Business Model of OYO Rooms

OYO Rooms is an aggregator that provides a market place for online hotel booking
similar to Uber, which provides a marketplace for online cab booking. Started in the
year 2013, OYO is turning into Indias largest chain of hotels. It has a very simple
business model where it adopts hotels, get them to follow certain basic standards of
services, features, staff, pricing and security and then list them on its web portal
and sells them under its brand, earning a part of the profit from the deal. Currently
the company is following invest and expand mode. Till now it has received funding
from the big firms like Sequoia and is estimated to be worth $400 million after its
latest round of funding in August this year, where it received $100 million.
OYOs asset free business model has now challenged the capital heavy hotel
industry. The company does not own any of the properties listed on its site. It only
invests in marketing and quality improvements for the hotels under its banner. The
model provides a win-win situation for both the small budget hotels and owners of
spare properties, who do not have enough capacity, network and knowledge of
smart marketing. OYO has helped them increase their bookings by more than 100%
thereby improving their yields.

Unique Selling Proposition

Finding hotels in India is not a big problem, the major issue is the trust factor and
predictability of services. OYO founder, Ritesh Aggarwal, capitalized on this basic
need by providing standardized hotel rooms across the country. The complete model
of hotel industry is based on consumer experience, and with the beautiful
amalgamation of technology and quality control mechanisms has improved
customer experience even at economical rates. The complete model is designed
keeping in view the consumer experience, right from booking to finding hotel to
standardized services to high technology room service option. To further enhance
the customer experience, company has tied with Airtel to provide its customers a
world class in-room internet and TV viewing experience at no additional cost.
OYO rooms has also started two new sub-divisions to increase its hold on the
market:
OYO Premium Moving from the budget room segment, company has also started
premium room service in metro cities to increase its customer base. OYO premium
rooms will cater those business travelers or families who are looking for premium
services and are ready to shell out few extra bucks for higher comfort.
OYO WE OYO WE a Women exclusive brand, started by OYO Rooms to cater for
women travelers with all women staff and special amenities for women. Some of the
features particular to this category include automatic door locks, hair dryer, full
length mirror in rooms, doctor and beauty services on call, apart from library with
magazines for women and cab services outside the property.

Customer Segment
The soul of any business lies in the customers it serves. No business model can
survive without taking into consideration the customer segment it wants to cater its
product or services. And then create the rest of the model based on needs and
demands of your customer.
Since OYO works as a platform that serves two interdependent customer segments,
the visitors and the hosts:
1. Hosts
In this section the company targets anyone who has a spare room or property that
can be rented giving the owner extra income. The owner has to spend some initial
amount on the room to make it as per the standard set by OYO. Currently it has tieups in 158 cities in the country and has around 5000 hotels.
2. Visitors
The hotel industry in the country has been traditionally dependent on tourists both
travelling across the country and the tourists from abroad who come to see the
diverse culture, climate and historical places. Another growing segment of the
customers are business travelers. This segment prefers comfort and normally have
a long stay which may even extend to months in many cases depending on the
project requirements.
Even for budget hotels of the category of OYO, these two customer segments stand
valid as the trend of staying in luxury hotels has recently shifted to budget hotels
where along with low costs, people feel more connected to the place. It also proves
to be economical for business travelers who have to stay for prolonged durations
and are looking for a more authentic staying experience than the one they get in a
hotel.
Another consumer segment that has emerged lately is the students, families and
entrepreneurs who are looking for short duration stays. Some of the entrepreneurs
have been permanently staying in such rooms that cost around 1K, and proves to be
cheaper than 3 BHK flat, where they also have to pay for brokerage, electricity and
basic amenities. Also this gives them an option of shifting from one location to
another on need basis and they do not have to bother about hunting for new places
to stay. For students who come on weekends to metros to take coaching, this is a
good option as they can rent rooms on sharing basis, thereby reducing there need
to rent a place in metros.
Oyo Rooms claims that its target audience is divided between customers and
consumers. Its customer ages between 21 year to 35 year while its consumer is
between the age of 16 year and 65 year.

Value Proposition
Value proposition basically defines the value being served to the customer segment
that you have chosen. It defines the particular need of the customer that your
product or service is satisfying. This can also be seen as the differentiating factor
that makes your customer come to you rather than other competitors in the market.
Different kind of value propositions can be newness, performance, customization,
design and price.

