CS206

GO BIG OR GO HOME

Table of contents

Sl. No. Particulars Page no.

1 Executive Summary 1

2 Countries Oyo can expand to 2

3 SWOT Analysis 3

4 PESTLE Analysis 5

5 Porter’s 5 Forces Model 6

6 Market Entry Strategies 7

7 Operational Strategy 8

8 Phase wise implementation 8

9 Marketing Strategies 9

10 HR Requirements 10

11 Financials 14

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Executive Summary

OYO Rooms, commonly known as OYO, is an Indian hospitality service and budget hotel

network. It was founded in 2013 by Ritesh Agarwal and has since grown to over 8,500 hotels

in 230 cities in India, Malaysia, Nepal, China and Indonesia. The company recently got its

Series D funding of 250 Million USD led by SoftBank Vision Fund and previous existing

investors. Oyo Rooms has plans of expanding to other countries all over the world. The country

selected in this report is believed to be the best fit for the company who have publicly stated

they wish to capture the South East Asian markets before expanding to European and American

markets. The country we have selected for Oyo’s expansion plans is Sri Lanka. Sri Lanka has

always been a tourist hot spot for relatively cheap vacations and scenic views. Additionally,

medical conferences and business meets have taken place via several SME enterprises. Enter-

Oyo Rooms, with the goal of affordable travel. We believe the supply of hotels in Sri Lanka

can be persuaded to become Oyo partners by aggressive recruitment policies. Additionally,

Contiki Holidays will make us the official holiday partner giving us huge, huge leverage over

the backpackers segment in the country, which is definitely growing in today’s millennial

society. Marketing and HR will be the two most important departments as we want to

aggressively acquire the market share in a scattered market. Sell right and Hire right.

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7 countries which OYO can expand to

• As we know Oyo has already expanded to countries like Malaysia, China and Nepal.

• Their further expansion plans underlie their intention to capture the Southeast Asian

and African markets.

• Eventually, they want to capture European and US markets as well which will give

them a total global presence

• OYO’s model is suitable for markets with large share of unbranded budget supply such

as South-East Asia, Africa and South America.

1. Singapore

2. Thailand

3. Philippines

4. Sri Lanka

5. South Africa

6. Morocco

7. Jordan

Basis of selecting the countries

• All the countries have been selected on the basis of the price points of hotels in the

region and if the economics of an organisation like ours would fit the ecosystem of the

country

• It is important to note that the business model of Oyo has been kept in mind while

selecting the countries

• Furthermore, the tourist traffic in places such as those which have been selected is fairly

high which gives us a healthy base of customers

• More specifically, the location we have chosen to expand to is Sri Lanka

• Rationale behind selecting the chosen country-

o Vital to capture neighbouring South and Southeast Asian markets before

expanding to different continents like Africa and Europe

o Hot tourist spot- Tourism in Sri Lanka is very popular tourist destination with

several foreign visitors over the years coming to bask in the natural beauty as a

detox from their everyday lives

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o Aligns with Oyo rooms values- Oyo promises customers rooms from Rupees

999/night (approximately 15 dollars) and it will be easier to find vendors who

will cater to this price point

o Scattered market- Opportunity to easily catch market share because of the

scattered market for hotels in the country

SWOT Analysis

1. Strengths

• Standardisation: The Oyo rooms are mostly owned by various providers but have just

been standardized under the Oyo franchise and thus people are guaranteed of

standardized service in all Oyo rooms wherever they may be located.

• Ever growing network: What started off as a one room one hotel thing in Gurgaon

now has around 8500 properties to its credit and an additional inventory of 4000 motels

and homestays? This is a clear strength.

• Spirit of Innovation: The root idea or need from which Oyo rooms were

conceptualized is a highly innovative one of a one-stop shop for a budget stay in India.

The company continues to maintain its strong spirit of innovation as is evident from the

policy to standardize rooms amongst many others.

• Subsidising Hotel Stays: Oyo subsidizes rooms to make them affordable for customers

and similar to Ola and Uber have emerged successfully in their line of business.

• Young and highly spirited leader: The founder of Oyo Ritesh Agarwal is a youngster

who has won a lot of accolades and besides entrepreneurship caters to a wide range of

interests. This is reflective of every strategy that Oyo adopts since there is a freshness

to the approach taken which is one strong reason for its instant success.

