Perhaps after almost exhausting all possible revenue streams from its current model, Budget hotel aggregator, Oyo Rooms has introduced an online marketplace for hotels called Oyo Bazaar, to procure daily essentials to run their business smoothly. The company with the help of the marketplace wants to maintain margins and boost loyalty among its partners.
Let’s first see what the entire deal is.
With Oyo Bazaar, the company wants to source supplies to the hotels in bulk and at prices that are 20-25 per cent cheaper than market rates, while generating almost similar percentage of margins for themselves in the process. And while this does sound pretty lucrative, whether hoteliers will shit from their trusted, personal vendors to someone like Oyo (whos brand image has been tarnished a hell lot in recent times), is a BIIIIG question.
CEO Ritesh Agarwal though, has a different take. He says,
As the market matures, hotel partners will look for more support from a single partner they work with. The intent is not to become an ecommerce company but to become a preferred supplier for our partners.
The hotel aggregator currently has over 5,500 hotel partners in more than 160 cities across India. Its margins generally range between 15-20 per cent per hotel partner. Ritesh further adds that even though the company’s margins are healthy enough to maintain the unit profitability that they achieved a while ago (a hugely questionable claim ever since it was made), they are looking to continuously “grow and nurture” their partnerships with their partners.
The company has already signed an agreement with 10 vendors for providing hotel supplies in a defined price range(regulated by the company), maintain quality standards, and deliver products to the hotels on time. The vendors will themselves take care of the logistics themselves.
It is also in talks with financial partners to provide loans to hotel partners in order to help them expand their business.
Oyo Bazaar launched in March with over 180 stock keeping units(or SKU’s) over the country. The SKU’s piloted in Delhi and Gurgaon, with three product categories, including linen, maintenance services and LED lights. The company has since then expanded to Mumbai, Banagalore and Pune and plans to setup over 500 SKU’s in the next two months. More product including leaning supplies, crockery, bathroom wares and room and kitchen appliances will also be made available on the platform very soon.
Oyo is currently striving to be the biggest budget hotel provider by leveraging more facilities to its customers and hotel partners alike. But is it actually what it claims?
If you’d seen the Softbank report where-in the hotel aggregator(yes, aggregator — not the biggest hotel chain) had reported unit profitability and 35x growth in revenues, you’d be surprised to see such rapid, massive growth. They might have reported a 5 fold growth in booked rooms, but it could also be said ‘booked’ if they themselves paid for it a part of the minimum guarantee scheme they introduced to get hotels on-board.
And since, Oyo rarely picked up the entire inventory of a hotel and because the hotels themselves hardly had any log that could project the number of walk-ins and room used, these booked rooms claims are debatable.
But, now what motive does the aggregator have to manage the inventory and launch a marketplace of their own? It is still unclear whether this proposition will provide inventory visibility to Oyo(that too if hotels agree to source inventory from them) or will it again be overlooked by touting another 30x growth in the next quarter. Its a wait and watch game, bit the wait might not really be too long.