1. Standardization
The major problem faced by the consumers is the lack of predictability in the Indian
hospitability industry. More than 50% of the bookings by travelers are now being
done online, and the numbers are further increasing. In most of the cases, people
feel dissatisfied with the services that are offered when they reach the hotels as
compared to the services shown online. To tackle this problem, the company has
introduced an intensive standardization process. As a part of this process they send
their sales representatives to partner hotels to collect data and take pictures based
on which all the hotels are filtered. Only those hotels that meet the standards are
included in the portfolio.
The company has also came up with an application to make sure that the process
of standardization remains same in all the hotels across 150+ cities. All the sales
representatives that go for site visits follow the app on their tables. The app has
defined parameters based on which any hotel will be evaluated. The representative
checks down the complete checklist to make sure nothing is left as a part of the
standardization process. Also the application takes into consideration the customer
reviews which plays crucial role while evaluating any hotel. Making use of the
application and technology, the company has been able to come up with strict
quality checks across all the locations where they exist.

2. Technology
Success lies in taking the best use of available technology in a way that maximizes
efficiency of your business thereby leading to higher customer acquisition and
thereby profits. A lot of innovation these days is happening around making the
consumer experience better with the help of latest technology.

1. Mobile Application for Hotel Booking

The key factor where technology plays a major role is in making the transaction
cycle smaller. In the hospitality industry where you are always in a touch-point
with customer, the company focused on creating a highly efficient, easy to use
mobile application for the customers. The company managed to develop an
application where a customer can book the hotel within 2 steps. In first step, you
search your query, based on which the application comes up with a number of

suggestion in the locality. The second step will be just to click the book button to
confirm your booking. This is an attempt of the company to provide a simple and
seamless way to access and manage your booking.
A major contributor to the two-step process developed is the standardization
process which has made the used comfortable in booking without worrying about
reviews of the place.

2. Tablets in Rooms
This is another step taken by OYO Rooms, where the company has come up with
a tablet application for hotel owners that allows them to keep a track of room
status and room service requests. The tablets have been installed at all the hotel
locations by the company. This helps both the hotel owners and the company.
The app provides the owners logistics of their inventory whereas also provide
better visibility and data about the hotel to the company.
The company has now also come up with an idea to put up a tablet in each room
in some of the hotel rooms. Customers can order room service directly via the
tablet. The application designed for the tablet also includes other information
like hotel directory along with the list of restaurants and other places to visit
around the hotel.

3. Low cost
Another major value proposition provided by OYO is the prices at which rooms
are available. The prices are normally 35% below other hotels of similar
standards. Also this is the first time in India that services like tablet and online
booking are being provided in budget hotels.

4. Ties up with Airtel

To further increase its value proposition, OYO rooms has recently made a
strategic agreement with Bharti Airtel. As a part of this agreement Airtel will
provide seamless internet connectivity and Direct-To-Home (DTH) services across
more than 3,000 OYO Rooms pan India enabling OYO Rooms customers to
enjoy a world class in-room internet and TV viewing experience at no additional
cost.

Channels
This section caters to the channels through with the chosen customer segment want
to be reached. Either you reach them directly or indirectly, physically or digitally.
OYO connects with its customers via a number of channels:

1. Mobile Application
OYO Rooms launched the Mobile Application platform that allowed the customers to
do last minute hotel bookings. With the help of the application, booking has been
made extremely simple. A room can be booked within a minute just by following two

simple steps of searching and clicking on book. Application also provides the option
to order room service.

2. Web Portal
A customer can book a room online through web portal as well where all the
partners of OYO have been listed. A booking can be made free of cost and payment
can be made at the hotel. The portal also provides information about the city you
are planning to visit along with the details of places to eat and shop nearby.

3. Telephone
In case a person is not able to connect to internet, there is also a provision to make
the booking via the channel of Telephone. A customer can make a booking by
calling 9313931393. Cancellations can also be done with this channel.

4. TV Commercials and Social Media

OYO has also made its presence felt to customers via mass commercial and social
media. OYO Rooms has 3 lakh fans on Facebook and 9000 followers on Twitter. The
social media campaign of JaiHind that featured Manoj Bajpai and Raveena Tandon
was the most successful campaign of OYO Rooms. The startup has also launched
three commercial on Television with #AurKyaChahiye campaign. As per the
company the reason for taking the mass media route is that although the brand has
been a product of digital domain, but its consumer base includes even those who
are not present on digital media. By providing there commercials on television the
company is attempting to connect with those masses that live in small towns and
are not tech savvy.