2. Weaknesses

• A strategy of co-branding: The negatives of co-branding with hotel partners is that it

is very difficult to maintain a standard of service and ensure it is being followed. Oyo,

under its new business model employs a franchisee model where it leases out the hotels

it supplies with.

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• Poor service quality: Though Oyo has tried to standardize amenities for each room

based on the prices they charge, they have not been able to do the same with services.

This has made the service quality and reliability highly questionable.

• Tight margins: Hotels that are on a tie-up with Oyo can also loop in other agents for

which Oyo cannot do anything much to circumvent. In this context, the model thrives

solely on how well the margins they provide for their hotels are which can be risky in

the long run.

3. Opportunities

• Growing demand for aggregators in the industry: As the world reels from the

aftermath of repeated recessionary trends, pay cuts, and job losses, most higher

end hotels are struggling to balance supply and demand. This increases the scope

for aggregators like Oyo since most hotels would prefer to take external support

for sourcing new business.

• Focus on budget accommodation: Earlier the trend was more biased towards

luxury and boutique hotels but not anymore. People are trying to minimise

spending and focus on saving and thus budget hotels that can provide decent

boarding and lodging facilities are on a high demand today.

• A surge in the number of business travelers in emerging economies: The

number of people who travel on business from both genders has grown profusely

in emerging economies. This has resulted in a demand for budget stays.

• Global expansion: With the company acquiring the market share in India, it is

now looking beyond borders to expand their business

4. Threats

• Competition: With lowered barriers to entry, every new entrepreneur is looking

at aggregating services. There are a lot of online portals like GoIbibo, Trivago,

MakeMyTrip, etc. which offer a varied gamut of services similar to Oyo.

• Growing concerns about safety: Today there is negative imagery of unsafe

stays and the number of cases of harassment is on an increase. Though Oyo does

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not guarantee safety at any point in time for its hotels they have a moral

commitment to ensure that no such untoward incidents happen.

• Partner mess ups- Oyo is the third party with a franchisee co-branding policy

and issues with fake bookings, lack of respect, etc. are very hard to control

PESTLE Analysis

1. Political Factors

• Getting the The Federation of Hotels and Restaurants Association of India on

board with the idea of expansion by providing documents such as a full

statement of intent and providing the legal documents required by the

government. Further, getting the licenses required for starting a business in the

proposed foreign country are the political factors to be considered

2. Economic Factors

• The hospitality segment is becoming increasingly cutthroat in terms of

competition and Oyo helps in increasing occupancy rates in hotels and ease of

access through a centralised booking system

3. Social Factors

• Oyo Rooms is a Gen Z business. The business concept was developed solely to

provide Indian travellers ease of stay and a level of consistency no matter where

they stay. Being such an organisation increases social media posts, etc. and

proportionately word of mouth. However, bad experiences cause negative posts

and bad goodwill

4. Technological Factors

• Oyo relies heavily on technology. Visitors will book rooms on the app or

through the website. The website is also where guests will write reviews. A bad

review means a host will have a difficult time with future bookings. They also

use automation. For example, If a host doesn’t respond to a guest’s message,

Oyo will automatically text the host for them.

• Without technology, rooms can’t be booked. Hosts can’t be contacted. And Oyo

wouldn’t function as seamlessly as it does today.

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5. Legal Factors

• Oyo has faced certain legal issues in the past with the company taking Zo

Rooms, a subsidiary of Zostel to court in the past for allegedly stealing

copyright material. Further, Oyo has a set of terms and conditions for customers

regarding no liability clauses and for partners to uphold and take care of service

values

6. Environmental Factors

• The Oyo office is a no plastic zone and Oyo always urges partner hotels to build

a sustainable environmental model as we believe it is our responsibility to

protect the planet and ensure a growth which is sustainable and feasible in nature

Porter’s 5 force model

1. Competition in the industry

• The rivalry in the hospitality industry is intense as the cost of product

differentiation and the cost of switching happens to be very low. What this

essentially means is that it is very easy to lose the market share tomorrow to a

competitor who comes up with a less expensive stay. Due to high operating

costs, it puts pressure on owners to sell by slashing prices when demand and

supply are not proportionate, which is usually during non-holiday periods.

