Have you heard of OYO Hotels? It’s about to become a household name. The six-year-old budget hotel chain is scaling faster than any other hospitality company in the world and is now taking the United States by storm.
This startup is run by an upstart. OYO stands for “on your own” rooms, which sounds like something a teenager might make up. Maybe that’s because OYO’s Indian founder and CEO, Ritesh Agarwal, founded his company when he was a 19-year-old college dropout. The idea came to Agarwal while he was backpacking in India and noted the lack of reliability and predictability when choosing accommodations.
That year, Agarwal won a $100,000 grant from Peter Thiel, the PayPal co-founder who subsidizes dropouts who start their own companies. Since then, OYO has enjoyed a meteoric rise, attracting venture funding from investors including Silicon Valley’s Sequoia Capital and Japan’s SoftBank Group. Earlier this month, OYO’s most recent financing round injected $1.5 billion of fresh capital into the business, with $700 million of that sum coming from Agarwal.
Bookings have also grown at an exponential rate, from 6 million global stayed room nights in 2016 to 75 million in 2018, according to OYO’s annual report card.
The OYO Playbook
OYO targets existing, underperforming budget hotels and rebrands them as OYO franchises. The company then streamlines back-end reservations, manages pricing and technology services, monitors standards on a host of parameters from cleanliness to Wi-Fi availability and, crucially, drives bookings through OYO’s mobile app. In return, OYO takes a percentage of monthly revenue.
Mind you, the picture isn’t entirely rosy. Growing this quickly can cause a company to get out over its skies, and many hotel operators complain about OYO’s inflexible and unreliable technology, as Skift reports.
The appeal for budget travelers is straightforward: OYO Hotels offers clean rooms with basic amenities and dirt-cheap prices that typically run under $50 a night.
Today, at just 25 years old, Agarwal runs the world’s most rapidly expanding hospitality company. After conquering India, OYO’s footprint spread at a breathtaking speed to China, Malaysia, Nepal, Malaysia, the United Kingdom, Japan and the United States.
When OYO enters a market, it scales at a breakneck pace. In China, OYO started with a single listing in Shenzhen in January 2018 and grew in less than a year to more than 271,000 rooms in over 1,000 OYO-branded hotels in over 170 Chinese cities. OYO launched in Japan just last April and six months later already has over 100 hotels in over 50 cities, including Tokyo, Osaka and Kyoto.
OYO entered the US market in February 2019 with test properties in Austin and Dallas, and today there are already more than 110 OYO Hotels in scores of locations, including large American cities like Dallas, Houston, Denver, Augusta, Atlanta, and Miami. But perhaps a better indicator of how quickly OYO is exploding can be gleaned from perusing job sites like Indeed.com, where nearly 300 OYO jobs are listed in second-tier cities like Akron, Ohio; Brookhaven, Mississippi; Buffalo, New York; and Nacogdoches, Texas.
A recent visit to the OYO website revealed the following prices:
- $38 for a room with a king-size bed at the OYO Hotel San Antonio near the AT&T center. Rooms are equipped with free Wi-Fi, air conditioning, mini fridge and TV.
- $25 for a room with a king-size bed at the OYO Hotel Jackson South in Jackson, Mississippi. Rooms have free Wi-Fi, air conditioning and TV.
- $40 for a room with a queen-size bed at the OYO Hotel Kannapolis in Charlotte, North Carolina. Rooms are equipped with free Wi-Fi, air conditioning, TV, microwave and an iron.
OYO says it plans to invest $300 million in the US over the next few years and is projecting extremely fast growth. “We plan to partner, manage and open the doors to on average one hotel building per day,” according to a statement on the company website.
That means, if all goes according to plan, there could be over 500 OYO-branded hotels in the United States by this time next year. To put that number into context, consider that Holiday Inn, founded in 1952, currently has 754 properties in the Americas.
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