MINI PROJECT ON

BUSINESS MODEL OF OYO ROOMS

AND HOW THEY WORK

Presented by

Joshua A
Student of Sem-1 MBA Class of 2019-21

Under Guidance of

Santosh Kathari
Assistant Professor
Department of Management Studies
CMR Institute of Technology,
Bangalore

NOVEMBER 2019

Page | 1
S. No. CONTENTS PAGE NOS.

Introduction
(a) Industry Overview
1 3-5

(b) Company Overview

6-7
2 Organization Structure

3 Business Model of Oyo Rooms 7 - 10

10 -11
4 Competition

11
5 Conclusion

Page | 2
 INTRODUCTION:
 Ritesh Agarwal is an Indian entrepreneur, the founder and CEO of OYO
Rooms - the fastest growing Branded network of hotels online & offline.

 He started his entrepreneurial journey at the age of 17 and is considered to

be one of the youngest CEOs in India.

 Oravel Stays Pvt. Ltd was his first startup in the year 2012. Oravel was
designed as a platform to enable listing and booking of budget and
premium accommodations.

 In simpler terms, it was meant to be destination for short and midterm rentals
for bed and breakfast joints, private rooms and serviced apartments.

 Soon, Agrawal realized that just a combination of bed and dinner would not
fulfill the expectations of budget travelers in India so he transformed Oravel
stays to OYO ROOMS, 2013 with the key proposition of offering affordable and
standardized accommodation.

Page | 3
Industry Overview:

Global Scenario: The hospitality industry is a broad category of fields

within service industry that includes lodging, event planning, theme parts,
transportation, cruise line, and additional fields within the tourism industry. The
hospitality industry is a multibillion-dollar industry that depends on the
availability of leisure time and disposable income. A hospitality unit such as a
restaurant, hotel, or an amusement park consists of multiple groups such as
facility maintenance and direct operations (servers, housekeepers, porters,
kitchen workers, bartenders, management, marketing, and human resources
etc.).

Usage rate, or its inverse "vacancy rate", is an important variable for

the hospitality industry. Just as a factory owner would wish a productive asset
to be in use as much as possible (as opposed to having to pay fixed cost while
the factory is not producing), so do restaurants, hotels, and theme parks seek
to maximize the number of customers they "process" in all sectors. This led to
formation of services with the aim to increase usage rate provided by hotel
consolidators. Information about required or offered products are brokered on
business networks used by vendors as well as purchasers.

In looking at various industries, "barriers to entry" by newcomers and

competitive advantages between current players are very important. Among
other things, hospitality industry players find advantage in old classics
(location), initial and ongoing investment support (reflected in the material
upkeep of facilities and the luxuries located therein), and particular themes
adopted by the marketing arm of the organization in question (for example at
theme restaurants).

Also very important are the characteristics of the personnel

working in direct contact with the customers. The authenticity, professionalism,
and actual concern for the happiness and well-being of the customers that is
communicated by successful organizations is a clear competitive advantage.

Page | 4
Company Overview:

About the Company: OYO Rooms, commonly known as OYO, is an

Indian hotel brand that owns and operates as well as aggregates standardized
hotel rooms. It currently operates in more than 200 Indian cities and in Malaysia.

Products and Services offered by OYO : HOTEL BOOKING A traveler can

book a room online at Oyorooms.com and can choose to opt for online
payment or pay at the hotel.

Page | 5
Organisation Structure:

CEO: RITESH AGARWAL CGO: KAVIKRUT

COO: ABHINAV SINHA CSO: MANINDER GULATI

CTO: ANIL GOEL

CFO: ABHISHEK GUPTA

CPO: DINESH RAMAKRISHNAN

Page | 6
REGIONAL HEADS

North Head: Gaurav Ajmera

South Head: Burhauddin Pithawala

East Head: Prasun Chaudhary

West Head: Shreerang Godbole

Business Model of Oyo Rooms

Oyo Rooms business model was similar to the usual aggregator business
model (Uber for x business model) but had the essence of the franchise
business model as well. The company used to –
1. Lease a part of Hotel’s inventory beforehand,
2. Organize those hotel rooms under their brand name – Oyo Rooms
3. These partner hotels provided standardized service to customers of those
rooms as it was decided in a contract with Oyo
4. Bookings were made through the Oyo Rooms website and mobile
application.

The current operating model of Oyo Rooms is similar to what it was before. It’s
just the company doesn’t lease the hotel rooms anymore, but ask the hotel
partners to operate them as franchise. They have good brand equity and
boasts a 100% increase in revenue to their partner hotels.

Page | 7
Partnership Model
Oyo Rooms provide visitors with quality hotel room stays at different
places around India. They have partnered with hotels and made them work
with them under their name.

Services Provided By Oyo Rooms

Oyo Rooms, started and famous as branded hotel rooms aggregator,
provides many more services than just hotel rooms to visitors.

The services included in the Oyo Rooms business model are –

Hotel Rooms
Oyo’s earlier strategy was to book a part of the hotels’ inventory, to
maintain it as per the quality standards, and to hold it captive exclusively for
Oyo customers. That is, they used to lease some rooms every month and
provide them to their own customers at profits.
The only thing that has changed is that the rooms are now not leased but
operated as Oyo Rooms franchise. Since the hotels and place owners act as
the franchisee, they are bound to operate as per the pre-determined
standards. The company even offers plans where it runs the place instead of
the hotel staff or owner.

