OYO Case Study – OYO Business Model Made It World’s Best & Fastest Growing Hotel Chain 2022

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OYO Business model made Ritesh Agarwal the owner of the world’s fastest-growing hotel chain, and today 50% of the business that is in India, have built it in China too, what a speedy growth!

OYO is connected with more than 23,000 over the world containing more than 8,50,000 rooms which are providing the best hotel services to the customers.

Ritesh Agarwal created a goal to create great living spaces for a common man, which seems impossible for any business analyst because both attributes are opposite.

The common man can not afford the great living spaces and great living spaces were not made for a common man and Ritesh Agarwal committed himself to make this possible.

In order to execute his business idea, Ritesh applied many failure-proof strategies with proper teamwork having the analytics on each step.

OYO is the world’s Fastest and Biggest growing hotel chain, so what are the strategies used in the backend, what are the root causes of this massive success, everything is going to be explored in this article.

How Ritesh Agarwal Started His Entrepreneurship Journey

OYO Business Model

Firstly in 2012, a teenager established a company named Oravel Stays Private Limited in Gurgaon.

He approached the owner of one hotel that his hotel business was not generating a profit, and none of the customers were availing of their hotel services.

He offered the deal of supplying the customers with his own strategies and he will bring the customers to the hotel and will take a small share from the profit.

The owner of the hotel declined Ritesh’s offer, as he was seemingly a teenager, and not only one hotel owner, many hotel owners refused to work on Ritesh’s strategy.

Despite many rejections, he did not give up, he offered a new deal of taking the full responsibility of loss, and fifty-fifty partnership in the profit.

The hotel owner agreed with this strategy and permitted him to move on with his business model.

He refurbished the hotel completely from the inner side and outside to attract the customers, he cleaned the beds, toilets, walls, ceilings, floor, and everything.

It was too costly to provide the higher class facility at low rates, and he thought that if he wants to make his business scalable, he is supposed to integrate the technology with his business model.

As a result of his highly visionary thought process, he founded OYO – On Your Own.

He covered the very important attributes of the OYO Business Model – Higher Revenue, Repeat Customer, Efficient Operation, and High-Class CRM.

Seeing the scalability of the OYO Business Model, many hotels started to offer their hotels for rent to OYO one by one.

Asset Light Strategy

Ritesh Agarwal believed that to run the business without inventory, he did not want to invest in inventory, he was planning to work as a service provider.

He did deep market research and concluded some interesting facts.

  • There are multiple small hotels that are empty, but have a great potential of generating revenue.
  • There is a huge universe of unbranded hotels.
  • There was a large customer base who wanted to work on the affordable price base model.
  • Lower-Mid segment customers wanted great quality, best location, and low price.

Ritesh started by focusing on the location aspect first, he chose the location around the mall, railway station, airport, and corporate hub.

He researched in more depth and noted that over the world, there are more than 90% of hotels having less than 100 rooms, and only 10% of hotels having more than 100 rooms.

He observed that none of the people were utilizing the services of that 90% of hotels, and Ritesh picked those hotels.

Ritesh found the greatest opportunity in working on those hotels which were vacant, and a new idea was born.

According to his thought process, properties are already available, he just needed to utilize them. Why should he invest in making hotels when hotels are already made.

By using the business mind, he thought that he would not make the hotels, he would do the partnership with the existing readymade hotels.

He studied the Indian Population’s tendency and made a business plan to make the hotel’s room available for middle-class customers in just Rs. 1000-2000.

Instead of making partnerships with 5-star hotels, he integrated his business with the 4 star and 3-star hotels on which no one was paying attention.

By refurbishing those hotels in an advanced way, Ritesh grabbed everyone’s attention on those hotels which were vacant for a long time.

The founder of the OYO business model implemented the Aggregator Business Model, where he was supposed to make his brand name with others’ inventory.

What is an Aggregator Business Model?

OYO Business Model, Aggregator Business Model

Aggregator business model strands for making the own brand by using their parties inventory by adding our own efforts, money, and strategies.

Ritesh provided those hotels the staff Training, Uniform, Quality, Price, and Standardization by which the business of those hotels picked up and it impacted the OYO Business Model Positively.

End to End Responsibility For Customers Experience

The Business Model of OYO took the responsibility of the customer from registration to check out along with taking the payment and price responsibility.

Ritesh upgraded the hotels by investing a little bit in it, which was looking too attractive from the outside and inside as well.

Here is the center point of the Business Model of OYO, the founder of the hotel, who has already spent around Rs. 50 Cr. , and Ritesh Agarwal spent only 2-3 lacs to upgrade it.

By implementing this strategy, Ritesh provided the below eases to the customer, which picked the OYO business model on the top.

  • Ease of Hotel Search
  • Ease of Hotel Booking
  • Ease of Check in
  • Ease of Check out
  • World Class Experience inside the hotel

Repeatability of Existing Customers

The OYO Business Model is not working on just grabbing the customers, it is working on converting the first and existing customer into a loyal customer.

But for making the existing customer converted into a loyal customer, they have to grab the customer first, and in order to execute it, they need to apply certain strategies.

He started the Audit Mechanism System to improve the business model of OYO.

He appointed a cluster manager for every 6 hotels, who was auditing one hotel every day, and this process was set for every week.

While auditing, there are almost 160 checkpoints that need to be verified, amongst those, below are some.

