How OYO Rooms Works: Business Model of India’s Largest & Smartest Hospitality Company

Published In : Brand Stories June 14, 2019

OYO, we all know this name when planning for a vacation or a business trip comes to our mind. But some of you must not be knowing the story behind the voyage of OYO Rooms, India’s largest and smartest hospitality company.

The company was founded by Ritesh Agarwal in the year 2011 with the name Oravel Stays. It was made to do the listing and booking of short stay budget accommodations and was built on the lines of US-based service AirBnB – an on-demand vacation rental app.

The company’s turning point came when it received an amount of $100,000 from Thiel Fellowship in 2012. Just after a year, Oravel stays pivoted into OYO Rooms and was launched in Gurgaon which is now a marketplace of budgeted hotels with standardized experience.

You must be still curious about its business model, its major milestones, its working style, and revenue generating process. Well, let’s dive further into detail. In the end, we would like to share some key takeaways for your business as well, so Stay Frosty!

OYO Stats and Facts: Funding and Major Milestones

  • Launch Date: 21st May, 2013
  • Legal Name- Oravel Stays Private Limited
  • Founders: Ritesh Agarwal
  • Company CEO: Aditya Ghosh
  • Funding Received: $1.7 Billion (latest funding raised on April 1st,2019)
  • Company Valuation: $5.7 Billion
  • Headquarters: Gurgaon, Haryana – India
  • Total Employees: 10,001 + Employees
  • Areas Served: Asia & Europe
  • Countries Served: 10 Countries (India, China, Malaysia, Nepal, the United Kingdom, the United Arab Emirates, Saudi Arabia, the Philippines, Indonesia and Japan)
  • Cities Served: More than 500 cities in India and operates more than 4, 50000 rooms globally as of January 2019.

How OYO Works?

OYO Rooms is an app for searching and booking accommodations. Using the app, users can book the hotels ahead of the time in any of the 128 cities across India. Because of offering impeccable services to the visitors in the city, an OYO room is recognized as one of the best mobility software solutions. If you are having this sort of extraordinary business idea for a hospitality management application, you must see how this excellent solution works and brings money to the table.

Here is the working of OYO Rooms app in eight simple steps:

  • After doing quick signup in OYO mobile app, users can book accommodation in just three simple steps. Just select the location, the number of guests likely to stay, budget, the number of rooms required and you are all set to enjoy.

  • The app will then list all the hotels of the desired location under the customer’s budget. Users can use the filters of cost & desired utilities

  • The payment for the room is done after booking.

  • For business trips or special events, OYO also provides options for OYO townhouses, OYO Homes, Silverkeys, OYO Palette, and OYO Living, Studio Stays.

  • OYO mobile app has a dynamic home screen which not just shows the list of hotels but also the options of nearby restaurants and adventure spots, even the option to book for it while booking your OYO room.

  • Some hotels listed under OYO offer free cancellation as well under some specific regulations.

  • OYO Wizard which is a subscription model is also available which offers exclusive discounts, deals & cashbook offers.

  • After the stay, the users can provide ratings and reviews within the app.

How OYO Makes Money – Revenue Generation Model

Just like the world’s best taxi-hailing app Uber owns no taxi – Oyo rooms have no rooms of its own. This implies that it doesn’t claim any of the lodgings that users book through its app. It is basically an interface for users to look for and book hotels which are a part of its Network.

Established by Ritesh Agarwal, Oyo began its voyage with only one network property in 2013 and now claims to have a presence in more than 230 urban communities across India. Recently, it has tapped in the International Markets as well.

The app evolved its business model from aggregator to franchise and has got amazing traction after that. They keep on holding no stock of their own, but their business model has developed into managing the whole lodging property for hotel proprietors. Let’s look at this more closely.

Initial Business Model of OYO Rooms

Initially, Oyo Rooms joined hands with property owners to advertise a part of their inventory of lodgings under the OYO branding. However, to be accepted into the OYO network, the owners needed to guarantee that their rooms affirmed to certain defined benchmarks of quality.

