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OYO makes an entry into China after successful launch in Malaysia and Nepal

Jun 20, 2018 by The Passage Team
OYO makes an entry into China after successful launch in Malaysia and Nepal

Strengthening its international presence, online budget-hotel booking platform OYO on Wednesday made an official announcement of its foray into China. The Passage first reported in Mandarin on this development on 30 May this year.

The announcement comes as Softbank Group, one of OYO’s leading investors, vowed to bolster startup investments at its shareholders meeting held on 20 June.

For OYO, this is its fourth international entry. This launch, with hotel tie-ups over 11,000 exclusive rooms in 26 cities including Hangzhou, Xian, Nanjing, Guangzhou, Chengdu, Shenzhen, Xiamen and Kunming among others, comes just a year after the brand announced its entry in Nepal. The company marked its international presence with an entry into Malaysia in January 2016. OYO has also made inroads into Indonesia but has not made a public announcement yet.

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Its footsteps in China are also traceable. In September last year, China Lodging Hotels Group, China’s leading hotel management company, and OYO signed a five-year memorandum of cooperation, and former made a $10 million equity investment in OYO.

Commenting on the development, Ritesh Agarwal, Founder & CEO of OYO said, “The launch will provide an affordable and trusted stay option for both Indian and International tourists, business travellers and local city-dwellers.”

“The country’s (China) tourism industry is on the cusp of booming and flourishing wherein it enjoys a strong influx of both domestic and international tourists; also the market is as fragmented as the Indian hotel market.”

Ritesh added that with the company’s expertise in managing chain of hotels backed by technological innovations, they will continue to empowering neighbourhood hotels to emerge in the same league as the big boys of hospitality.

OYO further announced that it will be generating lucrative job opportunities for locals in smaller tier provinces.

Founded in 2013, OYO is backed by leading investors, including the SoftBank Group, Greenoak Capital, Sequoia India, Lightspeed India, Hero Enterprise and China Lodging Group and has over 5,000 exclusive hotels in its chain.

In China, the company may face competition from The SUNMEI Group, a leading tourist & hotel chain brand that operates economy, mid and upscale hotels across the country. SUNMEI has more than 2,000 stores with over 1 lakh hotel rooms under its umbrella. At the end of 2016, it launched the “AA Room”, a new brand of Internet chain hotels.

According to Boston Consulting Groups, hotel occupancy in China is 70%, which is higher than 66% in the United States and 63% in India. However, there is still huge room for branded hotel business such as OYO.

Over the past few years, online travel agency dominated the Chinese hotel reservation market. And with OYO and SUNMEI, things might take a different turn.

Sanchit Vir Gogia, chief analyst, founder, and CEO of Greyhound Research firm in India, who has been critical of OYO said, “They (OYO) set out to solve an entire travel experience, even if was within the hotel segment. But they couldn’t. That shows either they lack clarity or they are bought out by the investors ideas. Something is amiss.”

“They are going after a highly unstructured market and they need standardisation at scale and not just for a few hotels. Otherwise customers have no reason to flock to them. It’s the same case with AirBnb.”

Recently, OYO also began to set foot in hotel asset management and other travel services. In OYO's APP, users can also book taxis and search for nearby restaurants. OYO Captains also provides users with barrier-free travel and check-in support services.

Two months ago, OYO launched the OYO Total Holidays holiday package, which provides one-stop travel solutions including hotels, domestic and international tourism facilities, sightseeing, guided tours, catering, air tickets and visas.

Abhinav Sinha, OYO’s chief operating officer had said that OYO Total Holidays is expected to earn 10% of the company’s total revenue within five years.

OYO has been reducing its losses over the years. According to its submission to the Companies Registry (RoC) in India, OYO reduced its losses by one-third in its fiscal year 2017, and its revenue is growing at a high rate. It had reported a loss Rs 330.97 crore (Approx USD 49 million) for fiscal 2017, compared to Rs 496.31 crore (USD 70 million) for the previous financial year.

Meanwhile, Masayoshi Son of Softbank which betting big on OYO, during the shareholders’ meeting on Wednesday said, his company will strengthen its focus on investments in start-up ventures with artificial intelligence and other cutting-edge technologies through its $100 billion Vision Fund set up last year with partners such as Saudi Arabia's sovereign wealth fund.

"We are the unicorn (company) hunter," Son said.

The Passage Team

The Passage is committed to creating in-depth content over technology industry across Asia with a focus on emerging startups in the technology, healthcare, education, food, tech, travel & mobility segments.

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