Posted on Monday, Dec 3rd 2018
In September this year, OYO Rooms checked into the Billion Dollar Unicorn club with a massive funding of $1 billion from Softbank and other investors. It is now the second most valuable startup after Paytm.
Gurgaon-based OYO Rooms was founded in 2013 by Ritesh Agarwal when he was just 19. Ritesh started coding when he was eight and was the first resident Asian to be accepted to the Thiel Fellowship. The idea for OYO came to Ritesh while he was backpacking around the country and staying in budget hotels. In 2012, he co-founded Oravel Stays as an online hotel aggregator looking to replicate the Airbnb model.
However, there was a clear need for standardization of services, amenities, and in-room service in affordable accommodation. He decided to pivot to OYO and tackle this need by partnering with budget hotels and transforming them. The company audits its rooms once every three days through the use of its proprietary apps while users provide feedback after every stay.
OYO charges property owners a commission on each booking. The average commission is around 15% and depends on the location and performance. In 2016, OYO started leasing hotels and using a franchise model. Under the aggregator model, its commission rate was 18% per month while the commission in the franchise model is 22%. Its budget rooms are priced at INR 1,000-1,500 ($14-$21) and at INR 1,000-2,500 ($14-$35) under the franchise model.
Early this year, it launched OYO TownHouse whose premium rooms are priced at INR 2,500 ($35 and above). In October, it launched a long-term rental product called OYO Living, which is similar to NestAway. OYO’s competitors in the Townhouse model include Bangalore-based Treebo, which has raised $57 million in funding and Gurgaon-based FabHotels, which has raised $35 million in funding.
Today, OYO has scaled to over 8,500 properties in 230 cities in India. It has about 125,000 rooms in India and about 87,000 in China. It currently has a presence in India, China, Malaysia, Indonesia, the UK, and Nepal. It plans to expand further internationally to Japan and the UAE.
For the financial year 2017, OYO reported operating of INR 125 crore ($174 million), up 635% over the year. Its losses narrowed 33% to INR 331 crore ($47 million) as a result of reduced expenses.
OYO Rooms recently appointed IndiGo’s former president and CEO Aditya Ghosh as its new CEO for India and South Asia. Founder Ritesh Agarwal who was the earlier CEO will now be the group CEO of OYO Hotels and Homes, which includes the company’s businesses across India, China, Malaysia, Nepal, the UK, UAE, and Indonesia.
OYO has raised $1.5 billion from investors including Greenoaks Capital, Lightspeed Venture Partners, Sequoia Capital, Hero Enterprise, China Lodging Group, and SoftBank. Its latest funding round was in September this year when it raised $1 billion at a valuation of about $5 billion compared to its valuation of $900 million last year.
OYO is yet another case of heavy funding and skyrocketing valuation. Its valuation is more than double that of Taj Hotels, India’s largest hotel chain brand.
Have you ever stayed at an OYO room? How would you compare it to others?
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns.
This segment is a part in the series : Billion Dollar Unicorns
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