OYO – Report Card FY 2015 – 2017

OYO – Report Card FY 2015 – 2017

2x Growth in Revenue Consistently 
Net Take Rate at 15%+
Largest Hospitality Company in India 
2x Jump in NPS
Still Day 1

“Innovation distinguishes between a leader and a follower.” – Steve Jobs

Sharing our recent operating and financial performance

OYO, India’s Largest Hospitality Company, is shaping the evolution in the hotel industry in India. We are very excited to share our recent numbers.

Our innovative business model is unique and indigenous to India and we are solving problems of small hotels with the help of cutting edge technologies and processes. Because we are not emulating a global template, we are sometimes not very well understood and often our metrics are misrepresented and quoted out of context. Until now, we have been very private about our financial and operating metrics. But, we have realized that this creates a perception that the company is not being forthcoming so, as CFO of the organization, I am sharing a brief business update with our guests, partners, team members and other enthusiasts.

Current GBV run rate of ~$400 Mn and 15 Mn+ Booked Room Nights annually

In the quarter ending June-2017, we witnessed our highest grossing months with total booking value closing just shy of $100mn setting higher watermarks for ourselves. Net of cancellations, our average daily realized rooms nights have grown 30% Q-o-Q and 1.7X Y-o-Y. The foundation of our capabilities is strongly laid and in an industry where players are showing growth by consolidation, we have grown only organically with a single-minded focus on bringing quality living spaces at the right price and locations.

12x growth in last 2 years in Realised Revenue*

Our quarterly Realized room nights and *revenue (net of discounts, cancellations and future bookings) have grown by about 12x in last 2 years. That’s the money our guests have paid for the room nights used.

chart 1

Net Take Rate at 15%, driving Industry leading economics – Earning and Investing instead of only Raising and Burning

What OYO makes from this realized booking revenue after paying our hotel partners is our “Net Take Rate*”. While most companies in India talk about Gross Take rate and show discounts/e-coupons in marketing spend, we share only the cash we make net of discounts. At a positive take rate, this is the number that comes in our audited financial statements as revenue.

We turned Take Rate positive in March-2016 and this number has been consistently trending upwards ever since. In fact last month, for over 33% of our booking value, we made a net take rate of more than 20% though, we intentionally keep this at a reasonable level to ensure that our partners make enough money at the end of the day – showcasing the partnership thesis that we and our partners are scripting together.

We have been able to grow many folds, while improving our take rate because we bring more demand for our hotel partners and make more absolute money for them (net of OYO’s take). Unfashionably, deep discounting is not the theme of the season for us. Result – a business delivering value to the whole ecosystem, from partner hotels to customers to shareholders

chart 2 v2

*Net Take rate is equal to (Money Paid by Customer – Money paid to hotel)/ Money Paid by Customer

Learning and Evolving Customer Experience in a market with many moving parts. Seeing a 2x movement in NPS in 1 year. Still Day 1

We are growing at such a fast pace and at the same time making giant leaps in the quality of our guest experience which we measure using an NPS* score and Advocates**
Our NPS score in the past one year has more than doubled. NPS at a network level is 42% and for our new offering OYO TOWNHOUSE it is ~80%.

Chart 3

Advocates number is rising steadily, crossed 100K in July, translating into a large base of loyal customers

Chart 4

*NPS =No. of people who give us a rating of 5/5 –No. of people who give us a rating of 1/5 or 2/5
**Advocates are defined as guests, who have stayed minimum 5 times at OYO in last 6 months with minimum 3 bookings made using our app. On an average, a guest books 1.5-2 nights per booking which means around 8-10 nights per guest

While we are proud of the fact that we have been able to grow our business as per the topline metrics shown above, we are also keenly aware that this growth has come along with the costs that a first mover would run into. For us, it was primarily for long-term capability building.

Chart 5

FY 2015 & FY 2016 numbers as per audited financials, FY 2017 numbers are interim unaudited numbers and our auditor EY is yet to review the same.

We think of these costs as investments that we have made in building niche set of capabilities that form a base for high growth profitable business. Highlighting our key capabilities:

Supply Onboarding – Majority revenue from 2.0 Supply and fast conversion happening with data science at heart

Our business development team specialises in converting properties located at the right places and selling them at the right price. This has contributed immensely towards growing the business. The on-ground strength is reflected in our numbers with around 30,000 rooms now under full inventory control or “2.0 properties” running at 80% occupancy in key business cities. This network-wide shift (2.0 was introduced only in late 2016) has been made possible with the help of our partners who have entrusted us as the sole brand and sales partners for their valuable cash generating asset.

