BUSINESS MODEL OF OYO
Before digging deep into the business model of OYO, lets first check out what a mammoth OYO has grown to be in such a short span of time.
Founded in 2013, by Ritesh Agarwal, Oyo has become the third-largest hotel chain in the world, offering over 5 Lakh hotel rooms, spread across 500 cities in more than 10 countries…
Surprised.!!!!!…… Yup that rate with which OYO, the blue-eyed boy of Indian startup has grown in just 6 years.
That’s not it … OYO plans to become the world’s largest hotel chain by 2023.
Let’s check out the OYO business model and how the company plans to achieve its audacious goals.
BUSINESS MODEL OF OYO:
FROM AGGREGATOR MODEL TO FRANCHISE BASED MODEL
Heard about Oravel Stays ?? Guess not. This was the first company started by Ritesh Agarwal in 2012 which was based on the aggregator business model just like OLA and Uber.
Ritesh Agrawal in his early age wanted to be an entrepreneur and was fond of traveling around different places. One major problem he commonly found during his travel days was the quality of hotel services.
Around 90% of small unorganized hostels were operating in the country freely. Ritesh noticed that huge sector of business opportunity was available. So, he decided to open OYO rooms and organized small hostels under the one uniform brand name.
What is an Aggregator model:
Aggregator business model is a network business model where the firms collect information about a particular industry which is unorganized and populated sector, make them their partners, and sell their services under their brand name.
OYO acquired its first hotel in Delhi in 2013 and from that day there has been no looking back for OYO. The OYO business model focus on making a partnership with hotels, apply uniform standards and develop a user’s friendly environment in their hotels.
After using an aggregator model for over 3 years, Oyo decided to evolve from being just an aggregator to have a franchise-based business model and become a full-scale hospitality company in coming future.
In the year 2018, OYO Hotels & Homes completed it’s transition to becoming a 100% leased & franchised hotel chain
Following the franchise business model, the entire hotel is renovated as per OYO brand and quality standards with CAPEX invested in assets primarily by asset owners to deliver core promises to OYO’s customers and ensure higher returns to asset owners.
Customer Segments of Oyo
There are different customer segments of Oyo divided on the basis of their demography. The customers can range from 25-70 years of age coming from different walks of life and economic background.
- Adventure Travelers – “Explorers” who spend the majority of their time exploring the city than chilling in the hotel. These customers prefer low budget hotels for their stay.
- Leisure travelers – Travelers who want to take a vacation from everyday busy life.
- Family travelers – People traveling with their families, they have their specific needs and demands when it comes to choosing and staying in a hotel.
- Business travelers – Oyo also has commercial places on its platform where customers can book office spaces and conference rooms for their business purposes.
Oyo covers a broad spectrum of customers and successfully manages to cater to their individual and specific needs.
Value Propositions of Oyo
The value propositions of Oyo are its standardization of services to enrich the guest experience.
Customer experience: Unlike Airbnb that only connects travelers with local hosts, Oyo takes full responsibility for services of the hotels listed on its platform.
Other value propositions are:
- Well-designed app
- simple and easy-to-use app for booking
- speed and reliability in finding hotels, bars, theatres
- personalized room features
- Holiday packages & discounts
- Discount membership program
- community and entertainment services
- Amenities
To refine its value propositions, it has launched separate banners of unique services.
Oyo Townhouse: Through Oyo Townhouse, millennial travelers can get smart services for their smart needs. ‘Smart rooms’ with specially-designed beds, formulated toiletries, power sockets, and TVs with Netflix installed are offered with 24/7 kitchen services. ‘Smart menus’ can be ordered by a mobile application.
Oyo Studio Stays: Through Studio Stays, people can book rooms for their internships, jobs, or corporate stays. They can rent rooms for either single occupancy or twin sharing.
Oyo B Direct: It is primarily for business stays, which provide simplified reimbursement by GST ready invoices.
Oyo Homes are fully designed private homes for people who are on their holidays.
Oyo Flagship: Oyo leases whole buildings/apartments for its Oyo Flagship brand. These buildings give a homely atmosphere as well as the comfort of the hotel. Friendly staff, vibrant decorations, theme-based rooms, and building walls with lovely quotations are some of its unique features.
Oyo Silver Key: it’s another exclusive service that provides executives and corporate clients executive apartments with private, spacious, and multi-utility services.
Weddingz.in: Oyo has also partnered with several banquet halls’ vendors to allow people to book their wedding venues through its easy booking services and within the best prices.
Revenue Stream of Oyo
As of Dec 2018, Oyo has an annual revenue of $1.8 Billion. Now let’s discuss how Oyo makes money?
How does Oyo make money?
- Commissions
Oyo charges around 22% of commissions every month from hotels owners. Commissions may vary as per the services and features offered.
- Room Reservation Fee
Customers pay a room reservation fee according to their services chosen. The room fee is charged with a few percentage margins of the hotels’ prices. For example, if a room is priced at Rs. 1,000 per night, Oyo makes only 10-20% commission from it, and that is their actual revenue.
- Membership fees
Users who subscribe to Oyo Wizard memberships are charged with premium fees ranging from Rs 500 to Rs 3000.
- Advertising
Oyo also charges different companies to place their ads on Oyo’s app and website. It also generates sizable revenue for Oyo.
- Sponsors and Partnerships
Oyo also charges some amount from its sponsors and key partners by promoting their brand name through advertising on their app.
- Consulting Services
Oyo charges for its business consulting and data analysis services, it provides to its clients, including hotels, clubs, organizations, etc. It provides these services as it owns an extensive database of locations, hotels, event organizations, users, and their preferences.