OYO HOTELS & HOMES TO DISPLACE LARGE INCUMBENTS*
458,000 rooms globally and realised value run rate of $1.8B with a y-o-y growth of 4.3x as at December 2018
“If you want to succeed, you should strike out on new paths, rather than travel the worn paths of accepted success”
– John D Rockefeller
*Morgan Stanley Research October 2018
2018- A YEAR IN REVIEW
Continuing our tradition from 2017 of sharing Annual Report and capabilities update
2018 has been another fantastic year for OYO Hotels & Homes and continuing the tradition that OYO started when our first (OYO – Report Card FY 2015 – 2017) was posted, I am excited to share key highlights and financial metrics for 2018.
This review includes a brief update on the capabilities that have been developed over the last year, which act as strong moats for our mission of creating great quality living spaces.
Full-stack leased & Managed hotel chain now growing 5.7x y-o-y with annualised stayed nights of 75m as at December 2018
(99M Annualised Stayed nights based on December peak)
In the last year 2018, OYO Hotels & Homes completed it’s transition to becoming a 100% leased & franchised hotel chain. Following this, the entire hotel is renovated as per OYO brand and quality standards with capex invested in assets primarily by asset owners to deliver core promises to our customers and ensure higher returns to asset owners.
OYO has also seen global stayed room nights (Annualised based on December run-rate) increase from 6m in December 2016 to 13m in December 2017 to 75m (99m based on December 2018 peak) in December 2018 (with a growth of 5.7x on y-o-y basis).
OYO LIVING IS ADDRESSING A $ 1.2 Tn GLOBAL MARKET OPPORTUNITY
13m+ customers have used OYO Hotels & Homes globally until December 2018. As a testament to the strong customer loyalty it enjoys, OYO has 790,000+ Advocates in India as at December 2018 (OYO Fans who have stayed minimum 5 times at OYO in last 6 months).
I will now share Global and India operating metrics and also India specific extract of the audited financial statements.
GLOBAL OPERATING METRICS
OYO Hotels & Homes has continued to execute in home markets of, India and China and has expanded into global markets including Malaysia, Nepal, UK and UAE
Among top 10 hotel chains and fastest growing to be #1 | 458K rooms as of December 2018
OYO Hotels & Homes is already among the Top 10 Hotel chains in the world and is growing exponentially to be the World’s #1 hotel chain. We are already at 458k fully controlled, leased and franchised keys as at December 2018.
Realised value run rate increased from $ 0.4B in December 2017 to $ 1.8B in December 2018 with a growth of 4.3x on y-o-y basis.
Sharing below the global operating metrics:
Notes : Constant Exchange rate of 65 INR/ $ and 6.5 RMB/$. Above metrics presented are not required to be statutorily reported and represent business metrics. Realised value run rate implies realised value net off future bookings, discounts and cancellations annualised based on December of respective year. Stayed room nights are annualised based on December 2018. “k” represents thousands, m represents millions, B represents Billions and Tn represents Trillions
INDIA OPERATING METRICS
Realised Value run rate of $ 1.2B with a y-o-y growth of 3x as at December 2018
Stayed room nights on annualised basis of 39m as at December 2018
The following data is for India operations. Comparing on Financial Year(April to March) year end and full year basis and Calendar Year (December ended) year end and Annualised basis.
Fully controlled leased and franchised keys increased from 9,764 as at March 2017 to 71,537 as at March 2018 and further increased to 172,822 as at December 2018 (3.3x growth on y-o-y basis from December 2017)
Stayed room nights increased from 5m for full year April 2016-March 2017 to 10m for full year April 2017-March 2018. Stayed rooms nights on Annualised basis at December 2018 were 39m (2.9x growth on y-o-y from December 2017)
Realised value increased from $ 123m for full year April 2016-March 2017 to $ 272m for full year April 2017-March 2018. Realised value run rate at December 2018 was $ 1.2B (3x growth on y-o-y from December 2017)
Advocates (OYO Hotels & Homes Fans who have stayed minimum 5 times at OYO in last 6 months) increased from 60k as at March 2017 to 228k as at March 2018 and further increased to 791k as at December 2018 (4.6x growth on y-o-y from December 2017)
Let me share a short video on what we do at OYO Hotels & Homes
Now let me give you an overview of India financial metrics
INDIA FINANCIAL METRICS | 3.5x increase in revenue from FY 2016-17 to FY 2017-18 and improvement in economics by 54.3%
(Below Data is for India operations)*
Statutory financial metrics refer to extracts from Consolidated audited financial statements. Realised value implies realised value net off future bookings, discounts and cancellations. Economics improvement signifies the improvement in Net loss. Estimates for FY2018-19 represent management guidance for indicative purposes and are not audited as per GAAP.
