OYO, Pandemic and Future: CEO Agarwal Makes Big Claims

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If there is one sector at which the pandemic really took a swing, it is the hospitality industry. But that’s not the only one that is going through the worst phase. The tourism industry has also struggled in times like these. But looks like, after a year of unprecedented pause both the industry had to take, things have slowly started inching back to normal. Amidst this creeping growth has come a heady avow from the 2nd youngest billionaire in the world.

Here alongside a fireside chat with OYO board member Troy Alstead, CEO Ritesh Agarwal – Founder and CEO of OYO Hotels – was assertive in telling employees that the Indian startup is finally making progress in recovering from the coronavirus fallout. Not just that, Agarwal also claimed that the company was equipped with a sturdy $1 billion (in cash, that is) to fund operations until OYO plans an initial public offering.

OYO, one of the Indian startup unicorns in the quiver of SoftBank Group Corp., was raking in the moolah, reaching a valuation of $10 billion before the pandemic slide. Backed with some optimistic number, perhaps the 27-year-old entrepreneur felt a bit compelled to make the statements he did, seeing as how the once high-flying company endured months of layoffs and losses as Covid-19 pummelled its business.

In the same riveting chat, Agarwal revealed that presently, the company’s primary focus was on getting revenue per available room to 60% to 80% of pre-pandemic levels across all markets. Given the global footprint that the OYO has been able to eke out, countries like India, China, Japan, and Southeast Asia are all making progress in reaching that range, he informed.

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Before the pandemic brought the life around to a standstill, OYO was growing at a whirlwind speed, all backed by the shrewd SoftBank founder Masayoshi Son. This very pace led to some operational missteps, for which the company had to layoff and furlough many employees, trimming its total workforce by two-thirds.

Agarwal was also frank in sharing that there he had not felt any additional pressure from outside shareholders during the turbulent times of the pandemic. The young founder also hinted that the management was striving to get the company in shape for a public offering, for when the time is rife.

The present and the future

While OYO had huge plans for its strategic expansion across the globe, the company plans to focus on 5 core markets during the pandemic, i.e. India, Southeast Asia, Northern Europe, China, and the US. With its gross margins now back to 85% of the pre-pandemic levels, things are looking upbeat even as there is uncertainty about how the days ahead pan out.

While India will continue to be the centrepiece of all its operations, seeing as how 64% of the revenue comes from the homeland, some hotels on OYO’s platform are struggling to survive. In most months starting June, when the lockdown ended, OYO managed to generate even less than 25% of its pre-Covid monthly revenues in India, clearly indicating that the worst is not over yet.

OYO is looking at making vacation homes the cornerstone of its strategy, seeing as how families have been insistent on remaining in a bubble while travelling. For a reason too, as their brands DanCenter and Belvilla have recorded significant growth of 137% and 56% respectively in their bookings, while the company continues to navigate by putting their best foot forward.

Besides, OYO plans to invest across the border for the time being too. Even as the staff has been slashed in China to less than 3,000 early this year from 8,000-9,000 in 2019, the RevPAR (revenue per available room), accepted as an indicator of demand, in China has regained about 75% of pre-Covid level, with business looking to normalize fully by 2021.

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Needless to say, the firm is understandably sceptical of putting up expansion across the border, seeing as how the retaliatory threat is ever-present.

OYO remained a market leader in south-east Asia, Europe, and the US too, until its business was rocked after seeing a surge in recovery before the second wave hit in October.

As much as Agarwal claims, the endgame is still to pan out. The estimated valuation of OYO is on a constant decline. The company valuation tanked to $8 billion in August from $10 billion in January this year. OYO, whilst looking to steady its ship must choose to respond adequately to markets across different regions, at least till the IPO beckons. Slow and steady for now.

Stay tuned for more updates.

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