Looking to get into profit and earn decent revenues after being unable to raise its desired amount of capital, Oyo has now ventured out into leasing hotels under its Oyo Flagship brand, reports Mint.
The pilot for the same was launched in Delhi NCR around three months ago. It is a part of company’s strategy to try newer means of creating supply and build more efficiency and predictability in their business.
Detailing about this new program, an Oyo spokesperson said,
The Flagship model pilot is an experiment with different kind of supply-streams to build more efficiency and predictability in our business model. Flagship is more upmarket than a standard OYO – a beautiful ambience and strong focus on customer service are key pillars of Flagship experience.
This new program though, is pretty much on an opposite end, when compared with the current aggregation one. Oyo Rooms used to book part of hotels’ inventory and was offering the same to the customers through its platform. That model — though less capital intensive — resulted in malpractices from the hotel owners, thus eventually costing more and more money to the company to curb this.
When quizzed about the same, an Oyo spokesperson responded,
A few of our partners were non-compliant with our standards thereby impacting guest-experience. These properties have been removed from our network.
With this Oyo Flagship offering, the company will have the ability to control daily operations, will train hotel staff & help the owners manage hotels as per Oyo’s standards, all of which will ultimately result in a more standardised experience than the one which the company currently offers. This will also eventually help company garner better return rates.
A person aware of this development told LiveMint:
We are leasing hotels and guest houses with low occupancy, as well as residential properties based on their location. A lack of good inventory of hotel rooms prompted us to think this way.
Depending upon the location and pricing of the property, the contract for the lease could range from six months to several years. Also, the company is deploying its own staff for the leased hotels to ensure good service. It is also planning to integrate other services such as food ordering, laundry, etc. on its platform for easy access. For this, it will be partnering with other brands in this domain such as Zomato, Foodpanda, Urbanclap, etc. Oyo however, has categorically denied these associations.
The company won’t be alone in doing this though. Another brand — Treebo Hotels — has been employing a similar model for its hotels. The only difference being — Treebo runs on a franchisee model while Oyo plans to completely lease properties for a set duration.
While the model does look like a win situation from a consumer point of view, it’ll be interesting to see how Oyo manages this on its balance sheets. This model — for obvious reasons — is a more capital intensive one as compared to pure aggregation. Moreover, the aggressive pace of expansion which Oyo has been witnessing, won’t be possible with this model. The company however, is reportedly ready to deploy in more capital if need be.
Talking about capital, Sequoia Capital and SoftBank just pumped in close to $100 million into Oyo Rooms. This capital would obviously come in more than just handy while Oyo expands its ‘flagship’ brand across India.
5:28 PM IST : The article has been updated with comments from Oyo Rooms.