- Revenue as per consolidated financial statements increased from INR 120 cr to INR 416 cr, which is a 3.5X growth in FY 2017-18. Revenue for FY 2018-19 is trending at INR 1,481 cr with a 3.5X increase.
- Realized value (net off cancellations) trending at INR 4,921 cr for FY 2018-19.
- Margin expansion and high degree of operating leverage in the business model has resulted in, losses as a % of total realized value (net of cancellations) coming down from 44.5% in FY 2016-17 to 20.3% in FY 2017-18 and is trending at 10.4% in FY 2018-19. The robust business model with limited marketing spend generates double-digit positive contribution margins. OYO continues to invest in technology and to build long term capabilities while getting on-board, the top talent in the country.
- Majority of our demand is repeat with word of mouth customers accounting for 93% of revenues in Q4 2018 (Oct-Dec) and hence ensuring lower marketing spends.
From Economy (OYO Hotels), Chic mid segment (OYO Townhouse) to Upmarket resorts (Pallete):
- Embarking on our multi-brand strategy, we also launched several new products last year including SilverKey (Corporate Apartments), OYO Living (millennial housing), Pallete (Resorts) and OYO Homes (Vacation rentals).
[L-R: OYO Rooms in Delhi, OTH in Bengaluru, OYO Home in Goa, OYO SilverKey in Kochi, OYO Palette in Pondicherry]
- New products: Significant growth in our bouquet of new products viz. Living, Weddingz (integrated into OYO Hotels & Homes business), F&B (Food & beverages) and delivery serve as motivating signs of success.
- We have 74 OYO Townhouses as at December 2018, running at more than 85% occupancy showing the incredible value we are generating for our asset owners and great guest experience. We expect to cross 100 OTHs by April 2019 having made record openings of 15 in November 2018. Leaving you with a video here of OYO Townhouse.
- OYO Townhouse (OTH) is an example of OYO operational efficiency. The latest research report from Redseer, a consulting firm suggests that OTHs have the fastest turnover around time, lowest staff-to-room ratio and minimal demand dependency on 3rd Party Online Travel Agent channel.
- The above report goes on to say that the Return on capital employed (ROCE) generated by OTH is 55% as compared to the peer chains with ROCE of 5% and 12%.
- Centralised operations have led to >2.5x staff efficiencies with OTHs having the lowest staff to room ratio of 0.31 vs 0.85 and 0.87 for comparable chains.
- OTHs also have industry leading turnaround time – they are 2x faster than comparable peers.
- 3x growth velocity achieved by adding more rooms as compared to peers.
- Significantly higher Gross operating profit per available room of INR 3,700 vs INR 900 and INR 2,800 for two comparable chains.
- OTHs see 95%+ demand from direct channels with low dependency on OTA of 5-10% vs 30-35% for comparable chains.
FRANCHISING & LEASING GROWTH | OYO HOTELS & HOMES IS CREATING A MARKET LEADING POSITION GLOBALLY
Opening 15k keys in franchised and leased assets per month in India and globally adding more rooms than the top 3 hotel chains combined
With numbers out of the way, I wanted to give an update on our core capabilities of franchising & leasing growth, renovation, Hotel Operations and Distribution – All enabled through our proprietary technology, stack.
- OYO Hotels & Homes in fact, adds more assets than the total size of our look-alikes. OYO is a leading player of choice with ~12x the size of the second largest player in the Indian hospitality market.
Able to be the worlds largest fastest growing leasing & franchising machine thanks to our supply capabilities.
Renovation | Elite group of engineers, architects and designers renovated 9,000+ buildings in India in 2018
Capability to transform all facets of an asset on average in 14 days | Renovation efforts helps us in creating brand value | Renovation app helps leverage tech capabilities
- An elite group of engineers, architects and designers make the magic happen at one of the most sophisticated and fast quality renovation engines.
