ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Startups

Indian hotel unicorn Oyo says surpassing Marriott only the start

Tech startup kicks off global expansion of room rentals in Tokyo

Oyo officially launched Oyo Life, an apartment rental service, in Japan on March 28. (Photo by Ken Kobayashi)

TOKYO -- Oyo is on track to overtake Marriott International as the world's largest hotel operator in less than four years, the Indian startup said on March 28, as it unveiled global plans to roll out its rental housing business.

Valued at $5 billion, Oyo claims to be the world's seventh-largest hotel group, with 515,000 rooms under management. It aims to overtake Marriott, which manages 1.29 million rooms, by 2023.

"I believe it will come sooner," Ritesh Agarwal, Oyo's 25-year-old founder and CEO, told reporters here. "But I think our mission is far greater. It's the beginning of a much bigger journey."

The company now seeks a foothold in the residential market. It launched Oyo Life, an apartment rental service, in Tokyo on March 28. Oyo rents out fully furnished rooms for a minimum of one month without asking guests for deposits, more flexible than traditional contracts in Japan.

Founded in 2013, Oyo swiftly became India's largest hotel chain by creating a network of small lodgings that were largely ignored by global chains.

By providing technology that replaces manual management with data-driven algorithms, the company says it improves operational efficiency while keeping rates low. In return for improving the hotel's performance, Oyo receives franchise fees or a share of revenue.

Oyo CEO Ritesh Agarwal speaks at a news conference in Tokyo on March 28. (Photo by Shihoko Nakaoka)

Oyo's hotel business spans eight countries including China and the U.K. Agarwal said the company plans to roll out Oyo Life globally. "Big metropolises like London are very exciting," he said.

The ambitious plans for both the hotel and residential markets underscore how technology-driven startups are easily stepping over boundaries set by conventional industries. Ride-hailing companies have diversified into food delivery and payments, and the trend is spreading across hospitality and real estate: Airbnb, the U.S. home-sharing company, strengthened its hotel business by agreeing in early March to acquire last-minute hotel booking app HotelTonight.

Agarwal said the same principles apply to the residential market.

In Japan, apartment owners typically pay fees for brokers to find tenants, while tenants are locked into one-year contracts and need to furnish the rooms on their own. Oyo Life signs long-term leases with apartment owners, furnishes the units and subleases them to individuals for shorter periods. By taking over the hassles and eliminating inefficiencies through technology, Oyo thinks owners will sign up and urban millennials will pay a premium for the convenience.

Oyo's breakneck expansion has been unusual, even for the fast-paced culture of tech startups. The company entered China in November 2017 and now ranks among the top five hotel operators in the country. This growth fueled further expansion internationally. Oyo said annualized gross sales of $1.8 billion are rising four times faster than the year-ago period.

Agarwal revealed that the rapid expansion in China was prompted by a tip from SoftBank Group CEO Masayoshi Son, who persuaded him to enter the market four years earlier than originally planned.

"He said, 'If you generally believe in it, you should do it now,'" according to the Oyo chief. "We had the balance sheet, but he inspired us to take the risk."

SoftBank Group's nearly $100 billion Vision Fund led a $1 billion funding round for Oyo in 2018. The Indian startup stands as a unicorn -- a private company worth $1 billion or more.

Though Oyo is still losing money, Agarwal said, the company expects the loss as a percentage of sales to decline to 10% for the year ending in March 2019, an improvement from 20% a year earlier.

Some are skeptical that Oyo can deliver its fast-paced growth in developed countries.

"They have been able to replicate [the business] in China and Southeast Asia," said Ujjwal Chaudhry, associate director at RedSeer Consulting. "It would be competing with established players in more mature markets, so it may be more of a gradual evolution."

The residential service business draws comparisons to that of U.S. co-working space company WeWork, and Indian media recently reported that Oyo is eyeing a foray into the office market.

"We want to have a view on spaces in a much broader format," Agarwal replied when asked about such a possibility. "There can be many opportunities."

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media