OYO Hotels Investment Analysis by LUSEM Consulting Team

OYO Hotels The right investment LUSEM Consulting Team Akos Nagy, Gustaf Nordin, Johanna Sjobloem, Anna-Maria Ostermann Presenting to: Michel Jakayla

LUSEM Consulting Agenda Situation Analysis Recommendation Implementation Financials Risks Conclusion Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting The world is already invested with OYO why shouldn t you? Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting Should OYO be your next step? Should you accept a job with OYO? What are the challenges they face? Does their strategy make sense? What does their future hold? Is their business model sustainable? Does it work in America? YES ? NO ? Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting A striving industry to be in! Consumer polarization Experience economy Disruptive changes in the Hotel Industry OYO Sharing economy Spontaneous traveling Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting A business logic that is ready for the future! Franchise Relieve overheads Marketing OYO Real-time adjustment of RevPAR and ROI Customer service Proprietary technology Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting The key concepts OYO is built on Digital O Y O Franchise Occupancy Traveler Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting The right strategy for a disruptive industry! Customer Experience Ecosystem Driver Omnichannel e.g. Hilton Hotel ? Supplier Modular producer e.g. Small Bed & Breakfasts e.g. Expedia & Air BnB Control of Value Chain Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting The right strategy for a disruptive industry! Customer Experience Ecosystem Driver Omnichannel OYO e.g. Hilton Hotel Supplier Modular producer e.g. Small Bed & Breakfasts e.g. Expedia & Air Bnb Control of Value Chain Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting Should OYO be your next step? Should you accept a job with OYO? What are the challenges they face? Does their strategy make sense? Does it work in America? Is their business model sustainable? What does their future hold? YES ! NO ? Take the job as a Territory Operations Leader Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting The competition in the US Branded Hotels 18.000 unbranded Hoteliers 71% branded Hotels Days Inn Hilton Extended Stay America OYO Holiday Inn Express Choice Hotels Air BnB Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting How does the customer choose a hotel? Leisure Work Convenience Atmosphere Locations Price Service Ratings Hotel stars Convenience Location Service Trust Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting OYO s value proposition their biggest challenges & opportunities Pricing Algorithm ! Food/beve rages ? Front desk Proprietary technology ! Clean rooms ? Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting Opportunities can become challenging Price Algorithm Orbis + Fast property acquisition + Streamlined process + Increase occupancy + Increase customer satisfaction - Property owners reluctant to renovate - Too big too fast - Customers can get used to low prices and may become reluctant to pay higher prices Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting What does OYO offer their customer? The Hotelier The Guest Revenue Management System Pricing Algorithm Occupancy Brand backing Trust Visibility Backend management Customer insights A nice and clean room with the necessary comfort Easy and convenient bookings at the right price Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting Should OYO be your next step? Should you accept a job with OYO? What are the challenges they face? Does their strategy make sense? Does it work in America? Is their business model sustainable? What does their future hold? YES ! NO ? Take the job as a Territory Operations Leader Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting The three key building blocks of future success 1. Scale 2. Digital 3. Experience Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting 1. Rapidly increasing market share 3. 1. 2. Experie nce Digital Scale Already operational projects Shared responsibility Fast acquisitions Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting 2. Cutting edge technology 3. 1. 2. Experie nce Digital Scale Backend Management Algorithms Ecosystem Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting 3. Outstanding experience for partners and customers 3. 1. 2. Experie nce Digital Scale Transparent Convenient Standardized globally Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting The three key building blocks of future success 1. Scale 2. Digital 3. Experience But is it sustainable? Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting Key assumptions Aspiration: No. 1 player in number of rooms by 2023 2.5% 2.5% Revenue (mUSD) & Global Market share 70.00 60.00 50.00 40.00 30.00 20.00 0.6% 0.6% 10.00 0.00 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting The three key building blocks of future success 1. Scale 2. Digital 3. Experience But is it viable? Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting Some reassuring words The franchise model is asset light and requires little capital investments as such, the business model is.. Scalable Lucrative (profit) Here to stay ! Did you know? In the great financial crisis (2008) asset light hotels actually proved to be a defensive investment! Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting The building blocks of a franchise model? The franchiser provides a set structure Digital back-end, brand, operational products B2B The franchisee provides the operational power - Operates facilities, maintenance, customers B2C The franchiser takes a fee from the revenue of the franchisee -20% B2B2C Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting The building blocks of a franchise model? The franchiser provides a set structure Digital back-end, brand, operational products B2B Costs are currently exceeding revenues (mUSD) 12 10 8 The rate of change in cost is much slower than the rate of change in the profits!! 6 4 2 0 2016-17 2017-18 Revenue Operating costs Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting So.. What if we apply the revenue projections to our new knowledge? Revenue & Profitability (mUSD) 2.5% 2.5% 70.00 60.00 2.5% 2.5% Revenue (mUSD) & Global Market share 50.00 70.00 60.00 40.00 50.00 30.00 40.00 20.00 30.00 20.00 0.6% 0.6% 0.6% 0.6% 10.00 10.00 0.00 0.00 2016-172017-182018-192019-202020-212021-222022-23 -10.00 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting Risk and Mitigation Risks Likelihood Impact Mitigation Higher occupancy rates can overthrow set off Millennials book spontaneously OYO has a large operation base 1 Undercutting Price Medium / High Medium 2 Renovation costs higher than revenue Medium High Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting Your risks! Risks Likelihood Impact Mitigation Turning global Global mindset 1 Risk of culture mismatch Medium Medium 2 Retirement Plan Medium Medium Turn profitable next year Business model works Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting The world is already invested with OYO why shouldn t you? Situation Analysis Recommendation Implementation Financials Risks Conclusion

LUSEM Consulting Executive Summary Main Challenge Should you accept a job with OYO? Key Issues Viable strategy Fit for America Future prospect Key Success Factors Digital Travelers Occupancy Key Figures Profitable by 2018/19 2.5 % market share Asset light Take the job as a Territory Operations Leader Recommendation Situation Analysis Recommendation Implementation Financials Risks Conclusion