- Technology-driven renovation and superior supply chain capabilities allow us to reduce costs and time.
- A Renovation app enables us to make sure we leverage on our tremendous tech capabilities to renovate the properties.
- Like before, I am proud to share some before and after pictures here.
[L-R: Photos OYO Townhouse, OYO Homes, OYO Living and OYO Rooms]
The process of the renovation is in itself fascinating. Sharing some videos on the renovation capabilities with you :
Here are examples of how our renovation efforts help us in creating brand value
Brand Signages across Chinese cities
Core Operations competence | Industry acknowledged best in class hospitality delivered with Tech and highly trained on-ground general managers
8,700+ properties operate on proprietary management system | More than 800 OYO General Managers on ground with problem solving abilities | Industry-leading tech suite to enable activities including housekeeping to be performed efficiently
- Our operations capabilities set us apart allowing us to deliver industry acknowledged best-in-class hospitality as well as smooth operations of hotel operations.
- 8,700+ assets in India are being operated on our proprietary management system (PMS & POS) : OYO OS that enables Express check-in and check-out, hotel service and operations including housekeeping, food ordering and tracking as well procurement management.
Now sharing a video on OYO OS
- General Manager: More than 800 OYO Hotels & Homes General Managers in India with problem solving abilities, have been deployed to ensure stellar customer experience and to resolve concerns faster.
- General Manager and 20+ OYO Skill Institutes get 90%+ repeat/word of mouth customers with low monthly spend on marketing.
Meet OYO Captain; our general managers on-ground
OYO Keep App ensuring OYO Hotels & Homes brand and quality standards are consistently met
Customer experience: NPS score continues to increase even with a significant increase in scale
ENABLING 100,000+ JOBS FOR YOUNG PEOPLE RANGING FROM HOUSE-KEEPING TO AI & DATA SCIENCE
- OYO continues to build capabilities to serve our customers better by investing in the OYO Skill Institute (OSI) that trains to close to 3,000 talent every month in India.
- Our incessant focus on customer experience has seen our NPS scores in India increase from 47% to in December 2017 to 51.4% in December 2018.
- We also see that on Booking.com – which is one of the largest hotel OTAs in the world – our customer experience score reached a high of 8, averaging across several parameters. This score considers location, value, comfort, cleanliness, service, and staff — a clear indication of our strong focus on the end-to-end customer experience.
Distribution | Revenue and Distribution capability is spread across online and offline channels to address the complete market
29.3% customers repeat in the next quarter after their stay, bringing in a world leading hospitality metric.
- OYO Hotels & Homes is the largest selling brand on almost all major 3rd Party Online Travel Agents (OTAs).
- Unlike our look-alikes, who continue to rely on 3rd party agents, OYO continues to build capabilities to allow our guests to have great direct brand booking experience, while ensuring win-win relationships with OTAs.
- OTA partners: Guests can have a direct booking experience for OYO on all major OTAs such as Booking.com, MMT, Go-Ibibo and Expedia.
- Customer cohorts Our India Customer (Android) cohorts indicate that 29.3% of customers of July-September 2018 returned to stay at OYO spaces between October-December 2018. These are industry best repeat metrics. It is heartening to note that we also had 10.4% of customers from as early as April-June 2016 coming back to stay with us.
- Our seamless apps and web site continue to be our strong suite with more than 18m travellers being shown personalized and localized content on the OYO App. We clocked close to 1.3m new installs in Dec18.
Got on-board 2,300+ sales people to increase omni-channel, enterprise and corporate business to 20%+ of sales with 16,000 Corporate accounts.
- To ensure our customers are able to reach us through omni-channel OYO also continues to invest significantly on offline ground capability across 140+ markets to cater to various forms of demand and these are met by travel agents, SMEs, intermediaries, corporates. OYO Hotels & Homes has access to 16,000+ corporate clients who use us as their accommodation partner in India.
[L-R: Corporates from Reliance to Godrej]
- I am very pleased to note that up to 93% of revenue comes from repeat and word of mouth in Q4 2018 (October-December)(with only 7% coming from paid acquisition)
93% revenue from Repeat or Word-of-Mouth, again, among world-leading, while growing 3x in India.
