OVERVIEW

OYO is a technology-driven hospitality company that aims to provide standardised and affordable accommodations. It utilises a franchise and partnership model, leveraging technology to streamline operations and enhance the guest experience.

Ritesh Agarwal founded OYO, which is a platform that connects people who want to rent out their homes or properties.

The platform also allows travellers to search for accommodations by providing details such as the destination. Oyo operates in markets such as gig economy travel and hospitality tech, and it serves in both B2C and B2B spaces.

Oyo appears to be quite similar to AirBnB, but it is not. Oyo operates as a hotel aggregator and franchise that partners with existing small and large hotels to standardise rooms by their brands, as opposed to AirBnB, which is a peer-to-peer platform.

AirBnB itself is an investor in Oyo, along with AirBnB. Oyo has 54 institutional investors, including Softbank Vision Fund Light Speed India, and Softbank is the largest institutional investor in Oyo.

With 3 seed rounds, 2 early-stage investments, 11 stage funding events, and 1 debt financing oyo has completed 17 funding rounds with the total funding collected by Oyo being $ 3.24 billion with $ 1.5 billion as the largest round.

BUSINESS MODEL

Standardisation:

OYO aims to provide a consistent and reliable experience for budget travellers.This involves standardizing the quality of rooms and amenities in its partner hotels.

OYO uses latest technology to streamline operations, including online booking, inventory management, and pricing.

Their app and online platform are central to their customer experience.

OYO primarily focuses on partnering with existing hotels rather than owning properties.This allows for rapid expansion without significant capital investment in real estate.

Partnerships with Hotels:

OYO collaborates with hotel owners, bringing them into its network.

In many cases, OYO provides support in upgrading and standardizing the properties.

Franchise Model: Increasingly, OYO operates on a franchise model, where hotels operate under the OYO brand.Hotels pay OYO for access to its brand, technology, and customer network.

Revenue Generation:

Commissions: OYO earns a percentage of revenue from bookings made through its platform.

Franchise Fees: Hotels pay fees to be part of the OYO network.

Value-Added Services: OYO also generates revenue through various ancillary services.

GEOGRAPHIES

While OYO expands its footprint worldwide, India continues to form the bedrock of its operations.With over 70% of the workforce based in the country, the centralised

operations in India are crucial to the company’s strategic initiatives and continued

growth worldwide.

India’s domestic tourism circuit also holds tremendous potential. In FY24, we witnessed the rise of spiritual tourism, a trend we capitalised on through the launch of properties across major Indian religious destinations. As India’s middle-class expands and the economy continues to outperform its counterparts in Asia, OYO is well-placed to reap the benefits of these positive trends.

Among other geographies, the company has seen growth across Europe, the US,Southeast Asia and the Middle East. Europe is the largest market for vacation rentals, and its homes business, OVH, is poised to benefit from the resilient leisure travel trends in Europe, especially given the emphasis the company has paid to its business in Denmark.

The company is also steadily expanding in the US, with over 3000 properties under it’s umbrella while also boosting its premium storefront count in the core Southeast Asian markets of Indonesia, Malaysia and Thailand.

TARGET MARKET

Budget conscious travellers : OYO caters to individuals and families looking for cost-effective lodging options.

Millennial and GenZ : These tech-savvy generations are comfortable with online bookings and appreciate the convenience of OYO's platform. They often prioritise value and unique experiences.

Business travellers : OYO also attracts business travellers seeking convenient and affordable accommodations for work trips.

Domestic travellers : In markets like India, OYO has a strong presence among domestic tourists traveling for leisure or pilgrimage.

Solo Travellers : The convenience of easily booked, and relatively standardised rooms, makes OYO an attractive option for people traveling alone.

CUSTOMER DEMOGRAPHIC

Age : A significant portion of OYO's customer base falls within the 20-35 age range.

Income : OYO primarily targets the middle and lower-middle-income segments.

Location : OYO's customers are often from urban areas and utilise online platforms for booking.

Tech Savviness : OYO's reliance on its app and online platform means its customers are generally comfortable with technology.

Important Considerations:

OYO's strategy has evolved, and they've attempted to cater to various segments, including those seeking more premium experiences. However, their core focus remains on the budget accommodation market.

Regional variations exist in OYO's customer demographics. For example, the customer profile in India may differ from that in Southeast Asia.

INDUSTRY ANALYSIS

MARKET OVERVIEW

Global Hospitality Industry: A massive and diverse sector encompassing various accommodation types (hotels, resorts, hostels, vacation rentals, etc.).

Latest Trends:

Rise of Online Travel Agencies (OTAs): Platforms like Booking.com, Expedia, and Airbnb have revolutionized how people book travel.

Growth of Budget Travel: Increasing demand for affordable and convenient accommodation options.

Technology Integration: Smart hotels, AI-powered services, and personalized experiences are transforming guest interactions.

Focus on Experiences: Travellers increasingly prioritize unique experiences over just a place to stay.

COMPETITIVE LANDSCAPE

Direct Competitors:

Budget Hotel Chains: Treebo, FabHotels, Zostel, RedDoorz (in Southeast Asia)

OTAs: Booking.com, Expedia, Airbnb (partially overlaps with OYO's model)

Indirect Competitors:

Traditional hotel chains (Marriott, Hilton, etc.) - compete for budget-conscious travellers.

Home-sharing platforms (Airbnb) - offer alternative accommodation options.

INDUSTRY CHALLENGES

Economic Fluctuations: Travel demand is sensitive to economic downturns and recessions.

Competition: Intense competition from established players and new entrants.

Maintaining Quality Standards: Ensuring consistent quality across a vast network of partner hotels.

Technology Disruptions: Adapting to evolving technologies and customer preferences.

Regulatory Changes: Navigating varying regulations across different markets.

SWOT ANALYSIS

Strengths:

Strong technology platform and data analytics capabilities.

Large network of partner hotels and wide geographical reach.

Focus on affordability and standardisation.

Strong brand recognition in key markets.

Weaknesses:

Challenges in maintaining consistent quality across all properties.

Dependence on technology infrastructure.

Competition from established players.

Opportunities:

Expanding into new markets and segments.

Developing innovative revenue streams (e.g., ancillary services).

Leveraging AI and machine learning for personalized experiences.

Threats:

Economic downturns and travel disruptions.

Increased competition from both traditional and new entrants.

Changing consumer preferences and travel trends.

FINANCIAL ANALYSIS

Turnaround to Profitability:

A significant achievement for OYO is that in the financial year 2023-24 (FY24), the company reported its first-ever profit after tax (PAT). This marks a major shift from the net losses recorded in the previous financial year (2022-23).Specifically OYO reported a net profit of ₹229 crore for FY 2023-2024.

Revenue:

While OYO achieved profitability, there was a slight decline in consolidated revenue from operations.

For FY24, revenue stood at ₹5,388 crore, compared to ₹5,463 crore in FY23.

There have also been reports of a 15% drop in operational revenue, when looking at a different financial breakdown.

Cost Reduction:

A key factor contributing to OYO's profitability was the company's successful efforts in reducing its total expenses.

Total costs decreased by approximately 13%, from ₹5,207 crore in FY23 to ₹4,500 crore in FY24.

EBITDA Growth:

OYO's adjusted EBITDA saw substantial growth, reflecting improved operational efficiency.

The adjusted EBITDA surged by 215%, reaching ₹877 crore in FY24, up from ₹277 crore in FY23.

Earnings Per Share (EPS):

OYO's EPS showed a positive turnaround, with approximately ₹0.36 in FY24, compared to a loss per share of ₹1.93 in FY23.

Inventory Growth:

OYO expanded its hotel inventory, increasing from 12,938 properties in FY23 to 18,103 in FY24.

WHAT DIFFERENTIATES OYO FROM IT’S COMPETITORS

While others just rent out properties oyo has range of properties for different uses.Oyo Silver Key - Oyo Silver Key is for corporate travellers, Silver Key stands out as a special service designed specifically for executives and corporate clients, providing executive apartments with private, large layouts and a variety of facilities. These furnished apartments provide modern conveniences and are specifically designed to fulfil the needs of business travellers looking for personalized stays of both short and long lengths.

