OYO Rooms Business Model | How OYO Make Money [Infographic]

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Business Model of OYO Rooms

OYO Rooms Business Model: If a person is interested in hotel chains or want to know they work and make money, this is the right place for them. Due to several means of transportation that are available to us today, people travel a lot. And when they travel, most of them stay in hotels. So, this has resulted in the growth of the hotel chain business.

There is one name in the hotel chain industry in India that has been making a lot of noise and that name is Oyo Rooms. In just a short span of time, the company has managed to gain massive popularity. With their quality service, they have successfully managed to satisfy their customers and have made a loyal fan base out of them. Through their phones, people are able to book hotel rooms in different cities very conveniently.

About the Company

Oyo Rooms is an Indian hotel chain and hospitality company that was founded by Ritesh Agarwal in the year 2013. It is the fastest-growing chain of leased and franchised hotels and ranks third on the list of the largest chains of leased and franchised hotels. In the 6 years since the inception of the company, OYO Rooms has grown exponentially. The company has made its presence known to the world as it has spread its business in countries like Saudi Arabia, Sri Lanka, Philippines, the United Kingdom, Japan, Brazil, Mexico, China, India, Malaysia, and the United States. Oyo has also attracted a lot of big names as investors like Airbnb, Hero India, Sequoia India, Lightspeed India, etc. The company has over 8500 hotels that are spread across 231 cities in the world.

More than 17,000 people have been employed by Oyo Room globally, out of which around 8,000 employees are present in India and South Asia. 26 training institutes have also been set up by the company to cater to the hospitality enthusiasts in India. Today, the evaluation of Oyo Rooms comes to be around 10 billion US Dollars.

The company has also received a lot of awards and accolades since it came into existence. It was voted as the ‘Best Startup’ at the SATTE Awards in 2019. Oyo Rooms also won the award for the ‘Best Travel Startup’ at the Zee Business Travel Awards in 2018.

OYO Rooms Business Model

Are you curious about how OYO Rooms work?

The business model adopted by Oyo Rooms at the start of their business was that of hotel aggregation. Under this business model, Oyo used to take some hotel rooms in a hotel on lease under their own brand name. Then, the company would provide these hotel rooms to customers at discounted prices which they book using the Oyo Rooms app on their mobile phone or through the company’s official website.

Now, the company has shifted from the hotel aggregator model and adopted the franchising model to expand its business. Under this model, Oyo Rooms does not own or lease any property. What they do is that the company gets into partnerships with hotels and asks them to offer hotel rooms, under the Oyo brand name, to customers at discounted prices.

HOW OYO MAKES MONEY | OYO BUSINESS MODEL
HOW OYO MAKE MONEY | OYO BUSINESS MODEL Infographic

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Oyo Rooms Customer Segment

As Oyo Rooms is a hotel chain company, it should come as no surprise that the company’s customers would comprise of travelers. But in terms of travelers too, there are a lot of categories. One category is the adventure travelers also known as backpackers who go around exploring different places alone or in small groups. The budget of people belonging to such category is usually low. Then there are business travelers, who travel to different cities and countries around the world for work. The budget of these travelers is usually high as it is often the traveler’s company that pays for the trip expenses of the traveler. 

Another category of travelers that come under the customer segment of Oyo Rooms is the family travelers. This type of travelers travel in large groups and prefer a comfortable and spacious stay. The budget of these travelers is usually high.

Oyo Rooms Value Propositions

Standardized hospitality service is the one quality that sets Oyo Rooms apart from the other companies that are in competition. This also helps the company in enriching the experience of the customers. The experience of customers with Oyo rooms is different from that with Airbnb. Airbnb does the job of connecting travelers or customers with the host of the place. But, in the case of Oyo Rooms, it is the company that is fully responsible for providing all the amenities and services that have been promised to the customers.

