OYO Hotels Expansion and Investment Analysis

OYO Hotels Presented to: Professor of Operations, Mentor Presented by: Jakayla Michel DeGroote School of Business, McMaster University Nicole Verni, Annette Szeliga, Stephanie Ebreo, Alex Beran 1

Jakaylas profile MBA Candidate, 2020 (expected completion) Education Junior Investment Banker (2014-2018) Work Experience Strong analytical skills Financial analysis & market research Client relations Operations specialization Skills Looking for a career shift Company with growth potential Leverage current skills Broaden work experience portfolio within operations Career Aspirations 2

With $300M of investment capital earmarked for the US expansion, can OYO s business model and strategy translate into success within this new market? 3

Jakaylas decision & proposed strategy YES! Territory Operations Leader (1st choice) Business Development Manager (2nd choice) Apply for job? Pursue US economy market (Target: unbranded hotels) Proposed strategy? 4

key issues 5

key issues - importance + Profitability Occupancy Optimizing margins 1 1 - urgency + 2 Consumer perceptions Online reviews Leadership & OYO team 3 2 Sustainable growth strategy Ensuring growth in all new markets entered 3 key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 6

analysis 7

venture capital investments analysis OYO Total Investment INVESTORS INCLUDE: SoftBank Lightspeed Ventures Sequoin Capital Greenoaks Capital Grab Taxs Didi Chuxing Technology AirBnB 1,466.50 300 In US$ million key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 8

Worldwide hotel market, % control 71% Branded hotels Economy hotels 53% 50% 40% USA USA Asia Pacific EU key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 9

company analysis One of the largest hotel chains in the world, boasted by a tech driven solution for marking economy hotels discoverable and bookable online. Bringing a clean bed and safe environment to all travelers at a budget price Mission Intuitive APP & positive brand Technology (Operations & management) Focus on budget market Differentiators Ritesh Agarwal Self made, wunderkind founder Questionable character Leaders key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 10

business model analysis OYO S ABILITY TO PIVOT BUSINESS STRATEGIES HAS PROVEN SUCCESSFUL IN THE PAST AND DEMONSTRATED FLEXIBILITY WITHIN THE COMPANY: FRANCHISING MODEL $50,000 upfront entrepreneur investment $50 RevPAR (Revenue per available room) 25%-65% Occupancy increase ~20% ongoing commissions 5 day partner signing period key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 11

opportunities 12

opportunities 1 Do not pursue the US market 2 Diversify to top tier hotels 3 Pursue US economy market targeting unbranded hotels key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 13

Do not pursue US market Exit from US market and focus on increasing franchises, rooms/hotels in India & China 1 key issue tracker benefits Room for growth in India market (only at 4% market share) Familiar with home base markets ? Profitability X Consumer Perceptions considerations Presence already established in US Large opportunities seen in the US market Investor commitment & relations ? Sustainable Growth Strategy key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 14

Pursue top tier hotels in the US Partner with higher quality hotels to create more OYO franchise hotels 2 key issue tracker benefits Increase awareness of OYO brand Capture larger portion of American hotel market ? Profitability considerations Consumer Perceptions Loss of revenue with higher priced rooms Change of OYO brand perception Currency & cultural risk Misalignment with core missions (budget pricing) ? Sustainable Growth Strategy key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 15

Pursue US economy market Target the 18,000 unbranded hotels within this market 3 key issue tracker benefits Foothold within the market (50 hotels, 35 cities) US talent acquired (Uber leader) Proximity to similar markets for future growth (Canada) Appealing to investors Profitability Consumer Perceptions considerations Currency risk Cultural risk Capital investment Sustainable Growth Strategy key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 16

preferred solution Do not pursue US market Pursue top tier hotels Pursue US economy market key criteria weight Profitability 0.4 3 2 4 Consumer perceptions 0.2 1 4 4 Sustainable growth strategy TOTAL 0.4 3 3 5 2.6 2.8 4.4 1.0 key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 17

preferred solution 18

Jakaylas proposed strategy overview July 2019 2020 2023 2021 2022 Internal development & mobilization Hire US tech interface Market research: unbranded economy hotel strategic plan Establish franchisee relationships in US Renovations/branding B2C marketing strategy EU expansion Leverage UK Brand recognition key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 19

implementation 20

internal development & mobilization 1 July 2019 Jan 2021 ACTION OWNER TIMELINE Establish US growth strategic plan CEO & C-suite Leadership Team KEY ISSUE TRACKER Profitability CMO & US Marketing Lead Market research Consumer Perceptions OYO Application Interface revamp (US) CIO & US IT Lead Sustainable Growth Strategy Talent acquisition & training VP HR & Talent Acquisition Lead key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 21

internal development & mobilization costs Component Costs Hiring & training $150,000 Market research $100,000 TOTAL PHASE ONE COSTS $250,000 key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 22

Establish franchisee relationships (US market) 2 Jan 2020 - 2023 ACTION OWNER TIMELINE B2C marketing strategy CMO & Marketing Lead KEY ISSUE TRACKER Profitability Renovations & branding Operations Lead Consumer Perceptions Sustainable Growth Strategy Consider third party sites Marketing Lead key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 23

Establish franchisee relationships costs Component Costs Cost per hotel $7,000 Technology $1,000 Experience $6,000 Number of additional hotels per month 150 TOTAL PHASE TWO PER MONTH COSTS $1,050,000 key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 24

Establish franchisee relationships revenues Component Costs Experience package costs $100 Number of additional hotel rooms per month 11,250 Occupancy rate 75% Conversion to experience package 25% Number of packages sold per month 2,100 TOTAL PHASE TWO REVENUES PER MONTH $210,000 key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 25

EU expansion Long-term growth plan 3 July 2021 - onwards ACTION OWNER TIMELINE Leverage strategy to expand into EU market US as stepping stone KEY ISSUE TRACKER Operations Lead Profitability Consumer Perceptions Brand recognition Marketing Lead Sustainable Growth Strategy key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 26

Six month plan costs key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 27

Projected implementation financials key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 28

key success factors 29

key success factors Factor Target Timeline US consumer reviews 90% satisfaction ratings 2020 Stronghold on US economy hotel market 500,000 rooms added 2023 Number of hotels franchised 40% of unbranded hotels 2023 key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 30

risks & contingency plan 31

risks & contingency risk trigger likelihood impact contingency plan Adapting to US consumer preferences Hire US native, closely monitor and adapt to initial reviews Negative online review Low - Medium High Stress benefits to hotel owners Exhibit past successes Recognizable brand Number of franchisees not meeting targets Acquiring franchisees Low High Decreased number of applicants Additional benefits Growth opportunities Salary increases US talent acquisition Low Medium key success factors appendices risks & contingencies analysis opportunities preferred solution implementation key issues 32

Jakaylas final reflections Pursue US economy market Proposed strategy OYO s strategy makes sense Prospects for future Sustainability of business model Success of business model in US market Final considerations 33

appendices 34

Implementation costs appendices analysis 35

Implementation revenues appendices analysis 36