OYO Rooms, earlier known as Oravel.com, was started in 2012 by dropout Ritesh Agarwal, then 17 years old. His aim was to create a platform that would disrupt the Indian hospitality segment the way Ola Cabs did the car rental market. In short, to use technology to help young travellers find quality hotels at an affordable price.
Initially started on the lines of the San Francisco-based Airbnb, Ritesh soon felt that the model could easily ensure standardisation, quality and safety for customers. He then tied up with smaller neighbourhood hotels and branded them OYO Rooms.
Since then, the company has attracted investors’ interest, with Sequoia Capital pumping in about ₹30 crore and US-based GreenOaks recently investing about ₹150 crore. The two-year-old start-up has already been valued at ₹600 crore.
Agarwal spoke to
Your firm is just two years old and already is being valued at $100 million. How did you reach here so fast?
I believe we have built an asset-light model that is a great fit for the hospitality market. Our business model comes to life through highly optimised processes that allow us to scale very fast — for example, our proprietary on-boarding process allows us to add new hotels rapidly.
We can add a new hotel to our network within 5-6 days of signing the agreement. Additionally, we have been able to build a team of professionals.
Did the change in business model help you raise more money? If yes, why?
We invented our business model to solve a customer problem of getting a highly predictable hotel experience across different hotel rooms, particularly in the budget travel space. In the last six months, we have clearly demonstrated that this model is a great fit for India, where budget hotels are known for always delivering an inconsistent experience. Most of our hotels see extremely high room occupancy levels – easily exceeding 80 per cent for most months. On top of that, we are also looking to grow to more than 1,000 hotels in 25 cities by this year-end.
We have set ourselves an ambitious target of becoming the world’s largest technology-enabled network of hotels. Solving the problem and not changing the model helped us grow and raise funding.
How do you plan to disrupt the hospitality segment?
We are doing so by offering a huge inventory of high-quality rooms at prices that are on average 20-35 per cent lower than comparable rooms in other hotels.
Our rooms start at just ₹999 a night and have all the standard amenities that any guest needs, including TV, air-conditioning, hot and cold water in the bathroom, complimentary breakfast and Wi-Fi. This is a value proposition that no other competitor is able to match.
We are also bringing to Indian consumers a predictable experience in the budget hotel category for the first time. Until we arrived, people booking a room below ₹3,000 a night did not know what to expect in their hotel — whether the air conditioner would work, whether there would be functional Wi-Fi or whether hot water would be available in the bathroom.
With OYO, we are making the budget hotel stay as predictable as stay in a premium or luxury hotel. This is a completely new paradigm for the hospitality market — this is why our hotels are nearly always running full.
What are the growth drivers for companies that operate on the same model as you?
We have a unique model and we do not know of any other company with a similar model. Our biggest growth driver is an enormous demand for branded, predictable hotel experiences in the budget hospitality category.
Our growth is simply a reflection of our trying to meet this demand, and we believe we have barely scratched the surface.