OYO (Oravel Stays Pvt Ltd) has been adopting various strategies for expansion. But the franchise strategy has found success.
Ritesh Agarwal, CEO of Oravel Stays Pvt ltd launched a website for hotel bookings in 2012. After staying in over 100 Hotels to research the industry, he pivoted his startup to OYO rooms. OYO rooms started with one hotel in Gurgaon in January 2013 and by September 2017 it had around 70000 rooms in 8500 hotels. In 2015, at the age of 21, Ritesh raised $25 million from investors like, sequoia, DSG Consumer Partners, Light speed ventures and San Francisco based Greenoaks Capital.
In December 2017 OYO announced that it will be changing its expansion strategy from hotel aggregator model to the franchising model and all hotels will be shifted to the franchising model. Mr Agarwar said that moving to the franchising model had very less impact on the pricing of the rooms. Due to the shift the company is able to manage, agreements, franchise partners, and hotel inventory more efficiently with fewer hotel staff. OYO has new procedures in place for all franchises, for example, one floor manager assigned for every 100 rooms, simplifying the managers work by data analytics and computers, auditors for checking 30% of hotels every day, etc.
The franchise strategy has turned out to be very successful and the company is generating more than 90% of its revenue from the new model where it is has leased out hotels from owners. It is adding 10000 rooms or 500 hotels every month by this strategy. The franchise model has increased the OYO’s commission from 18% to 22%. Its 5% is a increase.
Franchise consultants at Sparkleminds have been helping various brands adopt the right franchise strategies for about 20 years. The brands have been able to shift to the best suitable franchise model quickly so their growth over the years has been rapid. To find out if your business can grow the same way on a large scale Register and take a Franchise Quiz, you may score high right away.
