"For a few months, we doubled as hotel staff in housekeeping or at the front desk to see what people expected from budget stays. We found that consumers were looking for predictable experiences at affordable prices. We are trying to provide that through technology" - Abhinav Sinha, chief operating officer of OYO Rooms
When travelling, the common man usually stays in a lodge or at a two- or three-star hotel, an underwhelming experience at best, as the quality of rooms, services, and amenities provided are mostly substandard. With little choice, however, one simply accepted it. Not any more. The Indian middle-class traveller has swiftly shifted from being uncomplaining and accepting to extremely discerning. Today, he or she will scarcely make a hotel booking without reading umpteen online reviews of various hotels on sites like tripadvisor or Booking.com. Only after getting an idea of the standard and condition of rooms, amenities and services provided, and shopping around for a good deal, will a booking be made.
Ritesh Agarwal, 21, who dropped out of college at 17 as he felt attending classes would slow him down from doing what he really wanted to do, is the founder and CEO of OYO Rooms. In 2013, he felt the time was ripe to cater to the demands of the ordinary Indian traveller who wanted a clean, safe and reasonable hotel room equipped with modern amenities and services. His aim was to build a successful business model that would connect everyone involved in the business of budget stays with those looking for one. He launched OYO Rooms with 13 hotels in Gurgaon and Delhi. In 15 months, it grew to 2,500 budget hotels across 51 cities.
Co-founder and chief operating officer Abhinav Sinha, a chemical engineer from IIT Kharagpur and an MBA from Harvard, who quit a cushy job with global management consulting firm Boston Consulting Group to join OYO Rooms, says: “Ritesh and I knew that for the business model to work seamlessly we had to understand the needs of the consumer as well as the hotel operators.” So, apart from staying in budget hotels across India, the duo did the next best thing. “For a few months, we doubled as hotel staff in housekeeping or at the front desk to see what people expected from budget stays,” he says. “We found that consumers were looking for predictable experiences at affordable prices. We are trying to provide that through technology.”
Gaining first-hand experience helped shape the duo's business model, which, they say, has been copied by others. The model involves drawing up partner contracts with hotel owners across the country—the owners are expected to pay for prescribed refurbishments and meet 51 criteria that make them eligible to partner OYO Rooms. “We have made arrangements with various vendors and advise our partners to get all refurbishments done through them at very competitive costs,” says Abhinav. Some of the criteria are: clean, white bed linen; clearly marked fire exits and safety instructions; tea and coffee makers in rooms; OYO Rooms branded toiletries; western-style toilets with clear plastic buckets and mugs; covered, steel trash cans in rooms and bathrooms; piped music in the lobby; trained, round-the-clock receptionists; and a travel desk.
“The use of technology in the hospitality industry has always been minimal,” says Abhinav. “We wanted to transform that and took time to ponder how best to bring in technology.” A booking can be made instantly, after downloading the OYO Rooms app on a mobile phone or another electronic device. The average price of a room is $999. The fact that it offers affordable rooms at various locations within a city makes OYO Rooms a great option if one is travelling on work, has missed a flight, or has an electrical or water problem at home and needs a place to stay the night. The app provides a detailed map with directions from one's current location to the closest rooms available. The hotel receptionist is alerted when a new guest is on the way, enabling a swift check-in on arrival. Room service or a cab can also be ordered through the app.
Hotel owners keep only 40 per cent of the revenue while 60 per cent goes to OYO Rooms. Despite this, the company has grown from strength to strength, with more than 30,000 hotels looking to partner it. “After partnering with OYO Rooms, occupancy rates increased from 20 per cent to 90 per cent in a month,” says Jasjit Singh, owner of a hotel in Greater Kailash, Delhi. “At first, we had three rooms that met the criteria. Now, all 21 rooms at the hotel are OYO Rooms.” The Maharashtra State Tourism Development Corporation, too, is keen on partnering the company.
OYO Rooms has an army of on-ground auditors keeping track of the quality of services provided by its partner hotels. In the past year, the number of employees at its snazzy, 10,000-square-foot headquarters in Gurgaon, has grown from 300 to 1,500.
OYO Rooms has secured millions of dollars in funding from venture capital firms like Light Speed Venture Partners, Sequoia Capital, GreenOaks Capital and SoftBank. “India has vast opportunity and this gap has been there a long time,” says Abhinav. “When new users join us, we feel very motivated.” So far, more than 20,000 people have booked a stay through its app. The vacuum is indeed being filled.