Guide

Lessening the burden of payments due and accrue; multiple charges have been waived for the month of March onwards, including value-added service charges, Wizard membership accruals, etc. Under these initiatives, a total of Rs 24 crore (US$3.1 million) discounts has already been offered to over 3,000 OYO partners and continues to impact several others.

At the same time, thousands of partners who wanted to become a part of OYO Secure—a financial product similar to an online wallet for simplified deal benefits and real-time visibility of their earnings—were offered support. Support in terms of reduced joining amounts as well as a complimentary 30% top-up from OYO for every recharge to the asset owner’s OYO Secure wallet.

OYO Secure wallet

March onwards, irrespective of past dues at the property, we continue to make weekly payments and reconciliation settlements. This is helping thousands of partners immensely with managing working capital requirements.

We have also partnered with multiple lending institutions in India, ranging from non-banking financial institutions (NBFCs), private sector banks, new-age fintech companies to identify and facilitate adequate financing for hotel transformation, upgradation, capex, and working capital requirements. Over the past few months, the disbursals under these renovation and up-gradation advances have crossed over Rs 160 crore (US$21 million). The company’s partnership with these institutions helps fast track the loan process while reducing processing time as well as documentation delays. Starting April, we also launched a retention-linked discount for certain sections of asset owners. The discounts range from 50% on base fees for April and May and an extended discount of 20-25% across June-December.

Owners across the country

Certain services for a large section of eligible asset owners are also being provided free of charge for the said period. These include Free Tariff Manager Value Added Services

Through these fiscal relief and support measures as well as OYO Sambandh, we are maintaining a constant line of communication with our partners.

Q. How do you see all these initiatives actually impacting your economics? Who is bearing the cost for all this?

The first thing is the cost structure linked to a lot of these programmes is not very significant. For a long time, the hospitality industry has sort of operated with higher cost structures than it should. Like how over-staffing is a visible issue. And if you think that you’re just seeing this in businesses which are four-star, five-star, you’re mistaken.

Partly because of the cost structure reduction, and partly due to the migrant crisis, this is not going to do anymore. Hotels will have to learn to operate with significantly lower cost structures and we are going to be very focused in enabling that for our hotel partners.

So if you see the occupancy report from our China business, you will see that the budget and mid-market hotels have been able to ramp up the occupancy to ~45-50% levels. Whereas the luxury hotels are still loitering in the 13-14% range.

We have an app to track how these potential hotel partners score, we have multiple levels of people go and visit the hotel physically to check and validate things.

Are there places where we’ve gotten the check operationally wrong or whether certain city benchmarks differed from other cities? Yes.

AI powered hospitality

What have we done to make those changes? One, we’ve launched an ops bodyguard program, where there is one more check beyond the 140-point checklist. We exited 200 cities in the beginning of the year where we had one or two hotels, where we just found that the supply was just not ready to deliver the experience on OYO. That, by revenue, impacted us by like 1.5 to 2%. But that 1.5%, the noise that it would bring was disproportionate.

And the third one is we’ll try to help all our partners. But we saw that in some places, we just could not provide work with a partner for alignment. Even those were removed. We announced the 10,000 rooms-removal in December.

Oyo rooms video gallery, oyo hotel video gallery

Q. Complaints about OYO have not just been from customers, right? Over the last year or so, there have also been many vociferous complaints from your hotel partners. Firstly, in terms of contracts, with people saying that money was never paid as per contractual commitments. And secondly that there was no recourse—hotel partners didn’t have access to the right channels to complain or rectify those issues or it would just go into the ether, but nobody actually responded from OYO. Do you recognise these as genuine problems? If so, how are you planning to fix it?

First off, what are the things we added for our partners? You’d find it very hard to find a lot of partners that will come and complain about the occupancy of OYO. The second thing is OYO OS and the technologies that we bring. And the third is the repeat rate. These are three things that really added value.

Before I talk about the two problems that you laid out, let me share some complexity that we face in our business when we engage with our partners.

The first one is that the majority of our partners are good people. Now, among them, there is some percentage of owners who may sometimes try to short-circuit contracts. For example, there are roughly 25% owners who have said that there has never been any walk-ins at their hotel in their history with OYO. It is slightly unrealistic to believe this.

So, due to that, we will launch a policy of saying that we are going to ensure that going forward, we will have auditors go to the hotel. Or we will basically launch a policy to say that because the customer service is not good, after a certain number of complaints, there will be a fine.

Now, what happens is that disagreements creep in for those specific policies or systems. And those policies or systems disagreements lead to friction with partners. That’s one reason for friction. The second is the price point-volume equation and unrealistic expectations that we could have, in hindsight, managed better.