Oyo Rooms Services

Since the company came into existence in 2013, Oyo Rooms has innovated a lot and come up with a lot of different services that they now provide to their customers. Some of the facilities or services are listed below:

OYO Flagship:Whole buildings or apartments are leased by the company for the Oyo flagship. These places provide a mixture of the comfort of a hotel and the friendly atmosphere of a home. Room with themes, walls with quotations and friendly service staff are some of the features of Oyo flagship.
OYO Townhouse:This service is mainly provided to appease the younger generations. Smart rooms are designed where facilities like smart TV, specially-designed beds, magazines, etc are available. A person can also order from the company’s mobile application.
OYO B Direct:It is mainly for businessmen who travel for their work.
OYO Homes: This comprises of entire homes for people who come out for holidays.
OYO Studio Stays:Apart from hotel rooms, rooms and flats are also provided by Oyo Rooms to people who visit a place for a long stay like an internship, job etc. The rooms are available to the customers for single as well as twin sharing. Any time a customer comes through Oyo, the company charges a commission from the owner.
OYO Silver Key:This service also caters to people of the business class like corporate executives. Spacious and private places are provided to them where they can make use of multi-utility services.
Weddingz.inThrough this, OYO allows customers to book venues for weddings and other functions.
OYO Wizard:It is a subscription model that provides members with several types of offers, discounts, prizes, etc.

Customer Relations

There are many ways through which Oyo stays in touch and communicates with its customers. It can be through the staff present at the hotel or through the Oyo mobile app. The company also provides 24/7 support to customers to help them with any queries that they might have. Apart from that, Oyo is very active on social media and engages with the public through different marketing strategies.

Oyo Rooms Cost Structure

There are all kinds of costs associated with running a business. The same is the case with Oyo Rooms. One major expense is the development and maintenance of the mobile app and the website to make sure that everything runs smoothly. Another expense is the salary of employees and the support staff that is hired by the company. The cost of IT infrastructure and the cost of having a legal team are also some of the expenses borne by the company. Oyo Rooms also has to pay certain types of commissions. The company also has to spend a significant amount of money the advertising and marketing efforts.

Oyo Rooms Revenue

In 2018, Oyo had an annual revenue of 1.8 billion US Dollars. There are several ways through which Oyo makes money. The company charges a commission of 22 percent every month from the hotels it has partnered with. The company also earns a commission of 10 to 20 percent in the form of reservation fee that a customer pays to book a hotel room. The memberships provided through Oyo Wizard are available to the customers at a price of 500 to 3,000 rupees. The company also gets funding from its sponsors and in return, promotes them on its app and website. Different companies also pay Oyo so that their ads can be displayed on Oyo’s app and website.

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FAQs Regarding OYO Rooms Business Model

How many hotels do OYO Rooms have?

OYO Rooms is spread all across the world and has more than 8500 hotels present in 231 cities of the world.

How does OYO make money?

There are various ways through which Oyo Rooms earns its revenue. The company charges a monthly commission of 22 percent from the hotels it is associated with. Another form of revenue is the subscription fee from Oyo Wizard which ranges from 500 to 3,000 rupees per subscriber. The company also gets money from its sponsors as well as other companies who want their brand displayed on Oyo’s app and website. A 10 to 20 percent commission is also charged from the customers as a reservation fee.

What are the various services provided by OYO Rooms?

OYO Rooms has a large and diverse customer base and to cater to that, the company provides various types of services. Oyo Townhouse caters to the millennials while services like Oyo B Direct and Oyo Silver Key are directed towards the business class. A subscription based model named Oyo Wizard is also provided to customers where they can avail of certain offers and discounts.

Who is the founder of OYO Rooms?

Ritesh Agarwal is the founder of Oyo Rooms who started the company in 2013.

How much commission does Oyo charge from its hotel partners?

OYO Rooms charges a commission of 22 percent from the hotels that it comes into a partnership with.

What is the full form of OYO?

OYO stands for “On Your Own Rooms”

Are OYO rooms safe for unmarried couples?

OYO allows unmarried couples to stay without compromising on safety. They might ask for local ID proof like Aadhar Card or Voter ID for security reasons.

OYO Rooms Business Model Review

Oyo has changed the way the hotel industry used to work. With the help of its standardized hospitality services and the quality of experience that the company provides to its customers, Oyo has managed to become one of the biggest names in the hotel and hospitality industry in India. The company knows its customers and accordingly provides services to cater to their different needs. The company also has several ways to earn money whether it is through a commission from hotels, subscription fees from customers or funding from customers. All these factors indicate that Oyo is on a path of rapid growth and unprecedented success in this industry with no intention of looking back.

Final Words

So, it was all about the OYO Rooms business model where we tried to explain everything regarding how OYO rooms work and how they make money. Hopefully, the information was helpful. If you have any queries to ask, we would be happy to respond in the comment section below.

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