OYO’s building an empire, by rooms
Mark Zuckerberg wanted to connect people, so he built Facebook. When on a snowy night in Paris in 2008, Travis Kalanick and Garrett Camp couldn’t get a cab, the two were inspired to set up Uber.business Updated: May 09, 2016 10:39 IST
Mark Zuckerberg wanted to connect people, so he built Facebook. When on a snowy night in Paris in 2008, Travis Kalanick and Garrett Camp couldn’t get a cab, the two were inspired to set up Uber.
And, when one night, 18-year-old Ritesh Agarwal was forced to check into a hotel after being locked out of his apartment in New Delhi, the below-par services — torn mattresses, leaked taps and useless sockets — gave birth to OYO Rooms, which will soon be renamed only OYO.
“That’s how large companies are built — by solving a personal pain point,” says Agarwal, a college dropout and the first Asian to graduate as a Thiel Fellow (the Thiel Fellowship backed by PayPal founder Peter Thiel requires its Fellows to drop out of school and start their own businesses).
Agarwal started in 2012 with Oravel, a software to list-and-book budget and premium accommodations, before going on establish OYO Rooms in 2013. But Oravel soon hit a dead end — there were many players in that space — Expedia, MakeMyTrip and Ibibo, to name a few.
During his days at Oravel, for three-and-a-half months, Agarwal hopped on from one hotel to another, trying to understand the need of travellers. At some hotels, no one would pick up the phone, while there would be no signage at others. Mattresses would be torn, plug points would not be working properly, and so on and so forth.
So, Agarwal started talking to hotel owners, asking them to hand over the property. OYO would refurbish them — put up clean mattresses, equip them with high-speed WiFi and good toiletries.
As Agarwal told Rajesh Yadav, OYO’s first client: “If the property loses money, I will take the brunt. If it makes money, we split it up.”
But refurbishing entire hotels had its own problem — it took time to make money. So Agarwal decided to take up a few rooms at a time. “This helped in showing quicker liquidity,” he says.
Soon hotel owners wanted more rooms to be run by OYO. From 42% a year ago, OYO holds 71% (or 65,000 rooms) of the inventory in the 6,000 properties it is currently present. It recently raised $100 million from SoftBank and other investors. Grapevine says OYO is valued at almost a billion dollar, or maybe just short of it.
NOT JUST AN AIRBNB CLONE
Agarwal’s journey has not been the stuff that dreams are made of. In January, Kunal Pandya, CEO of software development firm Ncrypted, alleged that Agarwal was not a coder, and that Oravel was Ncrypted’s client. There were also logistical issues. Sometimes Agarwal couldn’t find the right properties, sometimes it was unviable to launch in certain cities. Last year, hotel aggregators, including MakeMyTrip, Ibibo and Yatra, banned inventory from OYO, and investors started questioning the company’s business model. “What is the global equivalent of OYO?” they would ask. Agarwal would say “none”, not even San Francisco-based home-stay rental major Airbnb, which has often been considered as OYO’s inspiration.
“Our ambition is to take up any piece of real estate, standardise it and put it online,” Agarwal says.
Airbnb is just one of OYO’s many problems, and with the US company announcing grand plans for India, the competition is only going to hot up.
Back home, OYO is up against Rocket Internet’s Zen Rooms, FabHotels, Stayzilla and Wudstay, among others. There is also ZO, which OYO is trying to acquire.
Agarwal is also lining up his artillery.
The 22-year-old has signed contracts to add 100,000 rooms to OYO’s exisiting 65,000. In the next five years OYO will have a million rooms, cornering a third of the market. Besides the bed-and-breakfast OYO Homes, there is Flagship, which is expected to give a Taj Vivanta-kind of experience. OYO has 25 such properties. There is OYO Premium, where the service quality is a tad higher than the Rooms.
Agarwal wants to standardise every piece of real estate – even temples, if he can. “They don’t look great,” he says. Why only temples, Taj Mahal is also on his mind. “It’s in a very bad state, there are spider webs as you enter.”
Who knows, soon Agarwal may be seen cleaning up those webs.