Ritesh Agarwal's OYO is a $5-billion business
The founder and group CEO of OYO Hotels & Homes, Ritesh Agarwal has had a dream run in the last five years, steering his start-up from an affordable hospitality option to a brand that’s present in China, the UK, Nepal, Malaysia, the UAE and, most recently, Indonesia. The Gurgaon-based company is India’s latest ‘unicorn’, meaning a privately held start-up company valued at over $1 billion; OYO is valued at $5 billion. The fact that Agarwal is a college dropout makes his success aspirational for many budding entrepreneurs. Here’s his story, in his own words.
OYO was launched in 2013 with the promise of delivering predictable, affordable, anytime-available stay experiences for travellers. During our early days, convincing hotel owners to put their property under the OYO platform was a Herculean task. Being an entirely new, untested business model, hotel owners were sceptical about the value and prospects we offered. I would often see myself committing to bear the losses, if any, and share profits.
Soon they started seeing repeat customers and higher revenues. They also noticed how hotel operations, revenue management, and CRM (customer-relationship management) became more efficient and convenient once they joined the OYO chain; they were convinced.
Our global footprint currently spans 500-plus cities across seven countries (India, China, Malaysia, Nepal, the UK, the UAE and Indonesia) where we host guests in 12,000-plus exclusive franchised and leased hotels and 3,000-plus homes (7,500 rooms) with various product and service portfolio like OYO Rooms, OYO Townhouse, OYO Home, Silverkeys, OYO Palette and OYO Living.
Is OYO like Airbnb?
No, we are not Airbnb. We are not in the aggregation business. We are a traditional hotel chain that franchises and leases properties from asset owners, just like other hotel chains.
Our biggest differentiator is our full-stack fulfilment-led model where we fully acquire hotels and homes, on franchise, manchise (a hybrid of franchise and management) or lease, renovate them and bring them up to OYO standards. We then use our technology and operational capabilities to ensure seamless management of the property — revenue, pricing and day-to-day guest experience, amongst others.
From a customer’s point of view, we differentiate ourselves from competitors (other traditional chains) by taking end-to-end ownership of customer experience, right from search and booking process to in-room amenities, service-delivery and checkout, as we practically run the hotel for the owner or with the owner.
OYO in the ‘unicorn’ club
I don’t think a lot about these clubs and lists. What keeps me going is our mission and our ability to create quality living spaces and livelihood opportunities for millions. As we continue to move forward, we will stay true to our core value proposition and promise to our customers and hotel owners — high-quality customer experiences at affordable prices and increased yields and occupancy for our hotel owners.
Checking into the UK
The UK is one of the most dynamic hospitality markets in the world. It has been the leading international travel destination for several years and last year hosted over 19 million tourists from around the world. We wanted to become the trusted partner of independent hotels across the UK, as we’ve experienced in Asia. Our focus has been towards providing a standardised experience.
About our long-term plan for the UK, we plan to invest £40 million in the country and will look to launch in 10 cities, including Manchester, Birmingham, Glasgow and Edinburgh by 2020. We also plan to delight customers looking for quality living experiences at affordable prices, with a selection of over 5,000-plus rooms in the next 15-18 months.
At home in China
For us China is a home market, and we are delighted to see the positive response that we’ve got so far. Interestingly, China’s hospitality landscape is as fragmented as that in India. Our expertise in managing a chain of hotels backed by technological innovations and unique ‘localised’ business model makes it possible for us to offer high-quality standardised experiences at unmatchable scale.
Our secret to success in China is the way we’ve built our business in the country. We didn’t approach the market like an Indian start-up setting shop in China, but like a Chinese player building and localising the OYO business model to make it work in the Chinese market.
As an example, most foreign companies look at recruiting bilingual management teams in a different country. We didn’t make that criterion because a local company wouldn’t have that constraint and if we had that constraint, we would narrow our talent pool. We still have very few English-speaking employees but then, they are the best at what they do. As of now, we are present in 285-plus cities with over 180,000 rooms and a robust and dedicated team of 5,500 employees in the country.
How it all started
I have always had that fire in the belly to do something, something different from the norm, something that I can look back on and feel proud of. It was never about making it big; it was about finding something that I truly believed in and can commit to for years to come. This kept pushing me closer to my dream.
Later, during my Thiel Fellowship, the one thing I learned was to “think big”. As entrepreneurs, we are wired to be optimistic and take a risk even if we see five per cent possibility of something working out. I had learnt this during my Thiel days: “Don’t let university come in the way of education.” And I have lived by this. I have found several opportunities to learn and grow, and I will continue to do so.
The road ahead
Our vision is to upgrade every form of real estate while ensuring an excellent experience for consumers and high yield for asset owners. To achieve this vision of OYO, we also have plans to hire 2020 tech talent by the year 2020 to strengthen our technology unit. Our goal is to establish OYO as the most trusted and loved hotel brand across the world for every traveller and become not just the world’s largest but also the most preferred chain by 2023.
My advice to budding entreprenuers
It would be to research and find a problem you can solve in the industry. Research is imperative if you have a potential business idea; always attempt to solve a real problem that makes the lives of customers better. When I say research, I mean spending time on ground with your customer or, as in our case, asset owners. You have to understand their problems for building products that support their needs. For example, had we continued to focus on making budget hotels discoverable through Oravel (Ritesh’s venture before OYO), we wouldn’t have opened up this phenomenal market opportunity. It was only when we addressed the issue of predictable, standardised affordable stays that customers responded with such enthusiasm. Stay smart, agile and realise that there is absolutely no substitute for hard work.
AIR TO OYO
Ritesh Agarwal on former IndiGo president Aditya Ghosh’s appointment as OYO Hotels CEO for India and South Asia
Aditya is a proven professional with over 21 years of experience. He was instrumental in turning the airline into the largest and most profitable one in India, and also into one of the fastest growing low-cost carriers in the world. In fact, under his leadership, IndiGo launched its international operations and took to it where it contributed to about 20 per cent of the airline’s operations.
With Aditya taking on this mantle for one of our home markets, India and the broader South Asia region, we are confident that he will be able to help OYO Hotels set new benchmarks in the hospitality industry, and nurture a high-performing workforce. His business acumen, his problem-solving capabilities, and his customer-centric approach to innovation that helped him build an influential brand that is loved by all, makes him an excellent choice for OYO Hotels.