Group -4, Project Report - A case study on OYO PDF

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Project Report On A CASE STUDY ON OYO

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Abstract The objective of this case is to elaborating about OYO rooms as objectively as possible from the perspection of a ‘situation case’ and effort has been to provide a sufficiently large pool of information, required to analyse the reasons behind every present success of OYO rooms in particular and an Indian enterpreneual pattern spurting out of the innovative use of technology and the marketing principals. This case brings the success story of Ritesh Aggarwal about how he used hospitality idea and initiative of budgeted hotels digging lot of investment in this segment. The attention of investors has been prompted for tourism and hospitality. Government in its action has also concentrated on “Make in India” which meant that entrepreneurs like Ritesh Aggarwal shall always be promoted and supported. Thus, there is a need to create comfort zone for young minds so that they can come forward as successful businessmen and thereby leading to country’s economic growth.

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HEADINGS Introduction About tourism sector of India Oyo’s Contribution to tourism Oyo’s Business model to Oyo’s Expenditure

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Oyo’s Suitability in India Oyo’s model with diagram

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Oyo’s expansion with YouTube Oyo’s acquisition

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Oyo’s Capital Runway

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Oyo’s Competitor Analysis Oyo’s latest robust strategy in-lieu to its competitors with blueshift inclusion

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Problems faced by Oyo

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Services provided by OYO

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with the SWOT analysis

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A peak into recent issue

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Planned roadmap for 2020 OYO crushed with the impact of COVID-19

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Conclusion

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References

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Introduction Shri. Narendra Modi’s or the Prime Minister’s call on “Make In India” initiated a lot of changes in designing the portrait of India. Even though it is worth awhile to focus on manufacturing has led a trade export model for sustainably economic growth, it’s big time now that to celebrate the rise of new breed of entrepreneur who are demographically has aligned to a youthful company. The Indian entrepreneur has began taking advantage of the opportunities that are becoming available as hundreds of millions of netizens and citizens has come to a common place virtual market through their smart phone interference and other hand held smart devices. Ritesh Aggarwal’s OYO rooms are among the first to spot out the opportunity to fix the problem of prediction ability as well as standardization by branding the India’s unbranded budgeted hotel segment, thus estimating to be a worth 88,000 crores. Aggarwal’s true innovation in the use of technology in hospitality industry, has not only won him high recognition, but also have brought huge investment in the sector. India is not anymore remained a legendary land of snake charmers, constarined tourism to the traditional sectors including mainly of Himalayas, Agra, Rajasthan, Kerala, North East and Varanasi alone. The rapid-evolvement in travel and tourist markets has highly attracted in terms of demographics and cultural norms. This drift in the emerging segment is marked by ‘individual’ and ‘noting of technology’. The members of its segment are self-management as preferred to search for best and reliable priced experiences. This segment makes an inclusion ‘visit friend and relative travels’, ‘the frequent independent traveller’s as in the opposite to group traveller’s, Business travels, pilgrims, medical tourists to be named as a few. And it is high time now that travel and tourism industry wakes up to the call and re-structure itself to meet the challenges and grabbing the opportunities, with throwing an open to them by this abundance of changes in the macro economic scene.

About Tourism Sector of India (2019)

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The number of Foreign Tourist Arrivals in India in a period of 2018 has increased to 10.56 million on comparing to 10.04 million in 2017. This growth rate in FTAs during 2018 over 2017 was 5.2% as compared to 14.0% during 2017 over 2016. This share of India in the sector of international tourist arrivals in 2018 was 1.2%. India accounted for 5.0% of international tourist arrivals in Asia Pacific Region in 2018, with the rank of 7th. Approximately 79.6% of the FTAs entered India through air routes followed by 19.6% and by land routes as well as 0.8% by sea routes. Delhi and Mumbai airports accounted for about 44.5% of the total FTAs in India. This top 15 sourced markets for FTAs in India in 2018 were Bangladesh followed by United States, United Kingdom, Sri Lanka, Canada, Australia, Malaysia, China, Germany, Russia Federation, France, Japan, Singapore, Nepal and Thailand. And top 15 countries accounting for about 75.33% of total FTAs in India in 2018. Tourism centred continues to play an important role as a foreign exchange earner for the country. In 2018, foreign exchange earnings from tourism sector was US$ 28.59 billion as compared to US$ 27.31 billion in 2017, registered a growth of 4.7%. Count of domestic tourist visits in India during 2018 was over 1854 million, as compared to 1657 million in 2017, with a growth rate of 11.9 %. And so count of Indian national departures from India during 2018 was 26.29 million as comparing to 23.94 million in 2017, registering a growth rate of 9.8%.