Chart 6 v2

Few glimpses of OYO’s 2.0 properties in Kolkata, Goa, Bengaluru, Delhi, Tirupati (not in particular order):

100 propoerty pic

Transformation and Remodelling – Beautifying the city with smart designs (Click here)

Our expert transformation team consistently delivers both on speed and efficiency while transforming each room, which ultimately reflects on the health of our hotels. Our transformation designs are now benchmarks in the hotel industry. The video in the link above is an example of our 2.0 property which was transformed in just 14 days.

Transformation examples – Before & After images

TH pics

 Operations and Hotel Management – NPS continuously growing with OYO Townhouse at an industry leading number. A lot more yet to be achieved.

In hospitality, one has to be maniacal about the guest experience and brand. We have made giant leaps in this area –our aggregate NPS score has increased from 16% to 40%+, advocates have grown 3x in last one year and OYO TOWNHOUSE is defining new industry standards running at NPS of 80% made possible through several innovative technologies and processes:

>OYO Skill Institute– We have in-house staff training capability with live on-the-job training and video clips benefiting 1000s of people. For every 3 rooms we on-board, one job gets created.

>OYO Captain – Localized and personal support for our guests (Click here for video)

>3C Property scoring mechanism – Customer feedback & intelligent property audit mechanism in place to ensure that only quality hotels stay in our network. After implementing this we purged several properties which did not meet these standards from our network. At the same time, we on-boarded numerous properties complying with this scoring standard.

Technology products  – From Industry first Mobile PMS leading to 100% check-ins to Captain App ensuring great experiences, OYO brings it all.

>Consumers: Multi channel presence enabling real time location-based search and booking through app, web, and a mix of offline and other connected tools
>Partner hotels: Allowing a dynamic inventory/ hotel management and a seamless check-in check-out process on industry’s first mobile tablet based hotel management system. While majority of the industry still relies on calls and emails, at OYO, we see 100% of check-ins happening over the new age mobile savvy experience
>Operations: Intelligent Captain App facilitating efficient and quicker tasks, stellar customer experience and a ticketing escalation tool to resolve issues faster along with several back office tools speaking to each other to deliver a new-age quality experience along with old school hospitality

98% Demand coming through Own Channels and Organic word of mouth with no-commissions to pay – making a sustainable business.

(Building companies with significant reliance on agents is effectively a 0% take model which we don’t promote)
In a short period of time we have achieved a scale where it’s tough to miss the “OYO” sign, no matter where you are. Currently, we witness over 45% repeat customers, this is largely a result of our seamless product experience, efficient marketing and solid distribution capabilities:

>98% Direct Demand – Most of our lookalikes rely heavily on online travel agents (OTAs), which fundamentally makes limited business rationale because of unviable economics and low customer repeat/retention rates. We have built capabilities where more than 98% of our demand is direct without much reliance on OTAs
>Offline to Online Sales – Indian market is still 90% offline. While majority of our business comes from App and Web, we have built a strong offline to online channel across the country that brings demand from corporates, SMEs, travel agents and intermediaries.

Superior guest experience & market share with great economics will continue to be the focus for us and we will put our complete strength in bringing great quality living spaces to each city.

The accommodation segment in India is very large and deep; the robust growth in our booked revenues is in line with our optimism about the market. Our top-line has more than doubled in the past year and losses brought down by a third. The positive indicators on growth and burn-reduction are a clear validation of the unit economics and business model, which has a high degree of operating leverage. Due to our supply side moats and direct distribution platform, we are creating liquidity and value for our hotel partners. This enables us to bring the supply at the right price and pass on the benefits to consumer while improving our margins. We don’t believe in mindless discounting and like to focus on providing value and experience to our guests who in-return reward us for the same.

Operating in a market of more than 4mn rooms, we still have a long way to go and our team, infected with an incurable optimistic approach, is hungry as ever. With strong capabilities, we plan to capture a double digit market share on the supply side by 2020. Guest experience takes utmost priority for us and we understand that every customer that doesn’t give us a rating of 5 on 5 is a mistake that needs to be solved for.

We are blessed with shareholders with long-term vision, who understand the scale potential and the value we are creating and will continue to bring quality living spaces for billions of people through talent & technology and change the way people stay away from home. It is still day 1 for us and we will keep innovating, surprising and delighting.

Stay tuned for more updates from Ritesh and other members of the OYO family. We are just getting started.

PS: We have investors who are public companies and hence have restrictions in sharing further factual information

Meet the author / Abhishek Gupta

Abhishek Gupta is CFO - OYO and responsible for driving the financial strategy of the company. Prior to OYO, Abhishek was the CFO for Philips India's Home Lighting business. He is an alumnus of GE’s premier global leadership development programs and has spent more than 8 years at GE in senior finance roles across business verticals in India and abroad. Abhishek has an MBA degree in Finance and Strategy from Indian School of Business and is a Chartered Accountant. He has also attended executive development program at Harvard University