I wish we had something like that in Wales. Sometimes after a day in the hills I’d like a hotel room for an hour just to have a shower and change into dry clothes before driving back down the A470. Fellow Welshmen may mock me now, I’ve grown soft from spending too much time in England.
Hotel management needs time to send cleaners to change the sheets and such after all. If booking is on an hour-by-hour basis like say a hotel meeting room, it isn't feasible to clean the place in between every booking.
Hotels (alas mostly the business oriented ones) absolutely rent day rooms at reasonable prices if they have stock available.
Just ask around.
Odds are that the hourly-rate rooms would be on a different floor than the daily-rate floors for logistical reasons, which makes it even harder for me to see any problem with this.
There’s significant a cultural difference here too, in the areas where Oyo primarily operates young couples need these rooms just as much as prostitutes.
This is the worst case scenario. Every company that Softbank tries to unload becomes a liability because of the association.
On the topic of the actual business, I think there's a really basic question people need to ask themselves when they look at these business models: In 10 years time does the industry you're in look different?
Because that seems to be the fundamental problem here, Oyo's business model is basically that in 10 years time nothing about Hotels will have changed. Well what does that mean? It means we know how much the end company will be worth because it'll just be some multiple of a basket of other similar companies that exist today. So here's the question: Why are they claiming to be more valuable than InterContinental Hotels Group whilst having 1/75th of the revenue?
Now onto the financial engineering - overvaluing your company, borrowing using shares as collateral and then investing that money back into the company. That is a feedback loop, if you can't pay back the loan the shares are worthless and so these loans are entirely unsecured. If that's happening at scale, that is exactly the sort of behaviour that will cause a bubble and it will burst. Someone really should do some proper reporting on that - find out how common it is and particularly if it extends outside of Softbank.
Travel along an Indian highway and try to find your standard roadside motel as you would in US ala Best Western. There are no low-mid tier chains.
What OYO is promising is scale. What Best Western took 50 years to do these guys want to do in 5 or 2 idk.
It's a worthwhile bet given the Indian consumers purchasing power/quality expectations are on the rise. It's not at all a big stretch to imagine such chains existing in India 10 years from now. Someone is going to build it. You can always ask the established chains in the west and they will tell you how long they think it will take.
Now if you asked a AT&T, Comcast or Vodafone whether they could role out a 4G network with 300 million users in 3 years across India, I don't think any of them would think it possible. But Reliance Jio did it anyway.
The textbook on how fast you can scale things is being rewritten. In that context what OYO does pull off is going to be interesting to watch.
> It's a worthwhile bet given the Indian consumers purchasing power/quality expectations are on the rise.
India's income and consumption growth have been slower than expected. A recent report even found that rural consumption in India fell compared to 2011-12, and urban consumption increased by a paltry 4%.
In the last two decades, everyone has been building businesses in India with the assumption that India will continue growing at "China pace". Real estate prices are the best example.
But as everyone is also beginning to find out, the money simply isn't there. At least not for now.
Oyo might be a decade too early. This business needs to be built, but not now
This would have been all good if the focus was only for that market, but the $10Billion valuation I'm sure is not because of India focus.. it is for claiming to be 2nd or 3rd largest owner of hotel rooms in the world - the problem is there.
Without solving fully by hyper focusing on one problem/segment/market, it decided to conquer the world because of $$ at disposal.
Isn't it undergoing a saturation of sorts as of now? Correct me if I am wrong but the general Indian consumer purchasing power/quality is led by employment in IT sector. What happens if there is a severe downturn in it or there is significant competition from other countries?
> Someone is going to build it.
Definitely but if they see profits and positive cash flow in it which I don't think companies like OYO are looking at.
> You can always ask the established chains in the west and they will tell you how long they think it will take.
This is because there is something called standards and inspection in the US. This is absent in India. One just has to look at the shoddy houses and apartments being constructed by some reputed builders.
> But Reliance Jio did it anyway.
With the full support from the Government I think it would be possible. Also is Jio making a profit? ( https://economictimes.indiatimes.com/industry/telecom/teleco... )
Also would Jio be profitable once they achieve their targets?