OYO’s Contribution to the tourism sector of India

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The Oyo’s upgradation of mid-market rooms in the country and bringing them into the organised segment is good news for tourism but issues need be resolved directly between the hotel bodies and the unicorn flush with funds regarding matters like contracts and room rates, said by tourism minister KJ Alphonse. India had a shortage of two lakh rooms in the mid-market segment and if Oyo is bringing the inventory of midmarket hotels into the organised segment through some upgradation, it suggested out to be good news, as there are no quality rooms in the mid-market segment and so the hotel associations and Oyo need to resolve their issues directly, highlighting the participation rate of Oyo in the tourism sector. The continuous focus on delivering value for the asset owners and the winning customer’s trust with loyalty has now led the company to become one of the world’s leading hotel chains, serving millions of guests across the world, including China, US, Europe, Southeast Asia, Middle east, Japan and more. Thus, in the calendar year 2019 they increased the revenues by “3X” on a year on year base with over a million rooms across the globe. Oyo was rated by brandZ as one of the most valuable new brands in India. The year 2019 observed of residing host travellers and city-dwellers in the hotels and vacation homes in 80 countries around the world. OYO hosted over 180 million guests from 120+ nationalities. In December 2019, an average of 750,000 guests were chosen to stay at an OYO every night. And so,they continued to delight their guests, and their average ratings on OTA (Online Travel Agency) platforms were 7.5+/10. Resulting which they were honoured by the opportunity and they have been given to serve guests across the world. Which placed a huge responsibility upon every OYOpreneur to deliver on the company’s mission. The repeat rate and organic demand metrics are a testament to the fact that the customers are loving their experience at OYO which is shown below-

And so, from the above chart it could be concluded that repeat rate has been increasing on a stagnant rate in all quarters with an initial spurt in the first quarter of 2019 leading to an overall increase at the last quarter of 2019. Thus, constituting a 90% demand to the hospitality sector of India. Apart from the above statistical representation there is a contradictory chart shown below representing the hotel booking apps growth globally.

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Thus, it is evident from this diagram that with repeat, paid and organic rates significant growth there is also a rise in the Oyo app user’s as till the month of October 2019. Financial Performance of 2019 as a growth Indicator The audited financial results is being included in this part of the report for FY19, which ended on March 31, 2019. With the pronouncement of a new standard for revenue recognition – India’s 115 (similar to IFRS-15) – which is applicable to OYO for the financial year 2018-19 onwards, OYO is required to account for revenue on a gross basis. The comparative figure for the year 2017-18 has been grossed up retrospectively. FY19 Revenue – 4.5x increase in total revenue to USD 951 million, led by India and China The consolidated revenue for FY19 stood at USD 951 million, which is 4.5X YoY growth over FY18. The fiscal year also marked our transition from an India-centric business to a global organization.  

Nearly 36.5% or USD 348 million of our fiscal revenues were from outside India. A year ago, this was a small part of our overall business. India contributed nearly 63.5% or USD 604 million of the Oyo revenues and they recorded 2.9X YoY growth in the market.

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The Gross Margin in India increased from 10.6% in FY18 to 14.7% in FY19 indicating the strength of our business model and a positive correlation between market share and economics.

The total margin, fell from 7.1% in expansion in markets such

gross however, 10.7% to FY19 due to newer as China.

FY19 Loss reduced to 14%; global increased from 25% to 35% due to expansion in newer markets such as China.

