INDIAN HOTEL INDUSTRY &
POSITIONING OF OYO
REPORT
GROUP 04
AJINKYA AHIRE 20063
GANESH P NIKAM 20076
SAKSHI VERMA 20101
VAISHALI TRIPATHI 20113
ABSTRACT
The objective of this project is to analyze the evolution of the Indian hotel industry and the
positioning of OYO in it. The unicorn startup has established itself as one of the key players
in the hospitality service market in a very short period. We aim to study the tactical
decisions taken by OYO along with the various marketing strategies adopted by it that led to
its success. The motivation behind choosing this topic came from the fact that we have the
first-hand experience of staying at an OYO. Our amazing experiences acted as a driving force
and encouraged us to research the back story and work of OYO. Also, this year, the owner,
who is almost our age, was in the news for all good reasons. He became the world’s second-
youngest self-made billionaire. How someone just like us could make it so big at a young
age, despite being a college dropout, made us more curious. Through this project, we hope
to learn the decision-making process involved in turning points of a business and expect to
gain managerial insights.
INTRODUCTION
INDIAN HOTEL INDUSTRY – THE BEGINNING
The roots of the hospitality sector are in the Hindu philosophy of ‘Atithi Devo Bhava’, stating
that an unannounced guest is to be given the status of God.
History of Indian hotel Industry:
[Link] and Medieval Era:
People used to stay in Dharmshalas and Viharas during ancient times. During the
medieval era, sarais and musafirkhanas were built. The sarais are places where the
traveler fulfilled the necessities – they provided water, a room, a stable for livestock.
[Link] Era:
The beginning of the organized hotel industry in India started taking place during the
colonial period, in the seventeenth century. First organized hotels like Georges,
Paddy Goose’s, and Racquet Court was built by the Portuguese in Bombay.
[Link] Era:
During the British period hotels like Taj Hotel (1903), The Grand (1930), Clarke’s
Hotel (1934), Oberoi Hotel Pvt. Ltd. (1946), East India Hotel Ltd. (1949) are
established. Post-Independence Late Pandit Jawaharlal Nehru realized the
importance of tourism, which could be an engine for India’s economic growth. This
led to the establishment of ‘Ashoka’ the first Government invested hotel. Indian
Tourism Development Corporation was set up in 1966.
EVOLUTION OF HOTEL INDUSTRY
The first hotel that was built by an Indian was Taj Palace Hotel in 1903 in Mumbai by Mr.
Jamshedji Tata. One of the major breakthroughs for the hotel industry was the economic
reforms of the 1990’s due to which India became an attractive destination for FDI. Also, the
government lead campaign of incredible India was a great success which leads to a
tremendous increase in the number of tourist arrivals. All these big events lead to creating
many new business opportunities in a rapidly developing country like India.
Taj, ITC, Oberoi often call as the big three dominated the landscape for decades with over
100-year-old Taj having a significant share in the branded market category. Also, the
positive image of these Indian hotels helped them to achieve global recognition. In 1991 the
government decided to open the Indian economy which leads to high economic growth.
Due to this huge potential available in this segment, global hotel chains like Hilton, Accor,
Marriot all announced major plans in the country. This in result given plenty of choices for
the customers.
THE SUCCESS STORY
Ritesh Agarwal founded Oravel in 2013. Due to his constant efforts, he managed to get a
Thiel Fellowship, which had paid him a sum of $100,000 over a period of two years to create
a start-up. He rebranded Oravel as OYO Rooms, a marketplace for budget hotels. The
potential investors of the startup were SoftBank Group, Sequoia India, Green oaks Capital
Hero Enterprise, Lightspeed India, China Lodging Group, and Airbnb who showed interest in
the business.
OYO Rooms became one of the dominant players in the Indian virtual hospitality brand. OYO
captured the market with its budget hotels and guesthouses, which enables the
accommodation discoverable by customers and easy to book through online platforms. It is
a managed marketplace of properties. The main aim of OYO is to provide travelers the
coolest yet cheapest, efficient, young, standardized rooms with no add-ons attached to it!
