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Oyo Business Model | How Does Oyo Work & Earn?

Oyo Business Model | How Does Oyo Work & Earn?

The largest branded network of hotels, Oyorooms started off its actions around an aggregator business model in 2013. With its shatterproof trials, it has now become an abode to 450,000 rooms globally operating in over 500 cities in India, Malaysia, China, Nepal, the United Arab Emirates, the United Kingdom,  Indonesia, Saudi Arabia, the Philippines & Japan.

Visiting the history, Ritesh Agarwal hailing from Orissa started Oravel Stays for listing and booking of hotels. The company used to establish partnerships with different hotels, lease some of the rooms and sell them under its name. It still works similarly but there is a slight change in the business model.

They are putting their main focus still on quality. They have made the partners provide services at predetermined standards to maintain the brand image. The business model of Oyo rooms was much like Airbnb but the focus is not only on discoverability but also on standardized quality.

The services used to be sold by the name of OYO rooms and customers did not care who the partner was. It was a combination of the aggregator business model and franchise business model earlier but now it is based on purely the franchise concept.

Oyo Rooms Business Model

OYO is a network of budget hotels that is completely different from famous hotel aggregators like Goibibo, Yatra, and Makemytrip. These hotel aggregators generally list hotels and other travel-related services on their websites.

In return, they get a commission on bookings as their revenue. They make a deal with the hotels by taking a minimum order guarantee per month and hence discounts and offers are provided in comparison to the rates that hotels generally offer to the guests directly.

What about Oyo? It establishes partnerships with non-standardized hotels and purchases some rooms of the hotel for a particular time duration. Then, it resells those rooms under the branding of Oyo. Since the rooms are to be booked in advance, there is a huge capital required to initially book the rooms.

There are no direct competitors for OYO so far as it works on a different kind of business model. It partners with zero to two-star hotels, gives a makeover to the rooms, and then brings customers to those hotels through its website and mobile app. Earlier, there was a fantastic marketing strategy OYO had adopted according to which OYO properties were listed on other hotel listing websites but it got blacklisted then from the sites like Makemytrip, Goibibo, Yatra, etc.

There used to be a general problem faced by people. Firstly, there were two listings shown of one hotel- One under the name of the hotel itself and the other with the name OYO. As an enhancement to its strategy, OYO did not use to show hotel names until you book. It was hard to locate the OYO properties at that time as the names were not disclosed.

Since Oyo also promotes people to travel to different locations and stay in their hotels for cozy and comfort ness. And this is a must priority for them. So both Oyo and travel aggregators in sync with their services allow people with their lucrative offers.

In case you too want to develop a travel app for your travel business with the merging of Oyo hotels listing, you can entice new customers to your floor.

We also have a few app ideas for travel businesses from where you can get ideas and make your business successful.

Why do Hotels allow OYO to establish its own branding on their property?

There is a mastermind behind the inception! Oyo basically targets zero to two-star hotels which are very high in number. They do not generally bother about getting customers. They do zero branding and no marketing for their business.  So, if there is any money that can come to them without moving any muscle, why won’t they love it?

Moreover, while sending customers to these hotels, Oyo is not worried about customer service as well because Oyo is the one which takes care of the proper makeover of the unorganized hotels.

In organized hotels and accommodations, Oyo books a number of rooms in advance by paying upfront after some bulk discount. Then, the rooms are listed on its website and other platforms to let people make bookings in luxurious hotels at a much nominal cost.

The other method of functioning is for the unorganized hotels in which Oyo gives makeovers to the rooms and in return, it gets as much money as the hotel owner gets for room booking. It is basically for the hotels which have not been recognized yet by potential customers.

How do OYO Rooms work?

There are different types of properties listed on Oyo Rooms. If unorganized hotels are there then organized are also their winning customers. Now, the question is why organized hotels need Oyo and why there is a big difference in cost when you book directly, in comparison to when you book through Oyo Rooms. It is because Oyo Rooms book the hotel rooms by paying in advance for the complete month.

Now, it depends upon the marketing and promotion strategies of Oyo that the particular hotel gets how many customers. Since the hotels get booking for the entire month, they are free from the stress of sales of at least those rooms.

What is the Marketing Strategy of OYO Rooms?

The basic concept Oyo is based on is blocking the hotel rooms by paying the whole rent in advance, let’s say for a month. If you will have a surface look, you will see a lot of difference in the prices of Oyo and prices of the same rooms when you buy directly from the hotels or any other aggregator website.

It is not something unusual and this is what most e-commerce companies are doing. They take the products in bulk and then sell the product on their sites while earning a decent margin. This is what Oyo is doing with the hotel rooms.

Most startups generally focus on getting and building a customer base initially but many Indian companies fail to understand the type of market in India. People always run behind what is being offered to them at the cheapest cost. The day such companies increase their cost will be the day, they will lose most of their customers.

How it is going with the Indian market?