  • Electricity Availability
  • Water Audit – Availability, Softness, Temperature etc…
  • AC and Fan Service
  • Wifi Speed and Connection
  • Quality and Service of Eatables
  • Room Cleaning
  • Condition of Appliances
  • Room Amenities
  • Position, cleanness, and Condition of Beds

The Business Model of OYO was based on the Low Budget, and Common Service mechanism, which was repeated by the business model of OYO, and business was getting scaled regularly.

Transparency Module

Sometimes, while ordering any product online, it happens that the product you received is quite different from what you saw on the website, isn’t it?

But Ritesh knew that he would have to keep the full transparency with customers while offering the hotel rooms.

In order to keep transparency, they were uploading the original high-quality photographs of the hotel which appeared to the customer while booking.

As a result of this strategy of the OYO Business Model, the customer was getting the exact rooms that were reflected on the website while booking.

With the repeating experience of transparency, they got the strong trust of the existing customers.

Implementation of Technology

Business Model of OYO

You might have come to hear one very good saying: Poor people work below the neck and rich people work above the neck!

Ritesh Agarwal is amongst the people working above the neck, and he integrated the OYO business model with the technology.

Meanwhile, the business was expanding more and more day by day in India and outside countries as well.

Hiring the manpower for each hotel’s audit and management was not affordable, if they do so, they could fail to provide a great experience at a low cost to the customer, which was the base of the OYO Business Model.

He made such a mobile application that was enabling the customer to book the room in just 3 clicks and 5-10 seconds.

By implementing the technology attribute, they controlled the three major aspects which directly impact the business revenue and business model.

  • Customer Experience
  • Operational Capability
  • Efficiency

Along with focusing on these major aspects, Ritesh Agarwal created a dedicated data science team, which was a very critical task.

Ritesh had a clear vision that constant innovation is the revolution of every business, and that’s why he set up a dedicated innovation team as well.

He applied a huge fund on innovation, and many of the innovations did not get success as well but kept on to do so.

After analyzing all the views of technology, he channelized Technology, Internet Factors, Artificial Intelligence, and Machine Learning, he built a very strong business model for OYO.

The output of manpower can not compete with the output of the technology so he thought of implementing the technology for the OYO Business Model.

OYO uses the Crypton Mobile Application to manage the worldwide hotels connected with it, which is their internal application.

By using this mobile application, they can conclude the price point of every hotel room of the world associated with the OYO.

They were able to fetch the analytical data from that mobile app like:

  • Rate of Return
  • Yield
  • Earning
  • Inventory
  • Price Point

Now, after introducing the Crypton App, the total work of 20,000 employees was managed by just 100 people, which was saving their cost as well with the accurate data with the best output.

Focused on Acquisition and Expansion

OYO Business Model was founded in 2013 with integration with only one hotel in India, in 2014, there were 5 hotels tied up with OYO, and now, the number is more than 10,000, associated with 12+ countries over the world.

Expansion of the Business Model of OYO was too fast due to his ultimate decision and teamwork strategies.

There is a dedicated team for the business explanation which ties-up with the different hotels every day, and adding them to their inventory.

They are increasing 50,000 rooms per month, and according to their vision, they have a goal to integrate almost 25,00,000 rooms with OYO Business Model.

What is the reason behind the faster expansion of OYO Business Model? Of course, It’s Technology!

The credit of faster business expansion goes to the expansion team, the expansion team makes the deals very fast by using the technology.

They don’t rely on the traditional typical methodology of making the deals, they work with the technology.

The expansion team avoids making the dealing process lengthy for the days, they communicate on mobile via the app, they send the contract on the application and make them signed by the hotels, and all inventory is monitored on mobile as well which cuts the wasting time.

Strategy of Feedback & FeedForward

Before the introduction of the OYO Business Model, customers were not getting the proper service, and due to the monopoly and lack of channelization and competition, customers were not being treated properly.

OYO founded a feedback system where a customer can directly register a complaint about any issue, by which the hotels became customer conscious.

They were taking the constant feedback from the customers about the staff, service, quality, and amenities of the hotels.

Hotels could be delisted as well if they were not supposed to follow the guideline. In very few times, the OYO Business Model dominated the hotel business world.

Maintaining The Manpower With Low Cost Training

Humans have created technology, technology has not created humans!

The work can be done by humans, can not be executed with the same quality by the technology, along with the implementation of technology, Ritesh did not avoid the importance of human thought patterns.

OYO established 25 skilling institutes where the employees were being trained by the CXOs to grow the business in an exponential way.

They monitor the behavior of the staff continuously. If they find that any employee is not performing well, he is not responding well to the customers, they give him refreshment training by bringing him to the skilling center.

After the refreshment training, the training team cross-examines him by passing him through different parameters and then lets them resume the service.

After resuming, they monitor him forever, and on the missing part, they upgrade him, what a nice strategy!

Conclusion

The current strategy of your business model decides the future face of your business, Ritesh Agarwal did not ignore a single micro step for his business growth, and you can see the result.

The total number of rooms of Top 10 hotel chains companies is not at least 50% of OYO, isn’t it the greatest achievement?

Who thought that a teenager of 17 years (while starting OYO) can establish a company of more than 35,000 Cr.INR?

The reason behind the OYO Business Model is the channelization of technology and humanity, working on each micro level step, and teamwork.

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