Oyo Townhouse - Oyo Townhouse is an excellent option for young travellers. They give cool services to meet your modern wants. The rooms feature unique beds, good amenities, and Netflix-enabled TVs. You can also order meals with a smartphone app.

Oyo Studio - Oyo Studio Stays allows you to reserve rooms for internships, jobs, and business travels. You can rent a room by yourself or with a friend.

Oyo B Direct - Oyo B Direct is ideal for business stays. They simplify things by providing invoices that are ready for GST reimbursement.

Oyo residences - Oyo residences are comfortable private residences built for your vacation.

Oyo Flagship - Oyo Flagship is like renting an entire block or flat. It feels like home while also providing hotel luxuries. The staff is nice, and the inside is adorned with fascinating themes and phrases on the walls. It's a unique and comfortable experience.

Weddingz. in - Weddingz. in is a cool service that Oyo has collaborated with banquet hall vendors. You may quickly reserve wedding venues at the best prices using their simple booking system.

Oyo Wizard - Oyo Wizard offers a subscription model. Members receive unique discounts, incentives, and cash-back advantages. Oyo also offers popular packages and hot bargains to travellers.

RISK ASSESSMENT

Operational Risks:

Quality Control : Maintaining consistent quality across a vast network of partner hotels is a significant challenge. Variations in standards can damage OYO's brand reputation.

Partner Relationships : OYO's reliance on partner hotels creates dependency. Disputes or disagreements with partners can disrupt operations.

Technological Dependence : OYO's business model is heavily reliant on its technology platform. System failures or cybersecurity breaches can have severe consequences.

Customer Satisfaction : Negative customer reviews and experiences can deter potential customers and impact brand loyalty.

Financial Risks:

Profitability : Achieving and maintaining profitability has been a persistent challenge for OYO.

Debt and Funding : OYO's financial stability is influenced by its debt levels and ability to secure funding.

Market Volatility : The hospitality industry is sensitive to economic fluctuations, which can impact OYO's revenue.

Regulatory and Legal Risks:

Varying Regulations : Operating in multiple countries exposes OYO to diverse and potentially conflicting regulations.

Legal Disputes : OYO may face legal challenges related to its contracts with partner hotels or other business practices.

Changes in Local Laws : As shown in the search results, OYO has to be aware of and change its policies in order to match local cultural and legal norms. This is a large risk when operating in many different regions.

Competitive Risks:

Intense Competition : OYO faces competition from established hotel chains, online travel agencies, and other budget accommodation providers.

New Entrants : The hospitality industry is dynamic, and new competitors can emerge quickly.

Reputational Risks:

Brand Image : Negative publicity or scandals can damage OYO's brand reputation and erode customer trust.

Social Concerns : As shown in the search results, OYO has to be aware of social concerns, and adjust business practices to them. Failing to do so can cause large reputational risk.

PROMOTERS AND SHAREHOLDING PATTERN

Investment Funds - 56.13

Corporate Investors - 24.02

ESOPs - 11.68

Ritesh Agarwal - 6.66

Angel Investors - 0.03

Other Investors - 1.46

SUMMARY

OYO is a global hospitality technology company that operates a technology-driven platform designed to standardize and improve the experience of budget accommodations. It partners with hotels and property owners, offering them technology, branding, and operational support through a franchise and partnership model. Primarily targeting budget-conscious travellers, OYO leverages its mobile app and online platform for bookings and property management, utilising data analytics for pricing and demand optimisation.

Operating within the dynamic hospitality industry, OYO faces competition from traditional hotel chains and online travel agencies. Its industry is marked by rapid technological advancements, evolving consumer preferences, and sensitivity to economic fluctuations.OYO's strengths lie in its technology platform, brand recognition in key markets, and a large network of partner hotels. However, challenges persist in maintaining consistent quality, managing rapid expansion, and navigating varying regulatory landscapes.