Oyo Rooms is a web based platform that allows you to books standardized hotel rooms across different cities in India.
Oyo has tie-ups with various hotels across the country to offer customers standardized hotel packages that include AC rooms with free WiFi and Breakfast. Oyo ensures a standardised product offering to its customers by including only those properties (hotels, homes etc) within its network that meet its pre-defined standards of quality.
In this post we discuss the revenue model of Oyo Rooms.
Oyo rooms has no inventory of its own – which means that it does not own any of the hotels that customers book through its platform. It provides an interface for users to search for and book hotels which are part of its network.
Update: Since the writing of this post OYO Rooms has changed their business model significantly. Though they continue to hold no inventory of their own, their business model has evolved into managing the entire hotel property on behalf of hotel owners. More on this below.
Founded by Ritesh Agarwal, Oyo started its journey with just one network property in 2013 and now claims to have presence in over 230 cities across India. Quite recently, it has tapped into the International Markets as well.
The Oyo Rooms Business Model:
Oyo Rooms started out as a Web Aggregator.
An aggregator brings together different businesses offering a similar service under an umbrella branding.
Initially Oyo Rooms partnered with hotel owners to market a part of their inventory of hotel rooms under the OYO branding. However, to be accepted into the OYO network, the hotel owners had to ensure that their rooms confirmed to certain defined standards of quality.
OYO pre booked a part of the hotel inventory (rooms) at a negotiated price.
They would then list these inventories on the Oyo platform under their own branding (ideally at a higher price).
The difference between the price negotiated with the hotel owner and the price at which the rooms were sold to the final customer, represented their profits.
How Does Oyo Rooms Make Money?
Oyo makes money by charging property owners a commission based on the tariff of the rooms booked through the OYO platform.
Prior to a shift in their business model, Oyo pre-booked a part of the hotel’s inventory of room at a guaranteed price. They would then sell these rooms under the Oyo branding at a higher price on the OYO app. The difference representing their commission.
Oyo called this the Net Take Rate and according to this blog post, this generally ranges between 15 to 20 % of the room tarrif. This Take Rate can however be higher or lower depending upon a number of factors which include the location and popularity of the hotel among others.
Note that OYO had to pay Hotels the guaranteed price irrespective of whether they were able to sell these rooms to the final customers.
Change in Focus:
Oyo Rooms has gradually shifted its focus from being an aggregator to managing the entire hotel property on behalf of the hotel owners.
With exclusive tie-ups, Oyo is now sells the entire inventory of hotel rooms under its own branding.
Hotels benefit from this tie-up because being listed on the OYO platform gives them more exposure (Oyo being an established brand) and helps their top line by bringing in more business.
Other Revenue Sources:
With the acquisition of Roads Less Travelled, OYO has also started marketing Holiday Packages through its platform (under the Oyo Total Holidays Branding).
Quite recently it has expanded its product offerings to booking of Banquet Halls and wedding venues under its platform.
It has also ventured into the business of managing “home stays” on behalf of the property owners.
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