As unlikely and surprising as it may sound (might not really surprise a few though), Oyo Rooms, which currently is India’s largest budget hotel chain, is looking to acquire its biggest rival in this space – Zo Rooms, which is currently in talks to raise funding in order to avoid shut down, reports LiveMint.
As per the report, Zo Rooms is currently in talks with at least two investor for a new funding round, which is turning out to be a task in itself for the company. Primary cause behind this trouble is the unwillingness to participate again, by its biggest investor Tiger Global Management as it has decided to slow down its investments.
Interestingly though, both Oyo and Zostel (parent company behind Zo Rooms) were earlier embroiled in a court battle, where the former had accused the latter of duplication IP and the concept. The court had issued a stay order then.
We have contacted Zostel for an update to the Mint report.
While Zoster is in talks with other investors, they are not even near to close the round. The Mint report further suggests, that If Zo Rooms doesn’t get the required financial backing, they will have to shut down operations. The company is believed to be under pressure to cut costs and is going to shut down its operations in Goa.
The report further suggests, that Oyo Rooms had approached Zo Rooms last month with its acquisition offer. While nothing has been confirmed yet, it seems that both the companies have an opportunity here at hand.
None of the companies in this space have been able to generate significant amount of revenues. As per experts, the merger of both the companies can change that. Oyo currently books around 2,50,000 rooms every month while Zo Rooms books about 1,00,000 rooms.
As for Oyo, even though it leads this domain in India, it might face a stiff competition in this segment as three of India’s biggest online travel companies are all stepping into this segment – MakeMyTrip, Yatra and Goibibo. Interestingly and honestly unsportingly, these online travel portals have also removed all the listing of Oyo Rooms and Zo Rooms from their website, hinting that they want to build their own independent businesses.
However, reports have suggested that Oyo might get a big capital infusion soon, which will not only put it in the Billion dollar vlaution club, but will also help it fend off competition for a while.
The budget hotels offering was — for a very long time — being talked about as the next big thing to the investors but slow growth in the segment and thus business’s capital intensive nature has stopped a lot of bg ticket firms from investing into such domains.
Oyo Rooms was founded in 2013 by Ritesh Agarwal. The company has raised around $125.65 million in four funding rounds from seven investors, latest being $100 million in Series B round.