I agree with you, and I was very bullish on OYO precisely because of this opportunity. However they have executed terribly by really not caring about a quality experience, instead chasing short-term growth.
Looking at Indian social media, OYO's brandname is now associated with a crap experience. It may already be too late, however they could still come out of this by doubling down on customer satisfaction ASAP.
> The textbook on how fast you can scale things is being rewritten
In hospitality, just putting your branded linens into a hotel isn't really "scaling". It's about consistency of experience. And that takes a time and/or a substantial training budget to ensure at least a few people at each site are trained appropriately, and this learning trickles down to every employee/partner.
How on earth does this translate into a $10 billion valuation? For comparison, Hyatt's market cap is $7.9B, and they made $296M profit on $1,215M in revenue in Q3:
https://s2.q4cdn.com/278413729/files/doc_financials/2019/q3/...
It's hard to see what actual additional value they bring though. They're not really a stamp of quality, and they're not generally opening new hotels, just rebranding existing ones. Booking websites are hardly a new thing - booking.com and hotels.com are pretty entrenched, and have the advantage that they index every hotel not just ones which agreed to put up the OYO sign. Maybe OYO will take a cut of the booking.com market (which from what I've heard is incredibly profitable), but by building an OYO brand with a reputation for budget low quality, they're moving in the wrong direction to do that.
This business should have been built slowly and carefully. But Softbank's billions meant that they expanded so fast and so soon that they had no quality control in place.
It's a brilliant idea that would have been inevitably successful. But all that money is going to be its downfall.
What do you know? 100% of Yelp reviews are 1-star: https://www.yelp.com/biz/oyo-hotel-houston-galleria-west-hou...
To be honest that actually makes them worse than WeWork at some level. WeWork may have an awful business model but at least its brand is (generally) known for consistent quality. [1]
WeWork, I feel is a very viable business. Its obituaries are too premature. It doesn't warrant its $47B valuation, but it can easily displace Regus. Easily a $10B business, if not a $50B one. Which is incredible in itself
Cut the perks to make it a viable business, and you’ll probably end up with...Regus.
Markets are pretty efficient that way.
In the absence of that assurance, what am I getting from OYO?
If I want a hotel room I will browse listings on the various aggregators that have them and go with the best find for my budget. Unlike Hyatt or Four Seasons or Taj, where you can treat the brand as an indicator of some standard, it doesn't exist in a meaningful way for OYO, even for a far lower standard. It's all over the place.
If anything I'd be suspicious of OYO immediately.
I'm unsure if my experience is the norm or the exception. If there's a huge segment of people who associate the OYO brand with trust, then their model would appear to be working quite well.
Not very unlike fast food franchise business, or Coca Cola bottling franchise - corporate puts in standards, best practices, supplies 'secret sauce' (some times literally), invests massively in branding and advertising which would be way out of thinking league of small time owners of the outlets.
If this was done purely from problem solving perspective (and not as 'growth hack'), then it would have worked beautifully.
How Oyo completely ruined my first wedding anniversary: https://oyo-ruined-my-anniversary.com/
There are good ones and terrible ones.
The business model doesn’t seem to make sense to me either.
That would involve spending money and make it clear that the marginal costs of franchising hotels is not zero, and so it’s not worth the crazy multiples of revenue valuations that software companies are.
All of these companies are an exercise in figuring out how to create plausible deniability to justify investing in it so that it can be dumped onto a greater fool.
The initial idea of guaranteeing basic amenities (clean bed/bath linen, WiFi, breakfast) through strict quality control and staff training was great, but they failed to deliver.
Instead of improving and growing their first product, they launched new products and entered new geographies - most likely to inflate valuation.
The founder itself has had a questionable behavior (ref: https://www.livemint.com/Companies/7CN7u5d4i3bfYgBAZLdLpM/Wi...)
In in all its seems that the approach may end up with a negative brand connotation as is developing on their Facebook reviews page and the knock on effect will ensure poor returns.A Softbank recurring nightmare.
[1]: https://www.medianama.com/2019/01/223-oyo-real-time-data-sha...
[2]: https://www.huffingtonpost.in/entry/why-oyo-sharing-check-in...