– India from 24% However

The consolidated net loss per cent increased from 25% in FY18 to 35% in FY19. The increase in net loss per cent is attributable to our global expansion as they have grown from being a predominantly single country operation to launching multiple geographies. New markets entry results in front-loading of setup costs and manpower investments while the revenue trails resulted in higher losses in the beginning.

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On scaling the mature markets, Oyo had demonstrated consistent improvement in their economics, in mature markets like India, and expect to follow a similar pattern in other markets. Their net loss reduced from 24% to 14% in India in FY19.

OYO’s replicable playbook has played a pivotal role in helping the organization grow globally at a rapid pace. The model levers are: 1) Build disruptive technology capabilities 2) Partner with independent hotels 3) Build large network 4) Create customer entrenchment 5) Deliver RevPar increases 6) Expand into new geographies. Since China and other international markets were in development and investment mode, they contributed to USD 252 million (75%) of the USD 335 million losses for FY2019, while these markets constituted only 36.5% of the global revenues. OYO made a continuous growth to investments in multiple new markets in the next fiscal year as well.It is to be noted that until FY2018, OYO accounted for revenue on a “net basis” and their earlier reports including Net Realized Value (NRV) as a key metric representing the total money paid by the guests. After moving to “gross basis” of revenue recognition as mentioned above, OYO have discontinued using NRV as a metric and replaced it with revenue which is net of taxes and loyalty discounts. The annualized NRV run rate for December 2018 was USD 1.8 billion (as mentioned in our last year report) which after taxes and loyalty discounts translated to an accounting revenue run rate of USD 1.5 billion. The overall interpretation that has been drawn from the financial indicators of revenue growth indicator over a year is that 4.5x increase in revenue has helped to grab a hold strong grip over the hospitality sector as expanding it to the tourism industry with 4.1% in the Indian gross margin and acquiring over bigger economy markets like China, as well as the FY19 loss reducing to 24% from 14% But the only set back is that a loss in the global market which increased from 25% to 35%. Therefore, it is evitable and portraying that OYO is climbing up with its right hand held strong on the Indian hospitality sector and moving forward to the global market’s tourism sector in the coming years.

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OYO’s business model After getting deep knowledge of continuous growth aspects of OYO it is necessary to see how this business model works its expenses and revenue generation. OYO rooms has professed to be a marked up system of spending lodgings and in this way unique in relation to other in aggregators and OTAs (Online Travel Agents, for example, Cleartrip, Goibibo, Yatra, Makemytrip, and so on. The action plan of lodging aggregators is basic as they basically associated the visitor (costumers) with the inn by posting out inns on their site and accept a commission in their income. And a numerous times they work out on an arranging the inns with a base request ensure every month and thus can give marked down rates and arrangements on the room rates have contrasted with the rates and by the inns specifically to an ordinary visitor. This made them lucrative for the visitors as OYO’s plan of action is extra-ordinary and it neither claimed any lodgings nor is an inn aggregator. .The OYO here accomplices with non-institutionalized inns and squares rooms by getting them out for a specific time span. And it is at that point the exchanges room inventories with OYO marking to visitors. This plan of action of OYO Rooms normally includes a great deal of operational expense and requires tremendous working funding to initially obstruct those rooms. OYO’s Expansion OYO Expansion is has always been important topic,‘OYO– rooms experience’ to the humans, pilgrim traveller, Leisure across 100 cities with a network of 10000 hotels. The OYO was started in 2013. The rooms were amongst the first to identify the opportunity to initiate the process of branding the domestic budget hotel segment, as the person is serving people in the price range of Rs 1000 to Rs 3000. OYO – is a stock light of reserving site offers clean, wi-fi, air adapter and empowering spots to remain with breakfast. Now the chain of this marked lodging that begins with a cost tag of Rs. 999/ – just having the quality in crosswise over 70 Indian urban areas with a stock of 12000 or more rooms. OYO has not own any property it just rented over internet enabled hotels and serves for them. Ritesh is clear about the objectives client as he putted it briefly “our vision is to give a standard encounter – The OYO experiences to anybody, anyplace searching out for a place to remain when not at home. The mind works differently from other startup founders his belief is that he is building a mobile-first for a company using above 10 business enabling apps such as standardization of every perspective audit, hotel