2. Threat of new entrants

• It is very important that there is optimum utilisation of resources in the industry.

The existing chains have an advantage over budding entrepreneurs as far as

brand image and loyalty are concerned. The new entrants need to be aware

about their target market and their quality of service. As this is a very

competitive sphere, it is important to keep innovating in the services they offer.

3. Threat of substitutes

• At the current price point, the threat of substitutes are relatively low as

customers would much likely go with a trusted brand name rather than venture

out and try something new for a minimal price differentiation.

4. Bargaining power of suppliers

• The bargaining power of suppliers is relatively low in the industry. Once upon

a time, this could be negotiated during the high demand periods, but with the

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excess supply today and ease of finding accommodation online at similar prices,

bargaining power of suppliers has reduced drastically

5. Bargaining power of buyers

• The bargaining power of buyers is much higher in this aspect than power of

suppliers. This is notably high during bulk orders, in which buyers exercise

bargaining power. These groups include tour operators, convention organisers,

etc. When it comes to travellers in this business it is important to compete in

prices

Market Entry Strategies

1. Mode of entry

• As the Franchising model has proved to be a success in India, we will continue

with the same model in our expansion plans. The Aggregator model poses

several problems and that is why it was best to do away with it.

• The advantages of such a model is-

o Less risky

o Expertise of franchisor

o Highly motivated employees

• Collaborate with several hotels matching our price point and most importantly

the standards we set for partner hotels, which is a lot of hotels in Sri Lanka based

on research conducted

2. Plan to capture market share

• Get as many partner hotels on board as possible by offering PII (Premium Initial

Incentives) as a perk of coming under Oyo Rooms

• Hold conferences- Offer free lunch and explain to hotel owners why they should opt

for Oyo and how it will benefit their business in the long run

• Oyo Apps- The Oyo Apps are well known for their ability to help vendors track

everything from earnings to contacting support, etc.

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• Setting up Colombo office- Colombo, which is the target for the maximum number of

hotels in the country will also have a regional office by Oyo so they can get their

grievances sorted out as well as any questions can be answered directly by professionals

rather than a computer which will give vendors a sense of security

Operational Strategy

• Oyo’s operational strategy will have the same framework as it did in India.

• The Franchisee model will be applied as it is and partners get a share in the profits,

which they can track on th Oyo Partner application, once a week to avoid confusion

• Recruit a mix of old and new employees; old employees will provide experience and

steady the ship, whereas new employees will give passion and enthusiasm to the

organisation

Phase-wise implementation strategy

1. PHASE 1: Set up (6 months)

a. Setting up of regional office and urging hotels to apply. Getting hotels to change from

independent sole proprietors to franchisees will be a difficult ask but there will be lots of

schemes and incentives for owners to apply

b. Within the first 6 months, plan to have 100 hotels set up under the Oyo name across

Colombo, Kandy and Dambulia

2. PHASE 2: Partner and expand (6 months)

a. Partnership with Contiki Holidays to become the official hotel brand of Contiki first in

India, Sri lanka and Malaysia

b. Simultaneously, expand to Sri Jayawardenepura Kotte, Batticoala and several other

cities and take hotel count up to 250 across the country

3. PHASE 3: Become the market leader (12 months)

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a. Get the official recommendation of Sri Lankan tourism department (was negotiated

based on targets achieved) and be recommended to travellers by the Department of Tourism,

Sri Lanka

b. Complete target cities and aim to have 500 stay venues across Sri Lanka for a variety

of purposes like vacations, business meetings, medical conferences, family vacations,

backpackers, couple friendly rooms, etc.

