To justify its value, OYO needs to find success in Chinese market

May 22, 2019

OYO's success depends on how well the hotel operating giant does in the Chinese market. Analysts claim its still uncertain

On Your Own (OYO) is one of India's most promising unicorns that you may have never heard of. Yet its deal-making in April alone has made OYO hard to ignore, with the hotel-aggregator startup garnering widespread attention when it received around $200 million from Airbnb.

As a standalone investment, this is a certainly a coup; if you're in the home rental or hotel business, there's obviously nothing like having Airbnb in your camp. Even without Airbnb, OYO had previously already ingested a mammoth-load of funding and linked up with many storied names. It attracted $1 billion from existing investors and an investor group headed by Softbank's Vision Fund in September last year, putting the company's valuation at around $5 billion which is a little crazy considering it was started in 2013 by a teenager.

A big reason for OYO's fast-growing fan base has been due to the large strides it's made in Asia. In April, around the time of the Airbnb announcement, it forged an unusual joint venture with its investor Softbank to expand its collection of budget hotels in Japan. 

But it is China that has added real luster to its global campaign. OYO has plans to deploy $600 million in China to become a dominant presence there -- a country that Google and Amazon has failed to crack. 

"India has 4.3 million unbranded rooms and China has 35 million, but there is only a 25% occupancy rate. We want to change that," OYO Founder Ritesh Agarwal said. "We are currently focused on Tier-2 and 3 cities in China, however we plan to expand this to Tier-4 and 5 too."

These ambitions may seem too grandiose for an upstart Indian company, but what makes it ostensibly possible is that OYO has a godfather in Huazhu Group, a multi-billion-dollar hotel management firm that is an early investor in OYO. Huazhu Group injected $10 million into the company back in 2017.

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May 22, 2019

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