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verification, quality and property performance tracers, audit reconciliation etc. OYO isn’t an independent organization in the market and it is now confronting rivalry from Zo rooms and Treebo. Other companies like goibibo, Cleartrip, MakeMyTrip etc. work on commission basis for booking of the rooms and hotel but OYO rooms has now worked on the different business model on reselling basis. The portion needed to solidify in future because advertising is going to get greater, remembering the current financial development rate also and ascend in buying intensity of the clients. OYO’s Marketing OYO has been before connecting the general population through short recordings and movies, as Jai Hind, Father’s day festivity and IPL last virtual challenge. And all together to connect with three level urban communities and to promote out the brand with elderly individuals for whom the inn appointments were finished by youngsters. OYO has now burst on the broad communications with the battle title ” Aur kya chahiye ? “. The battle is bolstered by computerized radio and print medium. OYO’s Revenue Model Oyo worked in a business model where hotel management, as well as the customer, is satisfied. And explaining how it works Oyo bookings in hotels with advance payments and pay to hotel management advances, in order to get the high discount by hotel owners. Hotel owners satisfied as they get bulk bookings in advance, which benefits to the customer a high discount that they get from OYO. Elaborated with an example:If the cost of 1 room/night- Rs.1800 Oyo rooms get 50% discount=1800*50/100= 900rs. Oyo resell at Rs.1200 Profit to customer- Rs. 600. Profit to Oyo is Rs.300 /room. In this way, they generate huge revenue because they are having a huge chain of hotel rooms.

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OYO Branding The branding played as one major strategy outcome to attract the customers, where people’s perception towards hotels in India was studied to which the branding structure was created through OYO rooms in the following ways  

Standardisation- In which a customer, the OYO brand means consistent experience, extending the real-life. An OYO hotel meant they get what they have seen on the website or app and paid for. Affordability- Based on customer-centric practices, quality amenities at pocket- friendly prices which is the USP of OYO. Technology- The app and website are user-friendly and light, a boon for the hotels that weren’t WiFi enaled, letting alone have an online presence, the bookings made hassle-free and would take just few clicks.

OYO with Digital Marketing OYO has been aggressively pushed fresh content to lure tier-2 and tier-3 cities. It wanted to reach oout to its demographic of the young people who are continually fidgeting with mobile and scrolling down until they find something worth their attention. OYO’s digital marketing campaign runs across multiple channels with a focus on personalised customer experience. OYO having wide spread over Facebook with more than one million followers and likes, the company stays active, posts daily and maintains engagement with its customers. Social media presence of the brand is always noticed by several popular videos and for OYO these were some of the popular videos   

#aurkyachahiye #Oneforeveryone #OYOnauts

OYO’s heavy discount offers The startup had also tried to salvage its business by offering a whopping 50% off to its customers for postlockdown travel plan. However this is proven, with the pandemic, it has all become insignificant. It will take a few months or more than that for people to muster the courage to travel again for leisure or even business. Travelling is anyway, a discretionary spending and economic collapse in the world, it is all going downhill for the hospitality industry, including OYO. OYO capturing price sensitive market Apart from the established hotel chains like Marriott International, HTDC, Panoramic group of hotels, lemon tree hotel have more significant turnovers and loyal patrons, which is unlikely a case with OYO the platform operating on deals and profits for the price-sensitive segment. Many times the customers explained that they got better deals without an OYO booking as the hotel could easily give them a discount. The startup often countered it with twgh guarantee of services and facilities but, for a segment that doesn’t flex on price, it really mattered. Not to be wondering, at the end of the fiscal year 2019, OYO has reported a loss of about $335 million on revenue of $951 million. The industry leads said that they can’t be put OYO Rooms in the same league as of traditional hotel chains, since it is an aggregator and a startup, it still needs to overcome the perceptive of the only for the pricesensitive customer group.

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It is a technology surrounded marketplace and doesn’t have to face the usua...