Marketing Strategies

1. Conventional Strategies

a. Social Media marketing- Having a strong social media presence with regular offers on

Facebook and Twitter pages as well as updates about fascinating travel experiences where Oyo

is based (Malaysia, Nepal, India, China, Indonesia and now Sri Lanka)

b. Responsiveness on social media- Handling criticism and negative reviews and handling

the company profile on social media platforms, including Linkedin.

c. Advertising Free WiFi and Breakfast as a USP- Not many hotels provide facilities such

as these included in the stay fees, and we must market our USP as our main selling point in

print media campiagns

2. Unconventional Strategies

a. #ObataDeKumakda?- This is the main social media campaign for the Sri Lankan

segment, with the text translates to “What More Do You Need?” in Sinhalese, the main

language of Sri Lanka. Users will be encouraged to share their experiences in hotels with this

hashtag. Will create positive buzz, encourage ambassador marketing and increase goodwill

b. Lungi Dance Dubsmash contest- After Sinhalese, the second most spoken language is

Tamil in the country. And the one thing that is common about all Tamil speakers is their love

for Rajinikanth. A Dubsmash contest will be held where users will upload it with the hashtag

#ObataDeKumakda to get featured and win a free trip to Malaysia.

c. Community nights at Oyo- Just what you needed to make your dull, boring, sad,

stressful work trip so much better. At Oyo, we believe we are a community and there will be

partnerships with nearby bars where you can go and using the coupon given to you at the

reception have a fun night and get 2 drinks absolutely free.

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d. Releasing our AI- Oyo has been accredited by THSC under the aegis of National Skill

and Development Council, Govt. of India, as an official training partner in hospitality. Our next

venture in training is our fictional host Archer. Archer is an experienced hotelier with all the

knowledge to make your stay memorable. Further, Archer also provides tips to hotel owners

about how they can improve customer stay experiences and a whole bunch of FAQs

e. CulturalSoulSearch with Contiki Holidays- Pre-set tours planned for people in the age

groups 18-35. We will have an India-Sri Lanka-Nepal tour sponsored exclusively by Oyo

where we are the official room partner

HR Requirements and Working policy

• The working policy of Oyo for partners is a binding contract between the

customer and Oyo rooms as well as between the partner and Oyo rooms.

• The Terms of Conditions must be agreed upon before signing.

• Oyo Rooms has a no liability clause in the Terms, because we are an

independent third party facilitating the transaction

• Given below is the working policy-

1. TERMS OF SERVICE

These Terms of Service ("Terms") constitute a legally binding agreement ("Agreement") between

Channel Partner and OYO governing access to and use of the OYO website, including any

subdomains thereof, and any other websites through which OYO makes the OYO Services

available (collectively, "Site"), our mobile, tablet and other smart device applications, and

application program interfaces (collectively, "Application") and all associated services

(collectively, "OYO Services"). The Site, Application and OYO Services together are

hereinafter collectively referred to as the “OYO Platform”. Your use of the Website,

Application and/or agreement signed (either electronically or otherwise) is an acknowledgment

that you have reviewed the Terms and Conditions listed at

https://www.oyorooms.com/terms?oyocorporate page and agree to comply with these

Terms.

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OYO reserves the right to modify these Terms at any time in accordance with this provision. If we

make changes to these Terms, we will post the revised Terms on the OYO Platform. We will

also provide you with notice of the modifications by email when they become effective. If you

disagree with the revised Terms, you may terminate this Agreement with immediate effect. If

you do not terminate your Agreement before the date the revised Terms become effective, your

continued access to or use of the OYO Platform will constitute acceptance of the revised Terms.

2. TERMS OF OPERATIONS

A. USE OF OYO PLATFORM & INTELLECTUAL PROPERTY

OYO grants to the Channel Partner during the period of this Agreement and subject to the terms and

conditions hereof the permission to (i) utilize the Know-How and (ii) be listed on OYO

Platform or any other online website, as may be expressly permitted by OYO in writing, to

market or promote bookings at the Channel Partner by associating with the Mark “OYO”.

The Channel Partner undertakes that it will list 100% of its total room inventory on OYO Platform.

OYO will provide the Channel Partner with digital tablet or any other device that may be necessary to

manage all check-in and check-out from the Channel Partner and record the payment receipt.

Such device is an integral part of OYO’s booking and reservation management system.

Channel Partner shall be solely responsible for safe and proper operation of such device. The

Channel Partner shall ensure that the device is not used to make any fraudulent booking or any

other illegal purpose that may compromise the records or the accounts of the Channel Partner

or OYO. The Channel Partner shall be liable to pay for the cost of replacement or repair of the

device in case any damage is caused to the device. The Channel Partner shall assign the use

and operation of the device to its authorized representatives and the Channel Partner shall

remain responsible as principle to the act of its agents.

