OYO: Emerging Market Unicorn - Strategy, Challenges, and Future Prospects
OYO, the emerging-market unicorn, has implemented a successful strategy focusing on technology, affordability, and customer-centricity. Although facing challenges like lack of profitability and malpractice claims, OYO's rapid growth and expansion into global markets showcase its adaptability and potential sustainability. The company's strong value proposition, wholesale strategy, and brand building efforts have positioned it as a disruptive player in the hospitality industry. The key takeaway is the successful transformation into a $10 billion unicorn within just six years.
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OYO: Coming to America The emerging-market unicorn CASE 2 CASE 2 SCHOOL NAME: NMIMS SCHOOL NAME: NMIMS NM Career Counselling
Problem Statement 1. Did OYO s strategy make sense? 2. What challenges did it face, and how could it overcome them? 3. What were its prospects for the future? 4. Was this business model sustainable? 5. Would the business model translate to the American market? Key Takeaway: Should Michel apply for the job?
The OYO Ideology Design cool, in spaces whenever you need, at fantastic prices. Key Takeaway: OYO is youthful, chic, open minded and customer centric
An Overview of OYO STRENGTHS WEAKNESSES Technology-based Solutions Focus on economies of scale Providing basic amenities and hygiene Affordability Hassle-free operations Lack of profitability Malpractice claims against founder OPPORTUNITIES THREATS Global expansion in North America and Europe Co-living spaces for outstation students Conflict of interest between Oyo and Hotel Partners Famous hotel chains
Value Proposition Understanding Customer Housing Needs Developing High Technology Solutions Lucrative, high value partnerships Key Takeaway: Proves a strong customer centric approach addressing needs with technology and collaboration
Was the Oyo Strategy successful? Oh Yes! Key Takeaway: OYO s strategy was definitely successful in making is a $10 billion Unicorn in 6 years
The Growth of OYO Implementing a wholesale strategy High risk, high return Brand and trust building Studying customer needs/wants Franchise Model OYO Life (Co-Living: Home rentals) Purchasing real estate Solving Housing crisis Utilizing Brand Value RAPID expansion Leveraging Competitive Advantage Boosting Occupancy by regulating pricing Buying bulk rooms at discounts Diversification Key Takeaway: OYO has rapidly adapted to its business environments
Understanding Customer Housing Needs For Hotel owners Low occupancy rates in established hotels Operational and maintenance expertise Constant upgrading High overhead costs Marketing For residents Lack of standardized basic necessities (WiFi, Comfortable beds, Functional Plumbing, Entertainment) Trusted Environments Affordable Pricing Key Takeaway: OYO s foundation is built on understanding its consumer base
Developing High Technology Solutions Easily accessible application 3 - tap booking software Dynamic Pricing Transparent Rating System OYO Keep for Hotel Maintenance staff ORBIS for swift contract signing Key Takeaway: Ritesh Agarwal s tech background has ensured OYO uses tech to solve all business problems
Lucrative, high value partnerships Airtel for Wifi Samsung for Televisions Biotique for soaps and shampoos Airbnb for housing expertise GRAB Taxi Didi Chuxing Financial institutions Key Takeaway: OYO also understands that collaborative environments are the future of business
Issues faced by OYO Stiff competition and entry barrier into the hotel aggregation and reselling business Capital Intensive The Kid Syndrome Wild variability in customer service and experience Developing subject matter expertise across domains Key Takeaway: OYO has seen extreme struggle
Overcoming Issues Strict quality control Economies of Scale Disruptive business practices (Foregoing booking fee) PERSEVERANCE Technology Key Takeaway: Perseverance coupled with business knowledge can overcome mountains
OYO Achieving future prospects On track to become the largest hotel chain in the world Expanding horizons (OYO Life, Luxury Hotel segment) On track to have a successful IPO Fast reducing losses Key Takeaway: OYO has achieved targets and sowed the seeds to ensure the rapid growth rate is maintained if not increased
The OYO Business Model OYO is not just a hotel aggregator
The OYO Business Model Oyo is a collective service provider in the business of: Interior Design Marketing Hotel Management Consultancy Technology Asset Management Key Takeaway: OYO provides multiple services to help hotel owners run more efficiently
The 100% leased and franchised model ensures sustainability Facilitates rapid yet practical expansion (ORBIS) Key financial partnerships prevent the need for CapEx requirement Utilizing and further developing the trust in the OYO name Four-fold improvement in RevPAR Key Takeaway: OYO shows multiple positive indicators for further growth
Value Proposition Understanding Customer Housing Needs Developing High Technology Solutions Lucrative, high value partnerships Key Takeaway: Proves a strong customer centric approach addressing needs with technology and collaboration
The refurbished image of senior management Refurbishing brand image of the founder, Mr. Ritesh Agarwal Mr. Aditya Ghosh, Former CEO Asia Pacific, now, Board Member Vocal on Social Media Cult like following Vast experience of heading and rescuing Indigo Airlines Hiring senior executives from significant roles in prominent successful companies like Uber, Tata Sons
The US Environment Political Economical Social Technological Volatile political conditions Higher overheads Growing hotel market Need for budget- friendly hotels Cleanliness, Safety and basic amenities are required Tech-savvy millennials Use of technology by businesses to gain competitive advantage
Adapting to the US Markets Need for affordable hotels Accessing the already growing hotel industry (Switching from the Uber model to McDonald s) Consolidating the Motel culture Potential to address the housing crisis of US
Job Alternatives Yes, take the Job Do Not take the Job Field Sales Representative HR Director Business Development Manager Territory Operations Leader
Why should Michel take the job? OYO is a trusted brand A good career switch: Working in a start-up with so much growth potential OYO has a sustainable business model that will thrive in the American Market Although she d be taking a pay cut, Michel will grow in seniority in the company and in financial renumeration as well An amazing option to work close by to her family home in Washington, DC
Global Stayed Room Nights Room nights annualized 80 75 70 60 Room Nights in Milions 5.7x 50 40 30 20 2.2x 13 10 6 4 1.5x 0 Dec' 15 Dec'16 Dec'17 Dec'18 Year
Economic Improvement YoY LOSSES 295.8% 86.5% 44.5% 34.6% 20.4% 10.4% 2018-19 2016-17 2017-18 as % of revenue as % of realized value
OYO Venture Capital Investments Venture Capital Investments 1200 1000 800 600 400 200 0 2013 2014 2015 2016 2017 2018
Conclusion Michel must take the job as OYO is not only a going concern but also a growing concern Key Takeaway: