maintenance: Incurring expenses related to acquiring and maintaining accommodations.
Technology Development: Investing in technology for platform management and enhancement.
Marketing and Advertising: Allocating resources to promote the brand and attract customers.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
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