B. BREAKFAST

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The Channel Partner agrees to abide with OYO’s Breakfast Standard; where the Channel Partner fails

to meet these requirements, such failure will be accounted for while scoring the hotel under

OYO’s IP protected Property Partner Scoring Policy.

The below requirement is applicable for both properties that have in-house kitchen as well as for those

that procure breakfast from outside.

C. SERVICE & PLATFORM FEES

OYO shall be entitled for a fees (hereinafter, “Service Fees”) for providing OYO services to the

Channel Partners. This Service fees shall be exclusive of all taxes applicable on such

transaction.

OYO is introducing a monthly “Platform Fee” effective from 1st December 2017, for all our Partners.

Platform fees shall be charged as below –

A) Base Rate for all Hotels: 2.5% fees on gross revenue earned on all bookings through OYO network

for below services -

1. Supply of Toiletries and other consumables

2. Tablet

3. Network and Sim/Data Card

B) Hotels where Hotel Manager services are additionally provided: Incremental 1% over and above

the base rate of 2.5%

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3. EXCLUSIVITY

The Channel Partner shall not during the period of its Agreement with OYO, enter into any agreement

directly or indirectly to engage with online aggregators in any manner for or in relation to

selling/ marketing / promoting rooms at the Premises. Provided , however that the Channel

Partner may continue to sell / promote rooms either directly or through any other business

partner, service provider (other than specifically named above) for marketing or booking

services through online or offline channel with prior written consent of OYO.

4. RIGHT TO INSPECT

OYO shall have a right to undertake periodic audits/ surprise checks to ensure that the Channel Partner

is adhering to the standards of OYO from time to time. OYO shall have a right to conduct such

audit without prior notice and through mystery customers. The Channel Partner shall not object

to such audits and challenge the findings based on the fact that no prior notice was given for

such audit.

OYO shall have a right to review the Guest records of the Channel Partner. The Channel Partner shall

co-operate during such audit and provide necessary and correct information

5. TERM AND TERMINATION

The term of this Agreement shall be valid and binding upon the Parties for a period of 12 months from

the date of acceptance of Agreement. The Agreement will be considered to be automatically

renewed for another 12 months unless terminated by either Party in accordance with the Terms

of this Agreement.

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HR Requirements

Job Number INR p.a. Total

Managers

Operations 5 7,00,000 35,00,000

HR 3 6,40,000 19,20,000

Marketing & Sales 4 5,50,000 22,00,000

Accounts 3 5,00,000 15,00,000

Project Manager 1 12,00,000 12,00,000

Hotel Managers* 25 3,25,000 81,25,000

TOTAL

1,84,45,000

*Hotel managers will be provided if requested by the hotel, at the condition we will charge a

higher fee, so essentially that will be outsourced to the hotel

Financials

1. Sources of Funds

• Recently, Oyo conducted its Series D funding in which they raised 250 million

USD

• SoftBank conducted the round with its SoftBank Vision Group with

participation from existing investors Sequoia India, Lightspeed Venture

Partners and Greenoaks Capital. Hero Enterprise has also joined the round as a

new investor

• These funds were primarily acquired for the purpose of expansion outside the

country to foreign markets

• This fund will be used as the primary source of funds for the whole project

2. Application of Funds

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INVESTMENT EXPENDITURE

Particulars Amount

Market Research 2,00,00,000

Office Development 1,10,00,000

Fixtures 10,00,000

Advertising & Promotional Expense 75,00,000

Public Relation 60,00,000

Employee Salaries 20,00,000

Recruitment & Selection 15,00,000

Training & Development 75,00,000

Insurance 30,00,000

Legal Expenses 1,20,00,000

Contingency Reserve 2,50,00,000

TOTAL 9,65,00,000

REVENUE MODEL

PARTICULARS YEAR 1 YEAR 2 YEAR 3

Oyo Rooms 12,00,00,000 24,00,00,000 47,00,00,000

Oyo Townhouse 6,00,00,000 13,50,00,000 30,00,00,000

Oyo Premium Rooms 7,50,00,000 15,00,00,000 24,00,00,000

TOTAL 25,50,00,000 52,50,00,000 101,00,00,000