At OYO we are on a mission to provide quality living spaces for millions of middle-income people across the world. Whether a city dweller or traveller, whenever they step out of their homes, they can now choose an accommodation that is safe, accessible, comfortable and suits every budget.
Globally, the accommodation industry is highly fragmented and a large percentage of assets are unbranded and often lack professional expertise. Owners of smaller hotels, and sometimes even large standalone hotels, in urban and vacation destinations, generally lack competencies like revenue management, technology and data analytics that enables a deep insight into the customer’s preferences, and distribution network.
As a tech-driven hospitality company, OYO is redefining the fragmented hospitality sector by empowering individual asset partners with its successful proposition of combining design, hospitality, technological expertise, revenue management and operational capabilities, thereby enabling them to succeed in this competitive space by consistently adding more and more customers, with higher RevPar and yields. This allows asset partners to focus on what matters the most – delivering a great guest experience, making OYO their trusted hospitality partner.
OYO started with the belief that all guests deserve a comfortable living space, and at the time, location, and price they are comfortable with. We understand that guests today want ubiquity, economy and convenience in all services. They want things on-demand and integrated with their day-to-day lifestyle. When it comes to travel, this means to have an ability to choose an accommodation option which is trusted, economical and available. They want to be sure on what to expect when they book a stay option. That’s why they choose OYO as their preferred stay partner.
Our continued focus on delivering value for asset owners and winning customers’ trust and loyalty has today led to the company becoming one of the world’s leading hotel chains, serving millions of guests across the world, including in India, China, US, Europe, Southeast Asia, Middle East, Japan, and more. In the calendar year 2019, we increased our revenues by 3X on a year on year basis with over a million rooms across the globe. OYO was rated by brandZ as one of the most valuable new brands in India.
As we enter 2020, we have been reflecting on the business, our progress so far, and the opportunities that are ahead of us.
Winning the Customers’ trust and loyalty
2019 was a year that saw us host travellers and city-dwellers in our hotels and vacation homes in 80 countries around the world.
We hosted over 180 million guests from 120+ nationalities. In December 2019, an average of 750,000 guests chose to stay at an OYO every night. We continued to delight our guests, and our average ratings on OTA (Online Travel Agency) platforms were 7.5+/10.
We are honoured by the opportunity we have been given to serve guests across the world. It also places a huge responsibility upon every OYOpreneur to deliver on the company’s mission.
Every aspect of OYO’s ecosystem is centred around providing a quality guest experience that is consistent and deserving of guest loyalty. We continue to make significant investments in data science and analytics to help us improve the experience at every touchpoint. Our insights drive more than pricing — they indicate design improvements, capital improvements, and other operational opportunities to delight guests.
The repeat rate and organic demand metrics are a testament to the fact that customers are loving their experience at OYO
OYO App is now Among Top 3 Hotel booking Apps Globally
Delivering for Asset Partners – OYO’s Family
The year has been about helping and understanding asset partners across the globe and delivering value to them. More and more asset partners trust us now and in 2019, we grew our total properties to 43,000+ hotels and offered customers access to over 50,000 vacation homes. Across locations, we were able to deliver value to our asset partners by significantly improving Occupancy and RevPar of their properties.
Increasingly, we are witnessing a trend where more and more of our asset partners with multiple properties are associating their full portfolio with OYO.
Asset partners signing multiple properties with OYO
In India, we engaged with over 18,000+ asset partners as a part of the OYO Partner Engagement Network (OPEN), with a goal of identifying ways to empower, support and enable them. We also used these forums to gather feedback and agree on systemic improvements that will be mutually beneficial, while ensuring strong business economics for both our partners, and us. In November 2019, we introduced OYO Club Red, our partner loyalty program, in order to make partnering with OYO an even more attractive proposition for our asset partners and continuously encourage them to offer the best hospitality experience to guests.
The results we are delivering for our guests and partners have been key to our continued growth, in key hospitality markets around the world.
OYOpreneurs Culture & Values
Our 25,000+ employees worldwide – or OYOprenuers as we like to call ourselves – are integral to the OYO story and what we have been able to build over the last seven years.
We strive to make our culture one of empowerment that drives an entrepreneurial spirit among OYOpreneurs. The way of life at OYO – and our approach to things – is guided by a set of principles that we refer to as OYO Culture Tenets – building trust, being respectful, being resilient, govern our actions at all times. Our goal with these tenets is that each of our team members is empowered and encouraged to meet the needs of our guests.
We are honoured to be recognized as an employer of choice and an innovator in the hospitality space. Four years in a row (2016 to 2019), LinkedIn has recognized OYO as one of the leading employer brands in India. OYO is also on their “Top Startups in India” list, in both 2018 and 2019. In 2019, OYO was also ranked #2 in Fast Company’s Most Innovative Companies in India, and The Economic Times named OYO “2018 Startup of the Year”, a testament to our continued commitment and efforts towards building an employee-first company.
