OYO Rooms Business Model [Detailed guide of OYO’s revenue model]

OYO Rooms Business Model [Detailed guide of OYO’s revenue model]

Overview of OYO Rooms Business Model

  1. Commissions
  2. Membership fees
  3. Room Reservation fee
  4. Advertisements
  5. Partners and Sponsorship
  6. Data Analysis and Consulting Services

OYO’s story

Did you know that OYO stands for ‘On Your Own’? Pretty neat, right.

Oravel Stays Pvt. Ltd, an online listing of budget-friendly hotel rooms, was established in 2011 by an 18-year-old college dropout Ritesh Agarwal. In 2013, Ritesh Agarwal secured the Theil Fellowship for Oravel & funding of $100,000 over two years, an initiative by Peter Thiel, Silicon Valley venture capitalist, entrepreneur & co-founder of Paypal.

Since then, Oravel Stays, now known as OYO Rooms is valued at $10 billion as of late-2019 & is the third-largest hotel chain in the world. Quite a ride, eh?

OYO Rooms are a platform used by travelling customers who wish to find comfortable accommodation at affordable rates. Today, it operates in 80+ globally, starting out in India and further expanding all the way to UAE, China and the USA too. Initially, OYO operated on an aggregator business model wherein it would partner with hotels who would lease them rooms for a monthly fee which would then be offered to customers via Oyo Rooms website or mobile app. In 2015, OYO changed into a franchise-based model under which they partner with hotels and hotels operate under them as a franchise. As OYO built its brand and its equity increased, this model proved more profitable.

OYO’s franchise business model provides standard quality hotel rooms at affordable rates in various locations with OYO’s branding. It offers standardized hospitality services and puts the focus on user experience. To partner with OYO, every hotel must meet a set of quality guidelines and services put forth by OYO on pricing, security, staff, feature and services offered by the rooms etc.

Here are some interesting stats about OYO for all the statophiles (not a real word) out there:

Oyo Stats 2019
OYO’s Annual Travel Index, 2019.

 

How do OYO Rooms work?

OYO Rooms business model encapsulates various services that they offer to their customers. 

1. OYO Rooms

Previously, OYO held a certain inventory amount of a hotel’s rooms that they notched up to their standards, which was available to their customers on lease. However, from 207, OYO completely switched to a franchise model and no longer leases rooms.

According to their current business model, the hotels partnered with OYO operate under OYO’s franchise. The hotels under OYO’s franchise now offer standard rooms and plans determined by OYO.

2. OYO Flagship

OYO Flagships are whole apartments/buildings that are converted by OYO to give a comfortable & seamless experience for users. Widely accepted & appreciated by users who have given a positive feedback about this initiative, OYO Flagships are of more premium quality as compared to non-flagship hotels.

3. OYO Townhouse

OYO Townhouses have been recently launched and are tailor-made to the requirements of millennial travellers. They are an integral part of OYO rooms business model & include:

a) Smarter Rooms: OYO provides rooms with special facilities like internet infrastructure, designed beds, shower, sockets etc.

b) Smarter Spaces: These spaces designed to provide a meeting place and offers facilities like business services, free printing, coffee, tea, magazines etc.

c) Smarter Menus: OYO provides a 24 * 7 kitchen service that customers can order from via the app.

4. Studio Stays

Another aspect of OYO Room’s business model is their facility of fully furnished studio flats for internships, conferences etc. The flats can be rented to single occupants or even on a twin-sharing basis. Rents for the flats are paid monthly and OYO charges a commission on the same. With Studio Stays, the company is looking to tap into another growing segment of students who travel for internships, college admissions and entrance tests; as well as first jobbers who need a decent place to stay while they look for homes to rent or buy in a new city.

5. Event and Weddingz

OYO offers hotel rooms for family functions like weddings, parties and corporate events like seminars, meetings, conferences to customers for extended or long periods of stay. They acquired Weddingz.in in 2018, thus officially entering the massive wedding industry. An official PR release by OYO said:

It seems like only yesterday that the Weddingz.in team came on board and it has already witnessed an exceptional growth of 480% in revenue in just a period of 12 months. Since the acquisition took place back in August 2018, it has been exciting for both OYO Hotels & Homes and the team of Weddingz.in as it has witnessed an instrumental 636% growth in bookings and a high customer delight. Weddingz.in is backed by OYO’s operational capabilities, a unique offering of providing hassle-free wedding experience and 1500+ talented employees.

6. OYO Workspaces

With the acquisition of Innov8 in 2019, OYO introduced OYO Workspaces, a multi-brand approach with two other coworking brands, designed to meet the needs of over 80% of the working population in the country:

Innov8 – Premium Workspace Designed To Help You Create and Innovate
Powerstation– Vibrant yet professional Coworking Solutions which is fully managed by us for medium and large businesses, startups, and freelancers
Workflo– budget-friendly, functional co-working solutions catering to the aspirations of a rising India

OYO Workspaces provide startups & companies workspace that are well designed, flexible & pocket-friendly.

7. OYO Wizard

A subscription-based segment of OYO rooms business model wherein customers who subscribe are given exclusive discounts, deals and cashback offers. OYO Wizard offers different plans with different costs and facilities. Specifics: The OYO Wizard membership entitles you to a 5% instant discount on current bookings and instant rewards in the form of OYO Money.  With super OYO benefits, you will also get a 10% discount on your next stay at the same OYO hotel, while you have the option to avail 5% discount across all other partner hotels. The Wizard Membership Program is applicable across OYO Rooms, OYO Townhouse, OYO Home, Edition O and SilverKey among our other OYO hospitality products. 

How does OYO make money?

Moving onto the crux of their revenue streams:

1. Commissions

OYO Rooms charges approximately 22% commissions to hotel owners every month. The commissions charged can vary based on factors like location, services and features offered. If OYO finances the standardisation of the property, the commission is higher usually between 27% to 35% or more. For hotels where no financial aid is required, the commission is usually around 20%. As of January 2020, OYO rooms has over 20,000 hotel partners & around 3 lakh rooms under its inventory.

2. OYO Wizard Membership

There are subscription fees charged to customers who sign up for OYO Wizard Services. These fees range between INR 500 and INR 3000 depending on the chosen plan.

3. Advertisements

OYO earns its revenue by charging companies who want to place advertisements on their mobile app or website.

 

OYO’s Funding History

Stage Date  

Amount Raised

 

Post-money Valuation Investors
Series B Jul 2015 $100 M  

Sequoia Capital, Lightspeed Venture Partners, SoftBank Capital, Greenoaks Capital

Series C Aug 2016 $90 M Sequoia Capital, Lightspeed Venture Partners, SoftBank Capital, Greenoaks Capital
Series D Sept 2017 $250 M Sequoia Capital, SoftBank Capital, Greenoaks Capital, Lightspeed Venture Partners India, Hero Enterprise
Unattributed Sept 2017 $10 M Huazhu Hotels Group
Series E Sept 2018 $1 B $5 B Sequoia Capital, Lightspeed Venture Partners, Greenoaks Capital, SoftBank Vision Fund
Series E Dec 2018 $100 M Grab
Unattributed Feb 2019 $100 M Didi Chuxing, SoftBank Vision Fund
Series E Apr 2019 $100 M Airbnb
Debt Nov 2019 $7 M MyPreferred Transformation
Series F Dec 2019 $1.5 B Softbank, Ritesh Agarwal

SOURCE: Craft.co

OYO Rooms Snippets

  • Headquarters & Year Launched: Haryana, 2013
  • Founders: Ritesh Agarwal
  • Revenue:  6,547 crores; Losses: 2,384 crores

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