OYO Rooms has become India’s first network that has explored the area of technology in the
field of hospitality with branded budget hotels and has also widely expanded its presence to
become the largest hotel chain in India with a plan to become the world's largest hotel chain
by 2023.
Additionally, the OYO mobile app has a download count of 10 million with more than 5
million bookings so far. The app has managed to secure the third spot in the ‘Travel & Local’
category on the Google Play Store.
Monthly app download (in million) Oct 2019
4.5
3.9
4
3.4
3.5
3
2.5 2.3
2
1.5
1
0.5
0
1
Player 1 Player 2 OYO
BUSINESS MODEL: AGGREGATOR TO FRANCHISE
OYO initially started as a hotel aggregator in India, as they connected the link between the
hotels and customers. They just used to lease rooms from various hotels in different
localities and rent them to customers. But OYO wants something more, they wanted to
capture the market and provide quality services to their customer so they shifted their
aggregator model to a franchise model. Under the franchise model, they offer a partnership
to hotels and asked them to operate as a franchise under the brand name OYO, then they
start selling and renting hotel rooms to their customers at a competitive price.
The USP (unique selling proposition) that Oyo offers to its customers was a standardized
budget hotel chain with OYO branding, standardized hospitality services, and smooth user
experience.
OYO Marketing Mix
PRODUCT:
• Oyo rooms act as a bridge that connects customers with the hotel business.
• They pitch to various hotels to establish a partnership with OYO Rooms branding.
• And then provide these branded hotel rooms to customers under their brand name.
PRICE:
• OYO Rooms provided rooms at a low price making it economical for the users.
• Different lucrative discounts are offered under price strategy.
• It captures a different variety and range of customers in terms of income level.
PLACE:
• OYO rooms initially started in Gurgaon, later on, expanded to other places.
• Soon it covered a vast area of India.
• Even later on OYO rooms captured foreign markets starting with Malaysia and Nepal.
• OYO Rooms worked through online via website and apps to register and book hotels
by the customers.
PROMOTION:
• OYO Rooms targeted and attracted customers through different social media
platforms (Facebook, Instagram, and Twitter).
• Promotion through special discount offer rates to the customers.
• It also launched certain special virtual campaigns such as #oneforeveryone (love ke
side effects, dil to bacha hai, aadat se majboor, and parde ke peeche) where using
famous songs it attracted customers and #aurkyachahiye (5 seconds hi to lagte hai).
PEOPLE:
• The leaders of OYO are two youngsters who are dedicated to making a change in the
hospitality sector.
• OYO comprises a team of young, potential, and energetic employees who are
dedicated to the company as well as individual growth. The positive environment
helps them to work to their full strengths.
PROCESS:
• OYO provides a platform for customers to search the hotels according to their needs
such as price, location, etc.
• OYO rooms act as an intermediator between the users and the hotel business and
gain their share as commission fee on booking.
• The services are provided by hotels, OYO only helps customers to select hotels
according to their needs.
PHYSICAL EVIDENCE:
• On booking of a room, OYO provides the user with a confirmation through mail and
message, which act as evidence.
• This mail and message were used to check-in at the hotel.
STP – VALUE PROPOSITION AND CUSTOMER SATISFACTION
Market Share (March 2017)
2.9
13.6
2.5 3.3
0.6
6.6
2 68.45
OYO Nightstay Roomstonit [Link] Agoda Booking Trivago AirBNB
SEGMENTATION:
• Luxury Travelers: no compromise in quality and services, destination holidays,
vacation and relaxation
• Adventure Travelers: explore, backpack travelers, frequent, budget-conscious, can
compromise on quality, small groups
• Family Travelers: large group or family, events or gathering, spacious and
comfortable stay, high budget
• Business Travelers: commercial purpose, business executives, technology-savvy, no
compromise on luxury high budget
TARGETING:
• Business Travelers were targeted as due to personalized services and amenities are
offered by OYO branded rooms.
