One of the world’s biggest, and fastest growing, hotel chains is targeting the UK and Europe – but it’s a brand most travel buyers will be unfamiliar with.
OYO opened a UK office on Mayfair’s Grafton Street in April this year – a sprawling building next to well-heeled Berkley Square – after outgrowing its first office in Holborn. I paid a visit last month, and the newly refurbished building screams start-up; inspirational quotes line meeting room walls, there’s plenty of hot-desking, and a fresh paint smell still lingers.
It’s prime location real estate, but small change for a company that received a reported investment of US$1 billion in September last year, courtesy of Tokyo’s Soft Bank. In April this year, Airbnb also committed to invest US$200 million. Other investors include Sequoia and Lightspeed. Today, the six-year-old company is valued at US$5 billion.
The new London office has recruited 120 people in just six months, reflecting OYO’s ambition. In October 2018, there was just a handful of employees, including Jeremy Sanders (pictured above), who is head of OYO Hotels & Homes UK. Sanders previously founded the Italian food chain Coco di Mama.
After joining OYO, Sanders said: “We are extremely excited to have launched in the UK, and are very encouraged by our progress so far. We are delighted to have already partnered with so many amazing independent hotel owners from across the country, and look forward to working with many more.
“This is the most sophisticated hospitality market in the world – there is a lot of competitive pressure, but also a lot of opportunity for the right offering that is well executed. A combination of our technology, investment and hotel expertise empowers independent hotel owners to take that opportunity and thrive.”
So how does OYO plan to make its mark in the “sophisticated” UK market? More importantly, the first question I have for the OYO spokesperson who gives me a tour of the new premises, is: how do you actually pronounce OYO? I’m told “perhaps the best approximation to English is ‘or-yo'”, although I also hear “oh-yo”. Let’s just say the jury’s out on that one.
We’re still building from the ground up with the initial focus on growing our network of UK hotels
Besides, the company has more important things to get on with – and its priority (for now) is growing its portfolio of properties, with employees actively seeking out hotels – literally knocking on doors. These could be family-run properties where the owners are looking to retire, or properties set up by younger owners with an “entrepreneurial” spirit.
The benefits for hotel owners are OYO’s “proprietary technology, revenue management capabilities and operational expertise”, and it claims to offer hoteliers a “15 per cent room revenue uplift” (based on its London data).
“We’re still building from the ground up,” the spokesperson tells me, “with the initial focus on growing our network of UK hotels, but we’re scaling up quickly.” At the end of May, OYO had 70 hotels in the UK, compared with 50 at the start of May. In London, there are 30 hotels and 750 rooms, with four alone in London’s Victoria. Other locations include Pimlico, Paddington, Ilford, Kings Cross, Camden, Bayswater, Wembley, Stratford and Southall. It has “more agreements in the pipeline” and is targeting 1,000 rooms in the capital by the end of this month.
Newer additions also include a large Torquay country house with meetings and events facilities.
“We don’t describe ourselves as a franchiser,” they add, “we negotiate the best deal and we invest with them. We go in quickly to refresh the hotel, and our branding reflects the property.”
Of course, we work with our hotel partners to ensure the necessary health & safety measures are in place across the hotel itself
As an example, they cite a typical townhouse that may have historic features. Rather than adding the large red OYO signage, a small plaque on the property would be used.
Meanwhile, “OYO captains” manage up to five properties at time, acting as cluster general managers and providing on-the-ground operational support.
Business travel market
There are dozens of OYO brands. For example, in India it operates OYO Rooms, OYO Townhouse, OYO Home, Capital O, Palette Resorts, Collection O and OYO LIFE. Yet the focus in the UK for now is “Hotels & Homes”. The company also has a dedicated corporate accommodation brand, Silverkey, but for now this exists in Asia only.
OYO’s lofty mission is to “upgrade all forms of real estate and thereby provide quality living spaces to travellers around the world”. Some commentators have noted OYO is even looking to disrupt the hotel sector with an Airbnb-approach.
For the corporate travel market, hearing Airbnb can still ring alarm bells, with duty of care issues on many buyers’ minds. On this particular issue, Sanders told Buying Business Travel: “We want to provide a consistent and reliable experience for customers whichever independent hotel they choose for the night. That means a warm welcome, a good night’s sleep, a hot shower, Wireless free internet access and a TV as standard. Of course, we work with our hotel partners to ensure the necessary health and safety measures are in place across the hotel itself.”
In terms of connectivity, OYO properties in the UK will soon be accessible through its own app, but for now they are available via Booking.com and Hotelbeds. It has also signed a deal with Ctrip – China’s largest online travel aggregator. This partnership includes “demand generation by providing access to customers of both brands, online-to-offline services integration, data operation and branding”.
There is also a focus on the app making life easy for users. Would-be business travellers in India, for example, can order food via the app in some countries, with “cloud kitchens” in place. OYO in fact already owns two catering companies.
This is the most sophisticated hospitality market in the world – there is a lot of competitive pressure
With a technology focus, it’s likely OYO will eventually pitch itself against the likes of Premier Inn and Travelodge. Business travellers love a budget hotel, and I ask if any corporate connections have been established yet, with the spokesperson replying the focus really is on growing its footprint. “But it won’t be too long before we start making those direct connections to TMCs, amongst others,” they add.
Building a business
So where did this US$5 billion brand come from exactly? OYO was founded by Ritesh Agarwal in 2013. The story has it that the then 17-year old had travelled extensively across India, and found there was a lack of affordable and good-quality hotels in the unbranded budget category.
After his travels, he applied for a place on the Thiel Fellowship (started by Paypal founder Peter Thiel), and went on “to fix this problem using technology and talent”, according to the company, with the promise of delivering predictable, affordable, anytime-available stay experiences for travellers – “a 100 per cent ‘Made-in-India’ business model and the first of its kind worldwide”.
The company has certainly delivered. It operates in 800 cities, across 24 countries, with more than 20,000 buildings and 700,000 keys under management.
This year, OYO plans to invest £40 million in the UK. As a result, it’s a chain buyers should have on their radar. They should also start mastering how to pronounce OYO – it could be one of the most talked about names this year.