But one of the big changes that I’m trying to architect is bringing in a culture of “No problem is too small; Every customer is critical”.

In terms of perceptions about customer satisfaction rating, a lot of times our competitors love to show our Booking.com scores in India and say, “Oh, look at OYO scores that are not so good”. What people forget is OYO gets a decimal point worth of business from Booking.com. And most of these ratings are ones that we inherited from the past. The number of hotels listed on Booking.com is also small. So it’s not just not representative.

Who is Ritesh Agarwal (R Bhashkar)?

We get many multiples of that booking just from MakeMyTrip and GoIbibo. If you look at MakeMyTrip, OYO’s average rating is 3.5 on 5, and the majority of our hotels are 4-plus in terms of their ratings and services.

Q. But how do you ensure quality when you are merely supplying customers to a hotel owner who runs the business. Like in the Bollywood movie Khosla ka Ghosla, one can ask OYO—“Aap party ho ya broker? ( Are you the principal or the agent?)”

From a consumer perspective, our proposition is very simple—low cost, reliable quality, and most importantly, owning the “end to end experience”. Whether it is a late checkout request, an early check-in, breakfast or any other service, if you booked a hotel room through an online travel agent, the OTA will ask you to discuss with the owner directly.

For us, being “party” or the principal is very critical. As far as the consumer is concerned, OYO is the party. Therefore, we should take decisions like a party so the consumer is assured that they don’t need to worry about what they can or can’t do.

Entrepreneurial Journey and the Principles

That said, there are two parts of our experience that we have seen complaints over and are things that we want to improve.

The first is check-in experience. Sometimes you’ve heard about customers saying “I reached the hotel and I didn’t get the room”; “I was stranded”. That is evil. That is unacceptable.

There are some practical reasons this happened. For example, if there’s a medical customer who says that I don’t want to check out, but the hotel has sold to capacity, you’ll have to say no to a customer. So what we’ve done now is adopted a new policy. One strike and a hotel gets deprioritised 50%, two times and the hotel gets removed from the OYO platform.

We have also made this a top area of accountability for all our group CEOs—their bonuses are linked to this. Over the last three months, you’d have seen these issues, even on social media, would have crashed.

The second focus is sometimes you have customers complaining that OYO gave a poor-quality hotel that didn’t deserve to be in the OYO network. Now, the first thing that people sometimes get wrong is thinking that we do no work before we go to a hotel. We put in a lot of effort. There is a 140-point checklist before we put up the OYO signage.

On the other hand, we continue to remain sharply focussed on the larger demographic of budget travellers.

The second thing that Ginger did, as did others like IBIS, was what they called “No khaana (food)”—they said breakfast will only be at the lobby. For that, too, you will have to pay more. They also squeezed the size of the room. I felt that both of these practices were customer-unfriendly.

I have tried as much as possible, in the majority of our hotels, to promote our hotel owners to continue sending ghar-ka-type khaana (home-style food) to the room. This is one big reason a lot of our customers choose to stick with us.

How much of your business is from repeat customers?

I think corporate is very critical. Basically, corporate for us is two parts—one is corporate employees who use an app and book with us. The second is corporate employees who use the OYO Wizard programme. OYO in India has partnered over 5,000 corporations, including many small and medium businesses. Pre-Covid, we got 20% of our revenue from this stream, what we call MM or micro-market business.

Regarding our overall national business, 70-75% of our revenue comes from repeat customers. And around 15-17% revenue comes from what we call organic customers. Organic is very simple—people who don’t need advertisements to come stay with us. People will just go to the OYO App, search for a hotel and come; Or if there is a corporate, where there were three employees who used to come and then a fourth employee started coming. So wherever you did not have an incremental expenditure marginal cost to bring the customer.

App Screens & Video Gallery

And this is India only, let me clarify. OYO India would have roughly 90% revenue for which you did not spend marketing dollars. But relatively, Southeast Asia will follow where we see this in the range of 55 to 60%. Our OYO Vacation homes business in Europe will follow, which will be roughly 50%. And then everything else.

Q. Normally, one would think that repeat customers making up the bulk of revenue isn’t necessarily good as that means you’re not bringing in more people into the top of the funnel. How would you reconcile that, especially since your revenues have gone up 4X from 2018 to 2019, but 90% of the same people coming in?

How does that work?

Yeah, I think, first off, the 4X jump is significantly driven by some of the global expansion. But that said, you’re right. A large part of revenue growth is still being driven by the same customers.

I have always believed that in India, if you build a business designed on the back of marketing dollars, it’s very hard to make money because how many marketing channels do you have overall? You have Google, Facebook, and then television. I can’t afford television, and Google and Facebook will squeeze out every dollar I make because there is MakeMyTrip, Expedia, and the big guys who are bidding on those.