Oyo Flagship
The partners used to book their own hotels when they used to see less
prices on the Oyo’s platform and this became malpractice benefiting the
partners while burning holes in Oyo’s pockets. To curb this, and to expand the
business, Oyo Rooms has started leasing of hotels and places where it has full
control over the day-to-day operations of these establishments.

Oyo Townhouse
The company has recently launched the Oyo Townhouse to hone its
value proposition and stand out of the competition when it comes to
standardized hospitality. Oyo Townhouse is based on the needs of the
millennial traveler. These hotels are planned and built based on the needs and
wants of the millennials. They have –

Smarter Rooms – with specially designed beds, showers, sockets, and

internet infrastructure. Even TVs have Netflix installed.
Smarter Spaces – common spaces designed to have meetings. Free
printer, business services, magazines, coffee and tea in the common area.

Page | 8
 Smarter Menus – 24 x 7 Kitchen which lets you order from the mobile
application and many more smart services.
Studio Stays
Apart from providing hotel rooms, Oyo Rooms also provides fully
furnished rooms and flats for long stays like internships, corporate stays, etc. The
rooms/flats can be rented on single occupancy as well as on twin sharing basis
as well (other provisions are also applicable). Rents are paid monthly.
Commission (take-up rate) is charged from the owners if the customer comes
through Oyo rooms.

Events & Other Long Stays

Just like studio stays. There are many family functions (weddings, parties)
as well as corporate functions (seminars, meetings, parties) which involve hotel
rooms for their guests to stay for long. This service is also provided by Oyo.

Commercial Places
Oyo has expanded its branches in the domain of the commercial places
as well. Now the customers can even book office spaces on Oyo as well.

Oyo Wizard
The company has also launched a subscription model where the
subscribers get exclusive discounts, deals, and cashback offers.

Page | 9
Revenue Model of Oyo Rooms
The revenue model has also transformed as the business model
changed from aggregator to franchise. Earlier the brand used to lease hotels
at a predetermined price and offered them to the users at a take-up rate. This
has been changed to a commission-based revenue model.

Oyo rooms charges a commission of 22% from its hotel partners.

However, this commission does vary according to the services provided by the
brand.

Future of Oyo Rooms

Oyo is growing. Though this growth is at a cost, it will be worth it
afterwards. According to a source, Oyo Rooms has delivered a 15x annual
growth with 2.3 million booked room-night transactions in the first quarter of
the calendar year 2016 while its GMV continues to grow substantially every
month. This shows the increasing brand equity and demand of Oyo.
Oyo has set its name as the high-quality budget hotel network, which might
change in the near future as the prices might increase. But since Oyo has
come up with a new franchise model, there are chances that the prices
might be kept as they are now.

Competition from FabHotels and Treebo

Budget hotel chain OYO's strong investor backing and rapid growth
appear to have locked out competition from rivals Treebo and FabHotels.
Simply put, a three-way contest is now a thing of the past as OYO cements its
status as top dog.OYO is by far the best-funded startup in the space. Since
setting up shop in 2013, its parent Oravel Stays Pvt. Ltd has received nearly $450
million (around Rs 3,000 crore) in investment from marquee investors such as
Japan's SoftBank and venture capital firm Sequoia Capital.

In comparison, Treebo and FabHotels have raised less than $100 million
between them despite funding from prominent investors such as Accel
Partners, SAIF Partners and Goldman Sachs.Generous funding aside, it's the
financial year 2016-17 that may have been a turning point for OYO. The Ritesh
Agarwal-led venture's revenue grew more than seven times to Rs 125.3 crore
in that fiscal, leaving its less-funded rivals in the shade.

Page | 10
 Although Treebo and FabHotels, which target the same customer
segment, increased their revenues, they managed considerably lower growth
compared to OYO. FabHotels, in fact, had recorded a higher operational
revenue than OYO in the financial year 2015-16.

A common factor was that expenses grew exponentially. Losses

widened for Treebo and FabHotels and though OYO managed to reduce its
losses, the figure still remained alarmingly high. "The RoC [Registrar of
Companies] numbers are dated and come with such a lag," said Treebo co-
founder Sidharth Gupta. "It is not the right metric for me to comment. There is
no standardisation on how each of the players mark their revenues."

FabHotels did not comment on this story. OYO chief executive Ritesh
Agarwal told TechCircle in an emailed statement that the
company's provisional revenue for 2017-18 stood at Rs 423.2 crore, which
would represent more than a three-fold growth.What is certain, though, is that
the trio has carved a niche for itself in the bracket offering hotel rooms for Rs
1,000-3,000 a night. (The likes of Lemon Tree Hotels, which recently went public,
and Keys Hotels operate at a slightly higher price point.)The question now is
whether OYO is too far ahead of the pack and whether FabHotels and Treebo
can catch up.

Conclusion:
The Overview of this mini project is that I’ve understood how an idea
can be turned into an opportunity from a single man’s perspective. What works
for Oyo is the fact that they believe in leasing hotels and have taken full
advantage of technology by developing an app where users can find room
convenient for them and also for their preferred price or also can be done from
their website. By which I’ve also learnt on how to find out something that does
not exist by checking our surroundings and to find out what is that is needed
by all. Also to be an entrepreneur age does not matter, it’s all about observing
our surrounds and finding the needs of people and making progress in
satisfying their needs.
Also how one can put into practice his leadership skills, entrepreneurial
skills and finding opportunities to implement them.

Page | 11