It inspires us to see seasoned talent, as well as young achievers with experience from world’s best companies and schools, choose OYO as the place where they want to work and create something meaningful. Our teams are further strengthened and supported by a diverse group of leaders.
Recent Leadership Appointments – Building a world-class leadership team
- In 2019, we reorganized our leadership team to better serve our asset partners and guests, as we grew and evolved as a global company. We recognized Ping Wang as Head of Supply for China and Zhu Lei as Chief Revenue Officer for China to lead the two critical functions imperative for our success.
- We also onboarded Tan Ming Luk as the country head of OYO Malaysia. Ming joined OYO with 13 years of management consulting and digital businesses experience with a focus on strategy development and operational improvement.
- To further build OYO’s presence in Southeast Asia and the Middle East we hired Dr. Mandar Vaidya as the Chief Executive Officer for Southeast Asia and the Middle East. Dr. Vaidya is a seasoned professional with over 15 years of experience.
- In India, we appointed Rohit Kapoor as the CEO of the India & South Asia business. Prior to his appointment, Rohit had been overseeing the growth of OYO LIFE – the brand’s long-term rental housing portfolio as well as other new real estate businesses in India.
- Most recently, we appointed Raj Kamal as the Chief Operating Officer, OYO Vacation Homes (The UK and Europe). OYO Vacation Homes comprises multiple brands, including OYO Homes, Belvilla, Dancenter, Danland, and the Germany-based Traum-Ferienwohnungen. Raj comes with 25+ years of rich experience across financial services, investments, strategy and consulting domains.
- OYO has continuously been investing in strengthening its corporate governance with the recent appointments of two new directors – [ Betsy Atkins, CEO and founder of Baja Corporation, and Aditya Ghosh who was previously our CEO for India and South Asia. ]
We believe in strengthening our bench by not just attracting the best talent from the industry, but also continuously focus on creating enough opportunities internally for existing team members to rise through the ranks and get access to enriching growth options at every step of their career. Meritocracy and recognition are core aspects of our work culture.
FY2019 financial performance
Continuing our annual practice, today we are pleased to share our audited financial results for the Fiscal Year 2019 (April 2018 through March 2019), key business updates for the calendar year 2019.
As we continue to focus on our mission of creating quality living spaces and investing in our capabilities, we are consistently improving our business economics to create a scalable, resilient and sustainable business model that will deliver long-term value.
The audited financial results we will share in this part of the report are for FY19, which ended on March 31, 2019. With the pronouncement of a new standard for revenue recognition – IndAs 115 (similar to IFRS-15) – which is applicable to OYO for the financial year 2018-19 onwards, OYO is required to account for revenue on a gross basis. The comparative figure for the year 2017-18 has been grossed up retrospectively.
FY19 Revenue – 4.5x increase in total revenue to USD 951 million, led by India and China
Our consolidated revenue for FY19 stood at USD 951 million, which is 4.5X YoY growth over FY18.
The fiscal year also marked our transition from an India-centric business to a global organization.
- Nearly 36.5% or USD 348 million of our fiscal revenues were from outside India. A year ago, this was a small part of our overall business.
- India contributed nearly 63.5% or USD 604 million of our revenues and we recorded 2.9X YoY growth in the market.
FY19 Gross Margin – India Increased from 10.6% to 14.7%
Our Gross Margin in India increased from 10.6% in FY18 to 14.7% in FY19 indicating the strength of our business model and a positive correlation between market share and economics.
Our total gross margin, however, fell from 10.7% to 7.1% in FY19 due to expansion in newer markets such as China.
FY19 Loss – India reduced from 24% to 14%; However global increased from 25% to 35% due to expansion in newer markets such as China.
Our consolidated net loss per cent increased from 25% in FY18 to 35% in FY19. The increase in net loss per cent is attributable to our global expansion as we have grown from being a predominantly single country operation to launching multiple geographies. New markets entry results in front-loading of setup costs and manpower investments while the revenue trails resulted in higher losses in the beginning.
As we scale in our mature markets, we have demonstrated consistent improvement in our economics in mature markets like India, and expect to follow a similar pattern in other markets. Our net loss reduced from 24% to 14% in India in FY19
Here is a brief summary of our overall financial results:
OYO’s replicable playbook has played a pivotal role in helping us grow globally at a rapid pace. Our model levers are: 1) Build disruptive technology capabilities; 2) Partner with independent hotels; 3) Build large network; 4) Create customer entrenchment; 5) Deliver RevPar increases, and 6) Expand into new geographies.
Since China and other international markets were in development and investment mode, they contributed to USD 252 million (75%) of the USD 335 million losses for FY2019, while these markets constituted only 36.5% of the global revenues. We will continue to make growth investments in multiple new markets in the next fiscal year as well.
