Room with a view

Attention to details lets OYO Rooms founder Ritesh Agarwal see the bigger picture


Ritesh Agarwal has long been persuading his team at OYO Rooms to start a hotel in his hometown, Rayagada in Odisha, but he has not been able to convince them yet. This, to a certain extent, explains how things work at OYO, India’s most successful startup after Flipkart, and for Agarwal, its 25-year-old founder and the brightest star among India’s new-generation entrepreneurs.

Though not in Rayagada, OYO-branded hotels are present in 800 cities all over the world. The company Agarwal started in a single-room office in Gurugram in 2013 is now valued around $10 billion. “More than five lakh heads rest on OYO pillows every night globally,” says Agarwal. “We are currently south Asia’s largest, China’s second largest, the world’s third largest and one of the fastest growing chain of hotels, homes and living spaces. We have a 100 per cent made-in-India business model.”

He recently signed a deal to buy back shares of OYO worth $2 billion from early investors Lightspeed Venture Partners and Sequoia India. It will increase his stake in the company to about 30 per cent from the current 10 per cent.

Agarwal eats, breathes and sleeps OYO. “He has a deep understanding of all aspects of the business and despite being the founder and having a fairly large team of CXOs, he continues to be quite hands-on,” said Aditya Ghosh, CEO (India and south Asia), OYO Hotels.

OYO is not a hotel booking portal or a room aggregator or an online travel aggregator; it is a chain of leased and franchised hotels. The company has been investing heavily in strengthening its capabilities in technology, talent and network. “Our pricing, inventory allocation and revenue management is driven by data science algorithms and allows each hotel to drive max RevPAR (revenue per available room) based on its location,” says Agarwal. “It allows pricing to adjust dynamically to supply and demand.”

OYO manages two-star and three-star hotels that usually run on market-led RevPARs like other hotel chains, while maintaining a price point that is ideal for customers and one that helps generate fair yields for hotels. “Unlike others hoteliers, we are able to deliver predictable and affordable tariffs to our customers because we can reduce the cost of operations significantly through the use of technology,” says Agarwal.

Many of his investors were convinced that his business model would be disruptive. “Today, OYO’s footprint stands at one million rooms across India, China, southeast Asia, Europe and now the US. This is the kind of stuff startups and venture-investing dreams are made of,” said Mohit Bhatnagar, managing director, Sequoia Capital India.

Agarwal ventured into China in November 2017 with a franchised hotel in Shenzhen. In less than two years OYO Jiudian has expanded its presence to 320 cities with around 10,000 hotels and 4.5 lakh rooms. “In May this year we became the second largest hotel group in China,” says Agarwal. OYO has been following a multifold strategy in China with strong emphasis on localisation and customising offerings as per the requirements of the guests.

Munish Varma, managing partner of SoftBank Vision Fund, which is an investor in the company, said that Agarwal’s vision had built a global brand from India. “It has been an exciting journey so far and we hope to achieve many more milestones together in the time to come,” he said.

OYO has a strong presence in Malaysia, Nepal, the UK, the US, the UAE, Saudi Arabia, Indonesia, the Philippines and Japan. Agarwal makes it a point to ensure that the company’s entry into any international market is backed by sound research and localisation of its model. OYO has teams that observe local nuances in each of the countries it is present in. For instance, in the Philippines, as the country has a lot of devout Christians, most hotels keep a copy of the Bible in the nightstand. In Indonesia, most hotel rooms have the qiblah sign. The arrow points towards Mecca, the direction to which Muslims turn at prayer. As Malaysia hosts many Indian tourists, the hotels provide information on the nearest Indian restaurants.

Recently OYO entered the workspaces segment with the acquisition and integration of Innov8. OYO Workspaces has a multi-brand approach with two other co-working brands—Powerstation and Workflo. It is all set to open in 21 locations in 10 cities with 15,000 seats.

Agarwal is probably the biggest patron of his company as he spends most of his time on business trips. When at home he loves playing with his dog, Lisa. “It helps me de-stress,” he says. “Whenever we have an off day, the entire team comes along to play volleyball or cricket.” Though he was brought up in Rayagada on the Odisha-Andhra border, Agarwal’s father is from Haryana and mother is from Rajasthan. “Very few people know that I can speak Odia and Telugu, and a little bit of Haryanvi and Rajasthani,” he says. And he is proud of his small-town roots. “Those are the places where values are instilled in you,” he says.