[Revenue contribution for India]
Our focus is to have multiple channels for our customers to reach us. Sharing below some innovative approaches taken towards this in our Home market China.
[L-R: Roadshows, Exhibition, Merchandise and Conference]
[Cohort for China above. Early trends from countries including UK and Indonesia are showing similar trends ]
The impact of what we do enables 16x increase in earnings and profits for the asset owners
Fast Company’s most innovative to many awards in hotelier India to LinkedIn Top companies to Work for.
External validation and accolades from industry and market participants make it all worthwhile
- Fast Company rated us as one of the Top 10 Most Innovative Companies in India 2018.
- In July 18 OYO Hotels & Homes was honoured to be called the Startup of the Year by Economic Times.
- In September 2018, the Company was also declared as the most sought-after startup in India by LinkedIn.
- Additionally, LinkedIn has recognized OYO on its list of ‘Top Companies Where India Wants to Work’ for three years running now.
- It was great to see as per a UBS Consumer survey, that we deliver the most value proposition while being the preferred choice of stay. We were also the second-most-popular hotel brand in India per the report.
- We continue to be humble and know that every customer rating of less than 5 is reason enough for us to work harder. Every booking is an opportunity to be better and strive for improvement.
OUR STABLE LEADERSHIP ACROSS GEOGRAPHIES INCLUDING NEW ADDITIONS TO THE TEAM
From London to Delhi, OYOpreneurs and OYO Leaders are winning hearts.
[L-R: Christmas celebrations in UK, Townhall in December 2018 and R&R session for North region in January 2019]
CREATING JOBS, SUSTAINABILITY, TRAINING, FLOOD RELIEF AND MORE THAN JUST HAPPY GUESTS
- Employment generation we are creating 100,000+ jobs in the country at a chain level, of which, over 75% are in Tier II and Tier III cities. Our participation in job fairs such as the one below, further validates our confidence in the youth of today to contribute productively.
- Creating the ecosystem to maintain quality standards by elevating the skills of hospitality of more than 3,000 talent every month via OYO Institute of Customer Experience.
- Created a special corpus fund of Rs 1cr for Hotel owners in Kerala as part of a small initiative from our side to help tide our asset owners over the tough times brought upon by nature. On-ground, our operations team continued to help our guests.
To summarise, globally we have grown our stayed room nights by 5.7x from 13m in December 2017 to 75m in December 2018 (99m as per December 2018 peak) with Realised value also increasing by 4.5x from $ 0.4B to $ 1.8B on y-o-y basis (annualised per December run rate). From a financial year perspective, our revenue increased by 3.5x to Rs 416cr for India operations in FY 2017-18. We significantly reduced our losses from 44.5% in FY2016-17 to 20.3% in FY 2017-18 for India operations through 54.3% economics improvement.
Even after a successful year, there is immense room for growth. There are more than 6 million hotel and guest house rooms in the Indian subcontinent, 45 million in China and 158 million globally. A huge white space exists in the economy segment to renovate and have the living spaces arranged by leasing or franchising by us.
In FY19, OYO Hotels & Homes India business is on track to register revenue growth of 3.5x on a year-on-year basis while improving economics further, all while continuing to be hotel chain of choice.
Our aspiration is to be the World’s largest Hotel Chain and re-define living worldwide
[L-R : OYO in UK, Indonesia, Malaysia and UAE ]
The market is undoubtedly large and deep with continuing, significant gaps in demand and supply growth. We will continue to create more value for our asset owners.
OYO Hotels & Homes is a disruptor, in fact rather, an innovator which is fundamentally re-industrializing how small-hotels were looked at and is bringing better living spaces for the common-man globally.
OYO aspires to be the largest Hotel Company in the world. The hunger for growth and the ambition to create value for all our stakeholders is only getting started and so are we.
Leaving behind a video of OYOprenuers across the world, to share their enthusiasm with you.
STILL DAY 0
Disclaimers Financial metrics after March 2018 and business metrics do not represent audited figures. We have investors who are public companies and hence have restrictions in sharing further factual information. Estimates and guidance for future periods is for comparison purposes and are indicative in nature.