OYO used to pre-book a part of the hotels at a negotiated price. They would then rundown these inventories on the Oyo platform under their very own branding (usually under an expensive rate). The distinction between the price negotiated with the hotel owners and the price, at which the rooms were sold to the end customer, represented their revenue.

Current Business Model of OYO Rooms

Oyo Rooms has step by step moved its focus from being an aggregator to managing the complete hotel property on the behalf of hotel owners. With these exclusive tie-ups, Oyo presently sells the whole inventory of hotels under its very own branding.

Hotels benefit by this tie-up because being listed on the OYO platform gives them more traction (as Oyo is an established brand) and helps them acquire more business.

Other Revenue Sources

Alongside the one mentioned above, OYO also has some other sources of revenue that are described as follow:

  • OYO Wizard is an exceptional membership program that was created by OYO to strengthen and deepen customer relationships by providing profoundly appraised and curated lodgings to its loyal customers at the best prices.

  • With the acquisition of Roads Less Travels, OYO began marketing Holiday Packages through its app.

  • It has also extended its product offerings to the booking of Wedding palaces and Banquet halls under its platform.

  • It has also tapped into the business of “homestays” like Airbnb on behalf of the property owners.

So, that was all about OYO business model. Now, because you know how the company operates and brings money to the table, let’s look into what you can learn from this amazing hotel booking app.

Key Takeaways from the Largest Brand of Hotel Networks – OYO

Based on the requisites of its customers during their holiday vacations, business visits or educational trips, OYO facilitates hotel rooms with some standard of services. In order to grow your hospitality brand like OYO, these simple but vital points should be kept in mind to allure your customer’s attention:

1. Standardized Services– The hotels listed under OYO are maintained with some standard of services that increase the rate of their repeat customers.

What you can pick from this? Whether you are working on aggregator model or franchise model or any other business model, make sure the services provided to the customers should not be sub-standardized as this not only decrease your traffic but also badly impacts your brand value.

2. Budgeted Accommodation – The rooms are available for the customers which are affordable and fall under their budgets which make OYO customers more satisfied while their hotel stay.

What you can pick from this? The comfort of a customer starts firstly from their pocket. If you are able to provide them some affordable & discounted options, then the customers are surely going to visit again.

3. Skilled & compassionate team of employees- From the time of post-booking till check-out time, utmost care is taken for the comfort of customers. Be it locating the destination, check-in/ check-out formalities or room-services, a team of compassionate employees is available. Valuable feedback is also taken so that they are able to improve their services and staff behavior for future customers.

What you can pick from this? Your employees have a great impact on the customers to increase their trust in the brand. Controlled monitoring and training should be given to achieve not only customer satisfaction but also the customer’s delight.

How Much Will it Cost to Make an App Like OYO Rooms?

Now that you know how OYO works and what business model it follows, its time to know how much will it cost you if you plan to start a business like OYO and want to develop a hotel booking app like OYO Rooms.

While you would be looking for an exact price quote in this section, but let me tell you that the answer to how much does it cost to make an app like OYO isn’t an exact value.

The expense to make an application changes dependent on various variables, including the features of the application, its tech stack, the hourly cost of the hired application developers, and the number of hours required for the development of a hotel booking app like OYO Rooms.

We, at Apptunix, charge something in-between $50K – $80K for a full-fledged OYO-like app development project.

This estimated price of developing a hotel booking app like OYO may vary dependent on the location and the size of the team you hire. So, you must look for OYO like app developers carefully to get a reasonable quote.

Wrapping Up

Started as a conglomerate of aggregate & franchise model, OYO is now purely franchise model which has enhanced their occupancy rate up to 80%, as claimed by OYO rooms.

As a high-quality budget hotel network, OYO had a substantial growth over the last few years. Though some critics claim this business model has a higher churn rate but CEO – Ritesh Aggarwal has proven all the claims wrong, as their brand equity and demand has increased along with the list of hotel owners & investors.

In conclusion, we can say that for the budget hotel industry, OYO is marking its own milestone and will be doing so in future as well depending upon the customer’s experience.

If you want to craft the next big thing like OYO, contact us!

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