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OYO Business Model | How Does OYO Profit?

January 18, 2023 in Advertising

OYO is a hotel aggregator, but not just any kind. It focuses highly on developing an effective Oyo business model.  They try to provide a standardized hospitality service with the best possible price through an innovative and efficient business model. To achieve this, they have more than one way to generate revenue for their enterprise. They collect hotel commissions and work closely with franchise systems and their brands.

It’s still pretty challenging to stay in budget-friendly hotels in the most popular holiday destinations. This makes sense, especially considering Oyo is aimed at the masses, not elite travelers. During their stay, guests may be eligible to redeem reductions with local tourism providers and wellness offers. OYO has over 6,000 hotels in about 90 countries worldwide, so it is the largest hotel network brand in the world, headquartered in Gurgaon, India.

Aim of establishment

OYO’s business model is to provide standardized and personalized hospitality services. By aggregating hotel standards and different experiences, they can offer an array of options. This includes highly competitive prices and an enhanced brand experience.

Each OYO property has a page on the company’s website. This showcases images and reviews from previous guests. Oyo sets high standards for its properties. As it lists the basic minimum amenities that each boutique should have and guarantees specific essentials each will meet. Customers can choose which location will work best for them. This gives the budget considerable flexibility. Oyo gives renovations by turning older buildings into modern designs inexpensively. This helps Oyo owners give their businesses an update without making a huge upfront investment.

Classification of Consumers in Oyo (essential for Oyo business model)

Ritesh Agarwal , Founder of Oyo rooms

Ritesh Agarwal launched Oyo with an initial investment of 25 lacs and a rented apartment. OYO is working to offer travelers who are younger and value experiencing the country a hospitality experience. It reflects what’s happening in the country. Oyo is an Indian hospitality group that currently owns 36 hotels. They primarily cater to the needs of first-time Indian travelers. Those who are looking to explore their own country; explore different topics to provide an authentic and immersive experience.

How it started

Oyo started as a hotel operator in 2012 as a primary Oyo business model.  In just four years, it has grown to become the largest hospitality firm in India. It currently has 250,000 hotel rooms and is backed by SoftBank and Tencent.

Throughout its history, Oyo has attracted different customers with different traveling patterns. Some are after an adventure in exotic places. While on the other hand, some seek leisure and a comfortable experience when they want to travel.

Oyo Rooms is one of India’s most rapidly expanding hotel chains. “This monolithic hospitality brand aims to offer travelers stylish yet affordable accommodation. They try to suit their budget, style, and travel preferences.” Oyo Rooms has launched its vacation hub page on its website. Users can preview every amenity with step-by-step pictures on how to book rooms.

Rapid expansion through new business models

The number of people looking for family-friendly vacations has been increasing globally in recent years. All thanks to the increase in two-income households. Since overnight business accommodations are no longer necessary, some side trips turn into multi-national vacations. Business travelers today aim for happy hours; half the time. They stay away from what they would like to call “remote locations,” meaning they prefer cities.

Oyo Hotels is moving towards a new customer segment.  That includes more high-end hotels by investing $1bn in the next three years.

Apart from that, chances of partnerships with major Airlines and Travels like Qantas may happen. Regional and international expansion of the group is another factor.

This will allow Oyo hotels to penetrate these different segments of niche or business travelers.  Such as those who prefer to stay at 4 and 5-star premises rather than at an affordable hotel. These are a few factors that have helped this hotel chain expand its customer segment successfully.  Thus, helping the Oyo business model on course for earnings growth for 2017-2018.

Value Proposition in Oyo 

Oyo offers

Every Oyo staffer is trained at least once to ensure that guests enjoy the highest level of service and are instructed on what and what not to do. Each guest room contains a clothes dryer and a separate workspace, and their rooms and suites have complimentary toiletries, hair dryers, and ironing boards.

Offers discount partnerships with restaurant chains, spa treatments, and movie tickets. Their membership program offers up to 56% discounts on monthly bookings. They offer nightclub passes and complimentary admission by presenting their card or looking for their logo in the venue’s VIP section.

Community involvement

The best part of the Oyo business model is its heavy focus on community involvement, which enables consistent contribution towards the community welfare of many people!

With highly personalized product offerings, gaming, entertainment experiences, holistic service offers, and customer service tools at their disposal, this has helped put Oyo above the competition. They are now the number one hotel chain because of these value propositions, but they also have plans to dominate the home market soon enough.

The significance of their investments in customer-centric technology deals with their people-driven philosophy of continuous improvements frequently unnoticed by our competitors, who tend to reduce CEOs’ statements as branding or marketing statements instead of well-thought-out strategies.

Oyo is located in India, and the founders faced many obstacles before they bought their first hotel. However, as a new and improved living-life brand, Oyo has proved its goodwill by providing more features for its customers for a better travel experience than before. Therefore,  in 2019, Oyo made an incredibly revolutionary change from a run-of-the-mill hotel chain to an “experiential” megahotel-type experience. That means they have invested heavily in renovating their hotels in order to provide the best experience when customers stay there.

The company says it is “just” making a profit, so they continue offering cheaper services to guests like transfers.

Relationships at Oyo 

Costumer services at oyo.

Using an online self-serve platform, the company made customer engagement seamless. The company wants to make every customer its priority and sufficiently fulfill their expectations.

To do this, the company recently launched its Customer Service Support portal, where customers can interact with staff and ask for a phone, SMS, chat, and social media queries. Furthermore, There are always customer service agents available 24/7 on live chat who will try to resolve queries as soon as they type them in the dialogue box on social media platforms.

