OYO might drive out smaller rivals with the success of its budget hospitality business

OYO's CEO Ritesh Agarwal has stated that his company remains the average traveler's "first choice" even with the growing rivalries of smaller businesses like Treebo and FabHotels.

The online hotel booking has a decent share of the online travel market that has revenues worth $8 billion in 2019. In terms of the value of online hotel bookings, the market will grow to a size of $4 billion in 2020, up from $1.2 billion in 2015, as per statistics portal Statista. And OYO as India’s largest hospitality player contributes significantly here.

Numbers Game

For FY18, OYO India registered a revenue of Rs 416 crore (approximately $59 million) – 3.5 times up from Rs 120 crore (approximately $17 million) in FY17 against losses of Rs 360 (approximately $51 million) in FY18 — a marginal increase from Rs 355 crore (approximately $50 million) in the preceding fiscal year. For FY19, OYO expects to grow revenue to Rs 1,500 crore (approximately $214 million). It is currently the sixth largest hotel chain in the world managing over 20,000 hotels across 24 countries. In fact, it recently became China’s second largest hotel having close to 10,000 hotels on its platform and 450,000 rooms.

This gives a perspective of how OYO has become one of the few global success stories coming out of India in this decade where the business model isn’t ‘inspired’ by any Silicon Valley startups.

OYO has been able to scale at a rapid pace, with no formidable competition in sight. While competition is always healthy for the market and for customers with respect to making choices but with the first mover advantage in the space and the backing from SoftBank, Ritesh Agarwal (OYO Founder and CEO) has ensured that OYO remains the go-to option for budget and mid-premium category travelers.

This has also meant a tough battle for incumbent smaller rivals such as Treebo that is vying for a share in this market. Compared to OYO, Treebo — launched in early 2015 in Bengaluru — has over 400 hotels on its platform across more than 75 cities whereas FabHotels, founded in mid-2014, has over 500 hotels in more than 40 cities in India (as mentioned on respective websites).

Moreover, total funding raised by Treebo and FabHotels combined is $92.3 vis-a-vis OYO’s mammoth $1.7 billion funding so far, as per deals tracker Crunchbase. Also, OYO currently has over 176,000 rooms in India while Treebo and FabHotels say to have over 10,000 rooms, as per their websites.

“It is going to be extremely difficult for Treebo or FabHotels to compete with OYO and build a brand against them with the money and aggression they have in the market,” Navneet Nagpal, Principal Consultant and Founder at hospitality consulting firm Spectra Hospitality told Financial Express Online.

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