How OYO outgrew Gurugram and conquered China?

340,000.

Where does it stand in the Indian Universities?

That’s the number of rooms that OYO currently claims it has in China. Nearly double its Indian inventory. And this despite only landing in China as 2017 was drawing to a close. The number of rooms in China may seem astronomical, but, as OYO’s China CFO Wilson Li explains, scaling is relatively easy as the Chinese market is 10X the size of India’s. It’s growth, he says, that is hard.

OYO, though, will not be deterred. If the SoftBank-backed hotel chain is to achieve founder Ritesh Agarwal’s stated goal of 2.5 million rooms by 2023, China will be key. And it took yet another step in this direction with its first acquisition in China this past week, snapping up its smaller rival, Qianyu.

An efficient hotel chain

Qianyu, which loosely translates to ‘Thousand Islands’, is a mid-range hotel chain with a similar model to OYO. It targets individual hotel owners, bringing them onboard its platform and linking them under one cohesive brand. Launched in August of 2017, the company has nearly a thousand properties across more than ten cities in China, according to its website.

An OYO spokesperson, however, told this reporter that Qianyu’s operations will remain independent. Interestingly, for a company that practically infests India’s larger cities, 80% of OYO’s properties in China are in Tier 3 or smaller cities.

OYO intends to continue its brisk and unrelenting march across China. Swallowing up individual hotels and small chains as it looks to recreate its omnipresence in India in a foreign market. But how did OYO get this far in China? And how does it intend to conquer a market that, as Uber and Amazon can testify, is notoriously hard to break into for outsiders?

Finding bearings

OYO doesn’t try and hide its Indian origins. However, the way it’s run makes it seem completely local on the ground. “I couldn’t quite believe it when they told me the company was Indian,” said a security guard at a newly-branded OYO hotel in the port city of Tianjin. He had worked at the same hotel for decades before the owner decided to join OYO in August of 2018. OYO has about 6,000-odd employees in China, the vast majority of whom are local.

“I believe we are a Chinese company,” says Li. “There’s no hierarchical relationship between us and India. The decision-making is completely separate.” Structurally, the company is completely separate from the Indian entity. It is owned by parent company OYO Global along with a clutch of private Chinese investors.

In addition, OYO also secured a $10 million investment from Huazhu Group Limited in September 2017, around eight months before entering China. Huazhu Group runs one of China’s largest economy hotel chains, Hanting. This further bolsters OYO’s Chinese credentials.

OYO, though, has taken nothing for granted. Rather than announcing its arrival by making a big splash, OYO instead chose to test the waters. It began with trials in November 2017 in Shenzhen, China’s tech hub in the southern province of Guangdong. OYO approached and partnered with local hotel owners, surveying them periodically as they operated over the following months. By May 2018, OYO had the information it needed.

The trials showed that owners of standalone hotels were interested in what OYO had to offer, and there was a largely untapped market of these hotels. With its homework done, OYO set to work.

 

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