OYO Business Model All you need to know in 2019
OYO Business Model used to be a hotel aggregator. The customers used to buy the services from the brand OYO rooms and didn’t care who the partner was. Just like Uber, OYO provided rooms with standardized quality and price.
OYO Rooms have a network of hotels that are currently operating in 5,000 cities in India, Malaysia, UAE, Nepal, China, and Indonesia. OYO started off its operations by building its business model around the aggregator business model.
Previously, the company is in organizing the partner with hotels, lease some rooms, and sell them under its own brand. The main focus of the OYO rooms is to provide quality services to their customers. They make the partners provide services at predetermined standards to maintain the brand image while they make them more visible to their user-base.
OYO uses an aggregator business model. Aggregator business model is a network business model in which the firms collect information about a particular industry that is unorganized, and acquire them as partners and sell their services under OYO’s.
Business Model of OYO Rooms:
OYO Rooms’ business model is similar to the aggregator business model. OYO has some essence of the franchise business model also. OYO room organizes those hotel rooms under their brand name and OYO partner hotels provided standardized service to customers of those rooms. Bookings of these rooms were made through the OYO’s website and mobile application.
Now the Oyo rooms have performed some changes in their business model. Now OYO doesn’t lease the hotel rooms, OYO asks the hotel partners to operate them as a franchise. OYO boasts a 100% increase in revenue to their partner hotels and they have good brand equity.
OYO Rooms provide quality hotel rooms to visitors who stay at different places around India. They have partnered with hotels and hotels works under their name.
Only after 5 years of establishment, OYO has expanded in more than 330 cities. OYO did not achieve success overnight, Oyo works hard to get this success. Here are the 4 strategies that made OYO successful:
1. Assets Light strategy:
OYO implemented is assets light strategy and doesn’t own a hotel but takes them on lease and invest a small amount of money to make it as per the standard of the company. This strategy is popular among startups because the business only has to own fewer capital compared to the value of its operation. Small hotels were 90% vacant and nobody was going there, OYO partnered with these small hotels instead of building them. Its saves huge amount of money for the OYO room.
2. Takes full responsibility for Customer experience:
OYO takes the end to end responsibility of customer experience and considers all the requirements that the customer may have. Customers can have requirements such as Searching hotels, booking hotels, easy check-in, easy checkout, and world-class experience. OYO spends a small amount of money to change the look and feel of the hotel for better customer experience.
3. Focus on Predictability:
OYO realized that data is an important element to gain and satisfy customers. OYO collects the data from the consumer and understand what are consumer likes and dislikes. OYO is focused on making the consumer of the service and create repeatability through predictability in service.
4. Use of technology for Speed and Scale:
OYO is focused on making a user-friendly mobile application. Through the app, the user can book a room in just 3 clicks. The company created an app for customers and for its partners. Oyo wants to minimize the use of human resources through technology. OYO also created a dedicated team of data science and looking forward to investing more money in innovation and Research & Development.
Services Provided By OYO Rooms:
There are many services that are included in the OYO business model. Some of these are-
OYO’s strategy was to have a partnership with hotels and to maintain it as per the quality standards for OYO customers and they used to lease some rooms every month and provide those rooms to their own customers at some profits.
But now OYO has performed some changes in its strategy, change is that the rooms are now not leased but operated as OYO Rooms franchise. The hotels and place owners are bound to operate as per the pre-determined standards. The company even offers several plans to hotels to runs the place instead of the hotel staff or owner.
The partners like to book their own hotels when they see fewer prices on the Oyo’s platform and this became beneficiary for the partners. To reduce this OYO Rooms has started leasing hotels and places where OYO has full control over all the day-to-day operations.
OYO Townhouse is recently launched to hone its value proposition and stand out from the competition to standardized hospitality. OYO Townhouse is based on millennial traveler needs and planned and built based on the needs and wants of the millennials.
Smarter consists of specially designed beds, showers, sockets, and internet infrastructure. Even TVs have Netflix installed.
common spaces designed to have meetings. These Places have a free printer, business services, magazines, coffee, and tea.
24 x 7 Kitchen services that let you order from the mobile application.
OYO Rooms also provides fully furnished rooms and flats for long stays like internships, corporate stays, etc apart from providing the hotels. The rooms/flats can be rented on single occupancy as well as on twin sharing basis as well. Rents are paid monthly and the Commission of the rooms is charged from the owners of the customer who comes through OYO rooms.
Events & Other Long Stays:
There are many family functions such as weddings, parties, etc. as well as corporate functions such as seminars, meetings, parties, etc. involve hotel rooms for their guests to stay for long, OYO is also providing these services.
OYO has expanded its branches in commercial places as well. Now the OYO has provided the ease that customers can even book office spaces on OYO as well.
OYO has also launched a subscription model where the subscribers of the OYO get exclusive discounts, deals, and cashback offers, etc.
OYO Revenue Model
OYO Rooms is having about 1,200 employees at an average of 25,000 Rs. per month per employee. That will make about 3 crores per month approximately.OYO is spending a huge amount on advertising such as online, TV, Radio and other mass media channels and on other marketing campaigns. TV ads can cost between 30 lacs to 3 crores per advertisement and the total ad run budget could have been anywhere between 20 to 100 crore. OYO is spending a large amount of money on online advertising and on Google as well. This will be estimated at around 1-2 crore per month.
OYO rooms have to face the losses even after providing the hotel’s rooms at such a great discount. Actually OYO invests his money in market segments to attract the customers. OYO rooms use both mass media and digital marketing to engage their audience to retain their customers and to attract new. OYO room has strong social media presence on Facebook, Twitter, and other social media platforms. This helps OYO to keep their audience engaged with new offers and campaigns. The bookings can be easily made through the website and mobile application and in this application customer book rooms at predetermined prices by Oyo.