OYO’s Journey: From Budget Hotels to a Global Hospitality Leader

Table of Content

Overview of OYO Rooms
Co-branding Partnerships
The Launch of Oravel Stays
Initial Challenges and Competitors
Revenue Streams and Commissions
Key Investors and Funding Rounds
Co-branding Partnerships
Summary of OYO’s Achievements

OYO Rooms, officially Oyo Hotels & Homes, is an indian hospitality company that has rapidly evolved into one of the worlds largest and fastest growing chains of franchised and leased hotels, homes, and living spaces. Oyo founded by Ritesh Agarwal in 2013, OYO initially started as a network of budget hotels catering mailny for travelers who seeking affordable accomadation in india. Over the years, it has been expended its footprint globally, currently operating thousands of hotels, vacation homes, and millions of rooms numerous cities in India.

Back when OYO was starting out, it has faced major competition from other venture-backed companies like Treebo and FabHotels. But OYO has managed to leap ahead, mainly because of its significant fundraising efforts and ambitious global expansion plans.

Ritesh Agarwal’s Vision for Affordable Hospitality

Ritesh Agarwal first launched Oravel Stays in 2012 to help travelers find and book budget accommodations. After spending months traveling and experiencing various budget stays in guest houses, bed and breakfast homes, and small hotels across India, he decided to shift gears.This led to the creation of OYO in 2013, focusing on standardizing budget hotels for an even better gust experience.

OYO partners with hotels to offer a consistent guest experiences across various cities. Soon after launching Oravel Stays, Ritesh Agarwal received a $100,000 grant from the Thiel Fellowship from Peter Thiel. Today, OYO has grown to over 17,000 hotels, 140,000 homestays worldwide, with about approximately 8000 based in India and South Asia. Evolving into a full-scale hotel chain, OYO leases and franchises properties, investing in capital expenditures and employing Genral Mangers to ensure smooth operations and customer satisfaction. The company reports having generated roughly a million jobs in India and South Asia and also established 26 training centres for hospitality enthusiasts across India.

OYO charges a commission of around 20-35%, depending on the property’s category—Townhouse, Collection O, Palette, or Capital O. In Europe, OYO also generates a revenue from its homestay business, expanded through acquisitions like Leisure Group and Direct Booker. An additional income streams come from sharing data analytics with property owners and running its customer loyalty program, OYO Wizard.

Early investors, including incubator VentureNursery and Silicon Valley venture capital firms like Lightspeed, Peak XV, and Greenoaks, also backed OYO in its initial growth stages. Japan’s SoftBank joined in the cap table in 2016 and tehy went on to lead several funding rounds, which has been fueled OYO’s rapid expansion.

Funding Success: Tracking OYO’s Rise to a $10 Billion Valuation”

The company currently valued at around $10 billion, based on its latest funding round. Here’s a snapshot of its recent funding milestones:

September 2018: OYO raised $1 billion, along with $100 million of that coming from Star Virtue Investment Ltd., officially it recorded in February 2019.
October 2019: The company has secured $1.5 billion in a Series of F round led by SoftBank Group, Lightspeed Venture Partners, and Sequoia India.
2019: Founder and CEO Ritesh Agarwal, through his RA Hospitality Holdings (Cayman), initiated a $2 billion primary and secondary investment round. The investment Supported by global banks and financial partners, this move allowed Ritesh Agarwal to increase his stake in OYO with partial buybacks from the company early investors, Lightspeed Venture Partners and Sequoia India. Both firms, while selling a part of their holdings, remain significantly invested in OYO’s long term mission.

OYO Rooms: A Comprehensive Product Portfolio for Every Traveler

Oyo Rooms offers a diverse product portfolio, that is regularly updated to meet the needs of a wide range of customers, resulting in a broad product line. OYO has also formed co-branding partnerships with various other companies like Airtel for Wifi support, Ola for transportation, Biotique for in-room toiletries, and payment options with Air Pegasus, PayPal, and Mobikwik for enhancing its customer experience.

OYO’s product offerings include:

Hotel Budget Rooms: In partnership with several hotels across 180+ cities in India and Malaysia, OYO provides standardized budget stays with amenities like free Wi-Fi, breakfast, branded toiletries, and premium bedding. Rooms are categorized as Standard, Premium, and Elite, each offering unique features.
OYO Townhouse: A midscale option, branded as the “neighborhood hotel,” aimed at millennial travelers who looking for modern and vibrant accommodations.
OYO Home: India’s first fully managed homes rental system, providing a private, well-maintained homes for the travelers across different locations.
OYO Vacation Homes: The world’s third-largest vacation home brand, featuring brands like Belvilla, Danland, DanCenter, and Traum-Ferienwohnungen in Germany.
SilverKey: Launched in 2018 to serve corporate travelers on both who short and long stays.
Capital O: Offers hotel bookings with as much as providing quality and convenience.
Palette: Targets guests seeking high-end leisure experiences along with affordable, curated resort stays.
Collection O: Designed only for business travelers who seeking seamless booking and a good accommodation services.
OYO LIFE: Aimed young professionals and millennials, OYO LIFE offers fully managed, affordable long-term rentals in urban areas.

Rising from Losses: OYO’s Remarkable Revenue Growth Story

In its first year, OYO posted revenue of Rs ₹32.86 crore but faced significant losses of ₹496.31 crore. By FY 2018, its revenue had surged to ₹415 crore, while losses slightly increased to ₹360 crore. Year after year, OYO saw remarkable growth, with a 245% rise in revenue, though losses remained fairly consistent, moving from ₹355 crore to ₹360 crore. Initially seen as a hotel aggregator or even an online travel agency (OTA), OYO’s business model has faced a mixed perceptions, sometimes even labeled as unsustainable business model. Today, however, OYO is India’s largest hotel chain, managing 173,000 rooms. Globally, It ranks as the third-largest, with over half a million rooms across 18,000 properties in 500 cities across 10 countries.