Please note that until FY2018, we accounted for revenue on a “net basis” and our earlier reports included Net Realized Value (NRV) as a key metric representing the total money paid by the guests. After moving to “gross basis” of revenue recognition as mentioned above, we have discontinued using NRV as a metric and replaced it with revenue which is net of taxes and loyalty discounts. The annualized NRV run rate for December 2018 was USD 1.8 billion (as mentioned in our last year report) which after taxes and loyalty discounts translated to an accounting revenue run rate of USD 1.5 billion.
Reflections on Recent issues
Having said all of this, growing at the pace at which OYO has in the past few years, we sometimes got ahead of ourselves and pressure-tested our organization at multiple levels. We see opportunities to improve in multiple areas like guest satisfaction, partner relations and sustainable economics, which includes right-sizing our workforce. In 2020, we are taking steps to address this, we will share some details in this report.
- Employee restructuring: Over the past weeks, we have been reorganizing our teams across businesses, functions and geographies in line with goals and objectives for 2020, and beyond. As we drove tech-enabled synergy, enhanced efficiency and removed duplication of effort across businesses or geographies, unfortunately, some roles at OYO had become redundant. This was a deeply painful decision for us, given its impact on the affected employees, and we deeply regret it. We have tried to make their transition less painful by adopting principles of fairness, and are committed to doing everything we can to ensure that our outgoing colleagues receive as much assistance and support as possible through this transition. Having said that, we are acutely aware of our responsibilities and are accountable for building a business with sustainable economics, and therefore it was imperative that we go through this process of restructuring.
- Partner Issues: In 2019, we understood the importance of partner alignment with our offering to customers. Its absence resulted in an increase in customer escalations and unfavourable social media coverage. We are committed to providing 100% of our guests a seamless experience. For it to happen, we need to put in place very strong processes and clear expectations from our partner network and we are taking all necessary measures in that direction.
In 2020, we will take our learnings over the last year and a half from the many successes we have had in individual markets and replicate them across the world and focus on three key areas to continually build trust and strengthen the relationship with our asset partners:
- Better communication and expectation setting as to OYO operating policies and guest experience standards to minimize disputes
- Continued investment in training and onboarding of the property staff, to ensure consistent high-quality guest experience across all OYO hotels
- Seamless integration and continuous improvement of OYO technology tools and processes–across all markets–with special focus on localization
Through, OPEN (OYO Partner Engagement Network) launched in India, we are bringing in significant improvements in these areas. This year, we plan to launch OPEN in other countries as well.
- Opportunities areas in delivering best-in-class Guest Experience: As we look back at 2019, we find many instances where our guests had a less than perfect experience and we could have done better. We have endeavoured to improve our ability to connect with guests and resolve their concerns. Our metrics across these dimensions (first response time, resolution times etc) have improved by 20-40% this year. Our refund processes have also improved with 90%+ customers getting a refund within 24 hours. Here are our top three focus areas for 2020 for delivering a best in class guest experience:
- Offering 99%+ customers a seamless check-in experience by better aligning our hotel partners to guest expectations, curating our network, providing visibility to the guests on check-in experience and also creating guest policies that will enable faster recourse
- Undertaking a competitive benchmarking exercise to prioritise improvement areas across geographies and leverage technology to execute the same
- Improving guest connect initiatives by deploying usage of chat and self-service features across our platforms
We will continue to invest in building trust amongst millions of our customers globally, who choose OYO every day.
2020 roadmap and priorities
As we enter 2020, we are taking steps to optimize and strengthen our business. We have heard what our guests, asset partners and colleagues have to say and are fully committed to delivering by focusing on the following strategic objectives:
Our 2020 priorities are as follows:
- Sustainable Growth:
- Balance the speed of our growth with our operational capabilities
- Build a network plan that drives accretive growth for OYO, for our partners and for our customers
- Focus on core businesses and rationalize growth avenues
- Focus on profitable locations and avoid growth that dilutes our margins
- Further reduce operating costs by deploying technology across our systems and processes
- Operational and Customer Excellence:
- Drive uniform adoption of our proprietary tech products across different geographies. This also makes our guests’, asset partners’ and our lives easier and efficient
- Leverage our Global Capabilities Team for each core function to accelerate technology development, to reduce duplication of effort, and to dramatically shorten the learning curve of every OYO market
- Culture and Governance:
- Enable OYOpreneurs with the right tools to drive productivity and governance
- Continue to build a culture of transparency, meritocracy and high engagement to drive belief in our product and in our capabilities
Deliver our value propositions while building trust as the underlying pillar that brings us closer to our asset partners and customers
We are well-capitalized and have a healthy balance sheet to deliver on the priorities we have laid out for ourselves.
Staying focused on delivering our mission
We continue to leverage technology to impact and change the lives of over 3.2 billion middle-income people worldwide who deserve better living spaces.
OYO has come a long way in a relatively short span of six years to become one of the world’s leading hospitality chains, and we acknowledge the higher expectations the world has from us. Therefore, today, our aspiration is not only to build a sustainable business but also drive net social impact. It is still day 0 for us at OYO.