• Adventure Travelers were targeted because OYO rooms were offering standardized
budget-friendly services to the customers.
POSITIONING:
• Quality: OYO focused more on the quality of the rooms they are providing under the
brand name so build the reputation in the market.
• Convenience: OYO focuses on an easy and convenient way so that customers can
easily operate their services without any hassle.
• Value for money: It presented how the value it is providing to the customer is worth
to the amount they have paid to avail those services.
• Care for the customer: OYO positions its attention towards how to cater to the
customer and gain their trust.
VALUE PROPOSITION:
OYO presented a good design application with a simple and easy UI that makes use
of it by users convenient. On the app, it provides speed and reliable search for
personalized rooms which enhances the customer experience. It also offered
lucrative discounts to attract the customer base. Overall amenities i.e. standardize
service, entertainment services, and basic services are all maintain by the hotels
under the OYO brand.
CUSTOMER SATISFACTION:
The easy and convenient self-serve application helps customers to search for
personalized rooms according to their needs. Fast customer service support through
feedback and customer staff interaction builds trust and reliability for the OYO
brand.
SWOT ANALYSIS
1. Strengths:
• Fast-growing network: One of the clear strengths of Oyo is its rapidly growing
network. Starting from one hotel one room idea, OYO currently has around 13000
properties including motels and homestays.
• Innovative spirit: The main concept of conceptualization of OYO hotels shows its
high innovation. The company’s policy of standardization of the stays is proof of its
strong spirit of innovation.
• Standardization: Oyo hotels are mostly owned by providers and
standardized under Oyo’s franchise which gives it an upper hand over its
competitors as people get to enjoy standardizing service at all places.
• Subsidizing Hotel Stays: Oyo’s idea of subsidizing rooms to make them affordable for
everyone has undoubtedly increased its customer base.
• Highly spirited young leader: The Strategies taken by Oyo always has a freshness
because of its young founder Ritesh Agarwal which undoubtedly a strong reason
for Oyo’s instant success.
2. Weaknesses:
• Co-branding Strategy: Oyo is mainly a hotel aggregator which do not own the rooms
but just cobrand with budget hotels where transactions between the buyer and
seller happen through Oyo’s common window.
• Poor quality of service: Though they standardize services for the stays based on the
prices they charge, they failed to do the same with their services which made people
question its reliability and service quality.
• Margins: Hotels in tie-up with Oyo, loop in with other companies that are not
in Oyo’s control but depend on the margins provided, which seems to be risky for
them in long run.
3. Opportunities:
• Increasing aggregator’s demand: With the struggling with recession, job losses, and
salary cuts, most luxury hotels are fighting to match the demand in the market. In
this scenario, Hotels are preferring aggregators like OYO to source their newly
established business.
• Focus on a budget: Nowadays people are focusing more on saving rather than
following the earlier trend which was more biased towards luxury
hotels. Thus, demand for the budget stays that provide affordable boarding and
lodging facilities are very high today.
• Increasing Business travelers with emerging economies: A surge in the number of
business travelers from both genders in the growing economies has increased
the demand for budget hotels.
4. Threats:
• Competition: With decreased barriers to entry, most of the new entrants tend
to offer aggregating services like Oyo.
• Safety concerns: With an increase in the number of harassment cases, people
assume stays to be unsafe. Though Oyo does not guarantee safety, they have a
moral commitment to ensure the safety of their customers.
TOP OYO COMPETITORS
[Link]
One of the biggest competitors of Oyo is Yatra. It is an online travel search engine and
agency which was founded in 2006. After OYO captured most of its market shares, the yatra
is trying different business strategies to regain the lost shares.
