Oyo Rooms business model is the innovation of Ritesh Agarwal. Ritesh founded Oyo Rooms in 2013 and it is currently one of the largest hotel chains in India. Moreover, Oyo Rooms hold the rank for being the third largest and quickest growing hospitality chain of leased hotels and living spaces.
After its inception in 2013, Oyo initially offered only budget hotels. However, with time, Oyo expanded and is now currently offering more than 35,000 exclusive hotels. Oyo is available in more than 800 cities as of yet.
Their recent growth has made them the fastest growing hotel chain in the world. Oyo started from India but it has now expanded all around Asia. Furthermore, they have also began operations in Europe.
Oyo Rooms use a variation of the famous aggregator business model. This business model has proven to be fruitful for numerous companies. Uber, the ride hailing app, is one of the greatest example of successful aggregator businesses.
They initially started using the aggregator business model but things took a turn as the company rapidly grew. There are two phases in their business model and we are going to talk about both phases.
The Initial Phase
Oyo Rooms employed the aggregator business model in the beginning. Most of the hotels available on Oyo were partners of the brand. Furthermore, they leased rooms so that they could sell them on their website and mobile application.
However, this has changed since 2018 due to the growth of the business.
Main Focus of Oyo Rooms
Oyo focuses on providing standardized quality to its customers. Their brand image is built around the idea of standardized quality of service. To maintain this quality and brand image, Oyo teams up with partners who are willing to follow a set of rules and regulations.
Oyo Rooms Business Model: Is It an Aggregator?
In a constantly evolving market, it is hard to follow a set path. More often than not, you are expected to make crucial decisions on the fly. These decisions define the future trajectory of growth.
Oyo Rooms started off by following the aggregator business model. The aggregator business model is also followed by Airbnb, a direct competitor of Oyo Rooms. However, Oyo Rooms changed their business model to a variation of aggregator business model that includes some aspects of the franchise business model.
They not only provided hotel listings to their customers, but also provided standard quality in their services. Something that is done by the likes of Uber.
This meant that the customers were directly dealing with Oyo Rooms and they did not care about the partner who was rendering the service to them. In return, the listings offered by Oyo have standard quality and price.
However, with more time passed, Oyo Rooms switched entirely to a franchise business model. More than 90% of the revenue that is generated by Oyo Rooms comes from hotels that fall under the franchise model.
The Oyo Rooms Business Model Details
Like mentioned before, Oyo Rooms have changed their ways of operation. Previously, the company used to lease some of the hotel’s inventory beforehand. This inventory was then rebranded as Oyo Rooms.
These rooms were prepared by partner hotels. All these rooms had standard quality of service as agreed between the partner and Oyo Rooms. Customers booked these rooms through the mobile application or the website.
Furthermore, not much has changed since then. There has been only one major change in the business model. Oyo Rooms no longer lease the hotels. Instead, the partners are asked to run those hotels as franchises.
This particular change in the business model affords better brand equity and boosts the revenue generated by hotel partners. The hotels saw a 100% rise in their profits with this model.
Working of the Partnership Model of Oyo Rooms
Oyo Rooms is associated to different hotels around the world. They partner with other hotels who are willing to follow Oyo’s set of rules and regulations. These partner hotels act as franchises. The customers of Oyo Rooms can stay at any of the hotels that are under the partnership with Oyo Rooms.
Oyo Rooms and the Services They Provide
Oyo Rooms are famous for providing hotel rooms but they have a wide range of offerings on their website and mobile application.
During the early days of the company, Oyo Rooms used to lease hotel rooms and provide them to their clients. The offered rooms had standard quality and were exclusively available to the customers of Oyo Rooms. These rooms were sold for profit by the company.
However, the offered rooms are now franchises and the partners are now responsible for providing the grade of quality set by Oyo Rooms. For more convenience of the business owners, they can ask Oyo Rooms to operate the entire hotel.
Oyo Rooms lease hotels in which they have control of the daily operations of the management. This give Oyo the ultimate control. This control allows them to provide consistent level of satisfaction with their services.
The Oyo Townhouse is there to suffice the needs of a traveler of this era. The hotels offered in this category of listing have all the necessary perks and amenities that a modern travelers looks for in places they visit.
The rooms are better in this category because facilities such as bathrooms, bedrooms etc. are modern and have utilities such as internet. The smart sharing of public places also boost the approval of Oyo Rooms.
Oyo Rooms Business Model and Revenue Generation
The revenue is generated from the commissions that are charged by the company. The current rate is 22% commission from hotel partners. This rate can fluctuate according to the services rendered.
Oyo Rooms make money through commissions that are charged at 22% of the total cost accrued by the customer. They initially started with the aggregator business model but gradually shifted to the franchise business model when the business took off.