Indian market is not a pigeon hole but a big banyan tree. Even if you are coming up with an innovative concept, you will find hundreds of people working on the same concept the very next day. It is true that you can bind customers by providing them with good service but if are thinking to increase the cost of service, you might lose more than 50% of them.

The reason why the Indian market is not a pigeonhole is you will get thousands or lakhs of services working under the same domain. If you disagree to serve, then there are several other good services that are waiting for the customers.

Just not the users who book, even the hotels are not loyal to Oyo. Oyo books the hotel rooms in advance for the whole month now if a seeker comes to a hotel and asks for rooms. The hotel will tell them they’re normal rates but if the customer says that we can book the room through Oyo. Then they agree to provide room at that cost only because they have already got a whole month’s money from Oyo. Now, they will focus on selling their other rooms even if they can sell them at a lower cost.

What concept OYO Rooms is based on?

Oyo Rooms has blended technology with living spaces and aspires to shape new low-budget methods of how travelers search for good services and make a stay in a completely new space.

The OYO team is using technology and talent to fix the socio-economic problem. “We are focusing on this so that people and property are in perfect equilibrium. Our long-term vision is to standardize all forms of real estate such as budget hotels, apartments, guesthouses, and resorts,” Agarwal argues.

“Globally, we’ve seen marketplace models pivoting from plain discovery to fully managed and leased services. The future is a brand with distribution and full management capabilities – OYO being a full-stack hospitality company is at the forefront of this innovation,” he added.

Most importantly, Oyo does not only get traffic from people who are traveling to other places but also due to plenty of other reasons such as staying late at work and then avoiding long way commutes or even partying out with friends. People generally do not wish to spend too much if it is a matter of some hours and hence Oyo is getting more popular day by day.

Continue with OYO concepts…

About the superpowers of Oyo, we must tell you that the CEO claims to have 300 people on the ground team including civil engineers, architects, designers, etc who transform the properties within 5-15 days.

If we talk about India, there is a great number of 0-2 star hotels. Running such a hotel is generally a side business for the people to just show losses. While their main business is running side by side. Now, if they are getting money and popularity through Oyo rooms then there is no harm for them.

Since its inception, Oyo has put its major focus on providing a fantastic user experience to the customers so that when they go on their next trip, they prefer Oyo rather than direct booking or booking from some other aggregator website. There is also a plan to offer holiday packages with guaranteed standardized hotels along with appointing an OYO captain for troubleshooting.

He says that “We’ve built technological capabilities to overhaul tedious processes like transformation and asset on-boarding making them swift and agile while providing a structural detailing to the value chain.

Our sales workforce uses Orbis which is a business intelligence tool that helps them in understanding demand patterns in the area and basis this intelligence offering the right quote to different partner hotels.”

How Oyo Rooms are possibly fit for customers?

Oyo is majorly focused on creating a huge customer base. It books hotel rooms in advance at an agreed cost. According to our assumption, the hotel owners might agree at a much lower consolidated cost if they are getting booking for a whole month at once.

Now, if Oyo has booked a room for Rs. 1000/month then it would be selling it for Rs. 1100. There is a lesser profit here but if we see it from the perspective of a huge customer base then it is really great.

Since OYO is still in its growing stage, it offers a lot of discounts to its potential customers who book through its mobile app or website. There is certainly a loss for the company as it also has to spend on renovation, operations, etc but since it has managed to raise very huge funding from Venture Capitalists, we cannot perceive any losses yet.

And that is the reason why Oyo’s is a better option for customers than any other.

Revenue of OYO Rooms

According to the Economic Times, Oyo plans to add around 400 properties in leisure markets by the end of 2022.

A report by Statista, the revenue earned by Oyo Rooms in India is likely to be estimated as RS 40 billion faced a slight drop after the pandemic. But Oyo achieved success again by changing the policies and adopting hygiene as a priority.

The company is expanding even in the international markets. OYO announced that it has already launched in the Philippines as its seventh overseas market besides the UK, UAE,  China, Malaysia, Indonesia & Nepal.

The travel tech lead company has restructured its old hotels and spaces with new living space that has impacted the hotel industry to a big hit. The company actually wants to understand the pain point of their customers and came forward with budget-friendly yet premium accommodations for hotels.

The company has also planned to execute a digital register mechanism that will be allowing them to share with the government the customer data. Though, it might impose a threat on privacy as Oyo is more about unmarried people than families.

Conclusion

With the unique market strategy and gripped understanding the OYO is reflected as a top pioneer in Indian hotel accommodation. It is known to serve constant hospitality and services to every ounce of customers.

If you are a business freak and want to develop a similar app idea then you can connect with us.

VerveLogic can be your one-stop solution for mobile app development and web development because we have a team of experts and market experience. You can get your app or website developed at the best price possible. Also, if you are looking for branding solutions or online marketing for your brand then you should check out VerveBranding and Verve Online Marketing today and make your brand stand out. We hope we have solved your every query regarding the app icon and how to create an amazing app icon. Let us know in the comments and questions.

Also Read: Whatsapp Business Model: How Does Whatsapp Work And Make Money?

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