Furthermore, Oyo ensured that the Net Promoter Score remained high by monitoring guests’ feedback through surveys and employing closed-loop methodologies.  Also, potential negatives are quickly addressed before they grow into any significant issues with heightened accountability for team members across all levels of the hotel hierarchy.

A self-serve platform, Oyo has creatively used different platforms to support customer relationships, thus, providing its customers with three touch points. It starts with the properties of self-serve learning. (An interactive section on the company website), which also offers details on the organization and its values.

The second is the Customer Service Support Team (a natural person answering calls or chats in their house), who then fulfills any requests or queries – whether about the location of car parking charges or booking a specific room.

And third is the Net Promoter Score, which calculates how likely a customer will recommend hotel accommodation to friends.

Customer service is crucial for a hospitality business. Oyo was looking for ways to maintain a strong relationship with its customers even as its needs grew – from 40 to 40,000 properties around the globe.

Important Oyo Resources

Oyo’s primary resources include the followings:

Technology-Based App Architecture 

Two new features were added to the OYO app in 2020. The OYO OS owner app’s Smart Pricing Manager was included to enable its partners to modify their room costs. Lowering the price function enables hotel owners to profit from the unexpected increase in demand and boost occupancy. To increase efficiency, it makes use of local expertise. 

 Additionally, OYO unveiled the Cancellation Prediction Engine function, which forecasts whether each customer who has reserved a room will arrive. It aids hoteliers in maximizing occupancy and preventing overbooking. 

Properties

Over 1.2 million rooms and 44,000+ hotel properties of the OYO enterprise are fully leased and franchised. In 2020, the company purchased 17,000 properties under TUI Holiday Residences, bringing its total inventory of homes to 145,000+ scattered over 70 nations. OYO’s market share in Europe has increased for the acquisition, and it is now among the top 3 players in four important holiday markets. 

Consumers

Oyo has a significant database of loyal, repeat clients. Adventure Travelers, or all those tourists who desire to travel solo (on a tight budget) or in a small group, are one of Oyo’s consumer segments. Backpackers are another term for them. Leisure travelers are on holiday from their regular busy lives and are traveling.

 Employees

Oyo employs programming, development, and maintenance professionals. OYO is a global platform that equips small businesses and entrepreneurs with hotels and houses by offering full-stack technology that boosts revenue and streamlines operations.

Venture Finance

Several venture capital firms, including Sequoia Capital and SoftBank’s Vision Fund, have provided money to Oyo. By the end of 2022, OYO had raised $3.1 billion across 22 fundraising rounds. OYO has a 45% interest owned by SoftBank, a significant investor in the business. Sequoia Capital, Lightspeed Venture Partners, and Microsoft are some additional investors.

Oyo’s Principal Activities

Oyo’s primary operations include these:

  • Create and maintain Oyo’s website and app using the platform.
  • Partnering with hotels, companies, event planners, etc.
  • Providing quality services and ensuring the customer experience at the hotel
  • Advertising and marketing tasks are performed in sales and marketing. Maintaining Facebook and Instagram sites are examples of active social media usage.
  • Hiring and retaining excellent people is part of recruitment.

Reasons For Oyo’s Business Growth: 

Oyo group has created a welcoming and promising environment for family and friends.

It has successfully Maintained good communication with all clients, customers, vendors, and partners of the hotel. In 2020, Oyo introduced the “Scrubbed Clean” program to guarantee that all of its hotels in the US adhere to the CDC health and safety standards. 

Oyo’s Principal Partners

  • Hotels, clubs, businesses, banquet facilities, and others are among Oyo’s principal partners.
  • Organization of any critical event.
  • Platforms for communication like WhatsApp are operated to manage booking confirmation, location, navigational information, and cancellation.
  • Taxi service providers like OLA accept payments online using the Paytm app.
  • Services for making reservations for dinner, such as GPS for restaurants using Google Maps
  • Services for Netflix in-room entertainment

Business Tactics Of Oyo Rooms

The business concept for Oyo Rooms has aspects in common with the standard aggregator business model (Uber for x). Still, it also had parts in common with the franchising business model. These are some of the elements in its sample business strategy:

  • A portion of the hotel’s inventory is leased in advance, and the rooms are set up under the Oyo Rooms name.
  • The Oyo Rooms website and smartphone application are used to make reservations.
  •  These partner hotels offered standardized service to consumers of those rooms as stipulated in a deal with Oyo.
  • Oyo Rooms’ present operational structure resembles that of the past. The corporation merely asks the hotel partners to run them as franchises rather than leasing the hotel rooms anymore. Oyo partner hotels reported a 100% increase in revenue. They also have substantial brand equity.

Conclusion.

Through a unique and effective business strategy, Oyo offers a uniform hospitality service at the lowest cost. Oyo caters to commoners rather than affluent tourists. It has expanded to become India’s biggest hospitality company. The corporation places a high priority on community participation, which permits ongoing contributions to social welfare. Over time, Oyo has grown from being a local hospitality business to the biggest hotel network brand in the world.

FAQs

Is OYO reliable for unmarried couples?

Yes, primarily, the Oyo customer base revolves around people youngsters. Couples can have quality time in peace with a good ambience and safety. But be sure you are above 18 years of age since OYO won't allow any stay for minors.

Is OYO going to replace Airbnb?

OYO is undoubtedly a great startup that transformed into a massive business idea. Still, OYO is undoubtedly a great startup that transformed into a massive business idea. Still, Airbnb is a tough competitor that provides services like OYO and has a more significant customer base than OYO. So, it's too early to predict such a decision.

How to get discounts on OYO bookings?

Look for coupons in the app. You will see discounts when you apply the coupons so that you can avail of rooms at a cheaper rate.

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Rahul Gupta More posts by Rahul Gupta