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Consolidation coming, room for only a couple of competitors: OYO’s Agarwal

Ritesh Agarwal

Ritesh Agarwal

Being predictable isn’t necessarily boring, says Ritesh Agarwal, founder and CEO of OYO Rooms which has made ‘predictability’ the mainstay of its budget hotel aggregation business. As he puts it, predictability is about trust, and that’s what keeps OYO’s customers coming back.

OYO today has a network of 1500-plus hotels in more than 100 cities of the country including Delhi, Gurgaon, Jaipur, Mumbai, Bangalore, Hyderabad and Goa. Founded in 2013, Oravel Stays Pvt Ltd which runs OYO Rooms, is the most funded venture in this crowded space counting Softbank Group, Greenoaks Capital, Sequoia Capital and Lightspeed India as its investors. It raised Rs 630 crore in August in a fresh round of funding led by SoftBank. OYO has recently started piloting food aggregation and housekeeping services.

In this interview with Techcircle.in, Agarwal talks about solving customer pain points and how having “30 copycats” at his back only makes the journey more exciting.

What was the idea behind starting OYO Rooms?

I actually stumbled into the hotels aggregation space. A few years back, when I was running Oravel (an Indian version of the global online rental site Airbnb), I would stay in a new property every day. In the process, I lived in over 100 properties and hosted guests staying with us. We realised that the problem in the hospitality space was not of discoverability but that of predictability. When somebody lands in a new city and calls the hotel, nobody picks up the phone. You are somewhere near the hotel and there are no signboards. You go inside the hotel to see a sleeping receptionist who is under-dressed. Inside the room, the mattresses are torn. These are big turn-offs for the traveller. Our belief is that Indians will travel more and stay in hotels only if you build predictability and trust in the hotel experience.

Don’t you think standardisation may make it monotonous?

Standardisation can make it monotonous but predictability makes it easier. Across the country, OYO rooms in every form and context would have probably 100 sq ft (a little higher or lower) room sizes; they might have different wall colours but you will also have 350 threadcount single stripped satin bed linen. You will always have 32-inch LCD screens, you will always have warm white light. So, predictability is nothing but trust, but there is also diversity in the kind of hotels. So we have a significant amount of diversity but all of this diversity is bound by single standardisation and predictability of quality assuarance that OYO brings with it.

How do you ensure the overall guest experience is good?

In our model the failure points are many. The hotel doesn’t come to your home, so if you don’t reach the hotel that’s a point of failure. You go inside, the receptionist doesn’t look good, then that’s the point of failure. You go into the room, if the water is not coming, that’s a point of failure. If electricity is not in your room, that’s a point of failure.So we have built more than 15 apps and products in the background and a quality team auditing each and every thing and constantly improving customer experiences. This has enabled us to be the leader in terms of supply and demand because anyone who has imitated us has not been able to innovate. They can only play catchup.

How do you plan to stay ahead in the budget hotel aggregation space with so many competitors coming in?

Our imitators started coming up only two months back. I’m glad that today we have 30 copycats. So it is a strong validation for a problem we are trying to solve that there are so many other entrepreneurs who are trying to solve the same things as us. It is not a reason for concern because we have close to 90 per cent market share. In the long term there is going to be space for only a couple of them, albeit at a very small size. But I think there will be space for others (who look at other problems) as well.

Do you see any consolidation happening in this space?

The only way consolidation might happen is with a few smaller players. Given the quality of experience OYO is able to deliver, the only way to compete with us is to keep joining hands. But that won’t solve the problem. The only way to solve problems is to innovate so as to deliver great experiences. If anyone innovates and creates a better way of solving guest experiences, we will be interested.

How will the de-listing of OYO Rooms by online travel agencies (OTAs) impact your business?

OYO has seen strong growth in customers booking via its own channels such as the mobile app, website and reservations helpline. The experience on these mediums is faster, direct and more convenient. Less than 15% of our customers choose to book OYO from OTAs, which include both domestic and international. Hence our dependency on a few domestic OTAs is very limited.

You launched the mobile app about two months back. What has been the feedback?

More than half of the overall business comes from the mobile app today, which is sizeable. Out of the 4 lakh room nights booking, we are getting more than 2 lakh room nights from the app. Almost 30- 35 per cent is driven via the web and the call centre and close to 15 per cent comes from travel agencies and within web and call centre, there is also the share of our offline travel agents.

Do you plan to venture into the overseas market?

India is a huge market and we would like to become clear leaders by solving huge problems here.And hence we are focused at this market at this point of time.

OYO has been offering discounts and deals. Can you have a sustainable business with so much cash burn?

We believe in acquiring users through various channels and then ensuring they repeat with us because of the customer experience we provide. This way, the life time value of our users is way higher than the amount we spend on acquiring each user through deals, discounts or any other form of marketing efforts.

To what extent is SoftBank involved in the operations of OYO?

It is not just SoftBank but almost every firm that’s involved in OYO. They are open to supporting us at any point of time. They help us with the insights and guidelines. What Nikesh (SoftBank’s president Nikesh Arora) says is: ‘Ritesh, it’s your company, we believed in your vision of building this brand and solving the larger problem. We can help give you feedback and make connects and support systems, but we expect you to be the person driving the company.’ I think that it’s a very interesting balance between ensuring that you support the entrepreneur and also pushing the entrepreneur to build and lead the company.

 

2 Comments

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Dr. Kavita Bhargava November 18, 2015 19:37

Hey, Happy to read the article… Thanks for making me understand that the copy cats are a measure of our success… 🙂

pradeep November 21, 2015 16:56

Its easy to burn investors money in name of customer acquisition. Real figure and profit will come to picture when you will sell to survive. Indian customers are smart, they are loyal until you are cheap and you are cheap not because you are competent, only you have investors money to burn at present.

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