An Atlanta-based software firm Ebix wants to acquire Yatra through a $337 million merger
deal which will make yatra a part of their travel portfolio, however, they will continue to
serve their regular customer. This acquisition will make the competition stiffer for OYO that
currently leads the market.
CLEARTRIP
Cleartrip being the second competitor is India’s second-largest online travel aggregator
which provides online travel services like booking flight and train tickets and other activities
in India and some middle east countries.
Cleartrip, with a 20% market share is currently focusing to capture a 20-25 % margin from
hotels and business activities and 5-6% from train and flight bookings, which seems to be a
threat for OYO in the long run.
TREEBO HOTELS
Treebo Hotels is an Indian budget hotel founded in 2015 with the purpose to provide high-
quality services in the fragmented and unorganized budget segment of the hospitality
industry in India. It currently has over 600 hotels in around 115 cities in the country.
The startup follows the full-stack model like Oyo where it ties up with various hotel owners
and runs their properties.
To earn more profits, the company has made certain changes in its strategies like adding
other sources of income Hotel Management CMS Super Hero to cater to non-tree branded
hotels and managing issues of hotel owners by removing the minimum guaranteed.
MAKEMYTRIP
MakeMyTrip is India’s largest travel agency which provides online services like booking
flights, bus and train tickets, hotel reservations, and holiday packages. It follows the same
business model as other top travel aggregators and charges a certain margin on stay
bookings as well as flight and train bookings.
The company has 14 company-owned and 30 franchisee-owned travel stores in various part
of the countries as well as in foreign countries like in Singapore, New York, Dubai, and
Bangkok
The company has made certain changes to expand its services like adding loyalty programs,
experiences, ground transportation, and business travel services to compete with [Link] has
also started its service in the US market to cater to the Indian community living there for
their US to India travel needs.
FAB HOTELS
Fab hotel is a chain of 3-star Indian budget hotel with 400+ hotels operating in around 50
cities of the country. It's the funding of Rs 40 crore from its existing and new investors (As of
Feb 2020) will surely add more strength to the company’s war chest Which would make
competition stiffer for OYO.
AirBNB
Airbnb inc. is one of the main competitors of Oyo in the international market that arranges
or offers homestays, lodging, and tourism experience. . The company acts as a broker
receiving commissions from each booking instead of owning any of the real estate listings
and hosting events.
MULTI-BRAND STRATEGY
• OYO Hotels (OYO Rooms) offers the most affordable and budgeted stay with high
quality and modern amenities at the best locations.
• OYO Townhouse aims at targeting millennial travelers aspiring for premium
economy accommodations.
• Capital O are premium hotels that are located at prime locations which attract the
new age travelers with the facilities that desire for when it comes to business &
leisure stays.
• Silver Key provides a luxurious stay for corporate travelers on business trips for a
short or long duration of time providing them with executive furnished
accommodation.
• Palette Resorts offers the best stay for those who desire an interesting experience at
affordable prices. These come under the upper-end leisure resorts category.
• Collection O caters to the requirements of business travelers with bigger and
spacious rooms, premium furnishing, and personalized amenities.
Preference for Hotel Booking
5% 4%
14%
77%
OYO GOIBIBO MAKE MY TRIP TRIVAGO
Brand Positioning through CSR
OYO is navigating through the pandemic, committed to its employees and customers. It
has been taking the Covid-19 challenge and supporting the fight against the pandemic
well. Many OYO hotels are being used for a noble cause, exclusively putting a roof over the
head of homeless people.
Fighting the pandemic
It has launched an initiative called ‘Sanitised Stays’ for a zero-touch check-in and check-out
experience, leaping forward towards the digital age. And has also introduced Yo!Help, a self-
help tool for customer queries, tech-based solutions to minimize human contact, and
maintain social distancing norms. It offers 24*7 real-time chat assistance for guests who
have booked accommodation or want to book one and assists them till check-out and even
post that for after-experience.