Case Analysis:

OYO ROOMS : ANOTHER UNICORN IN THE MAKING?

Strategic Management

Submitted By:
Ratul Paul
Arnab Sarkar
Aman Agarwal
Shomil Srivastava
Amit Kumar
Aniruddh Chaudhary
MBA Power Management 2018-20
Q1. Discuss the characteristics of OYO’s Business model and analyse whether the model
qualifies as a lean start-up?

Ans. OYO is a customer centric and its app is totally based on customer need and want. OYO
brand highlight three promises: Affordability, accessibility and predictability. The OYO is
based on asset-light business model which basically relied on three pillars which are:
Standardization, affordability and technology driven experience. In this business model the
ownership of the hotel is in hands of its owner but the training and management of the room
were done by the OYO to meet the level which is meet the customer standard.

The Business model was shown as follows:

1. Acquiring the inventory: OYO have their inventory by acquiring small and unknown
hotel by entering in contract with them. They basically target the unorganised sector hotel.
Major problem was these hotels were having low occupation as they were not known, the
second problem was customer experience was not good as these hotel lacks some essential
features, the third problem pilferage of hotel property by certain undesirable customer. But
these problems were addressed by scale economies, marketing power by providing online
platform for booking, check inn and check out etc and the Standardization by providing basic
facilities to clean rooms and linens, wi-fi and other customer amenities.

2. Transforming the properties: After acquiring the property OYO convert that property
into OYO rooms by Standardization like earlier mentioned according to customer
requirement.

3. Technological Advancement: OYO gave OYO operational excellence. It was a highly

sophisticated algorithm build handle huge amount of transaction and software provide
excellent interface between the customers, hotel manager/owners and OYO. It was an
integrated system of customer information, hotel operation and pricing as well as many apps.

4. Auditor: Auditors were there to examine the hotel condition. There was audit of hotel
rooms for every three days so that they can ensure the AC, water heater and bathroom all are
in perfect condition or not otherwise hotel will be taken out of OYO network.

Lean: I think that this start-up qualifies to be lean start-up because OYO was systematically
managing the hotel that were taken by them and auditor were there who can examine the
hotel every three days so that the quality of rooms do not degrade and if they degrade then
they are thrown out of the chain of OYO and they were basically using the technology and
analytics to do so make them qualify the lean as they are using less material, requiring less
investment and using less inventory and customer centric that qualifies that OYO is Lean
start-up.

Q2. What should OYO do regarding the threats of hyper competition and copycat?

Ans. OYO founder Riteish Agarwal was basically concerned about the competitors and
copycats. There was one of the predominant competitors of OYO that was ZOSTEL who
launched “Zo Rooms” which was same as OYO rooms and were like the copycat of them and
for that there was a legal battle over copyright violation. There were many competitors like
Vista Room, Treebo Hotel, Zip Room and Wudstay based on OYO’s success these start-ups
had sensed a huge opportunity in aggregating stand-alone budget hotels which lacked proper
system and a recognised brand name. But the major challenge was by three apps which were
MakeMyTrip, goibibo, yatra.com. These apps provide services like traveling booking, hotel
booking and other facilities and their facilities were similar to that of OYO so the problem
increase for OYO. The things that OYO should do are as follows:

1. Open a direct link to your customer so that you can directly address their problem and
provide solution to there prospect and supply them with what they need as opposed to selling
them what you want to sell.

2. Create your niche and have more room means that we know that the market is already
crowded and has less scope of expansion. It is essential for OYO to provide something
unique for customer which are not already there.

3. Pricing should be down so that customer segment which was not able to afford the hotel
from OYO can now book the hotel from OYO only and identify who is offering good money.

4. Make new innovating discovery for OYO app like now they should go in café business and
travelling booking which they have not entered but their competitors have entered.

5. Their customer service quality should be so good that the customer should leave all the
other app and use OYO for booking hotel.

Q3. Analyze whether OYO has a sustainable competitive advantage by identifying threats.

Standardization of unauthorized budget hotels:-

The Oyo rooms are providing service of mostly owned by different providers i.e. Asset light
business model. This asset light or fly light business model covering of big market of
unauthorized hotel to provide the opportunity to the customer by standard authorized budget
hotel. Currently all others are considering only luxury hotels to stay. In doing this all others
are not able to cover the biggest segment hotel stay market i.e. unauthorized budget hotels.

Enthusiastic in doing Innovation:-

The big picture behind the idea of the Oyo rooms is come on the ground with highly
innovative one stop shop by providing the budget stay in India. The company is strong
believing in the innovation in the policy of standardization of unauthorized hotels.

Ever growing network of budget hotels:-

The Oyo rooms started with one room one hotel type of hotel in Gurugram (Gurgaon) now
around number of properties and motels and home stay under asset light model or fly light
model. The other doing this model only in luxury hotels and this is not the big segment of the
total hotel stay market.

Subsidizing budget hotel stays:-

The Oyo rooms in initial stage invest money to provide the rooms on subsidized rate so it will
be affordable budget hotel customers. This is provided by others as well in the luxury hotel
i.e. very small segment of the total stay.

4. Ans:

To reach consolidation and profitability oyo have to take following steps

1. Implement OYO cafe:

It could be easily implemented as oyo has already a huge network of hotel chains. With their
infrastructure it is very easy to implement restaurant and food delivery chain that would
utilize the hotel's kitchen as base.
2. Auxiliary services for hotels

With so huge network oyo under him has a number of expert people managing their hotel's
service needs like cleaning and laundry ING. It could be easily set up as a independent
platform that can cater to any hotel's need be it for own or otherwise.

3. Building more robust network:

With so much brand equity Agarwal must cash it in as soon as possible by collaborating with
maximum hotels which would further augment their revenue stream and brand equity.

4. Innovating new technology solutions to augment service quality:

One of the core strengths of oyo is their implementation of technology solutions in hotel
industry in india. They have to further improve on this to survive in the cutthroat hotel chain
industry with rival brands popping up like mushroom. It could only be possible with
unmatched service performance that could be provided only in oyo hotels.

Answer 5

Yes, OYO ought to penetrate in new segment of the market as its one of a kind business
strategy has helped it to change the market structure hospitality management and useful to
provide solution to clienteles who faced difficulties in finding a budget hotel suitable for their
accommodation. With its swift progress they started to expand their reach in global market,
which has given fruitful result by generating huge profit. OYO should target more of the
developing countries, as it will be easier for them to capitalize the market because of past
experience.

As mentioned in exhibit 5, funding is one of the major reasons for its success, due to these it
will certainly boost OYO’s growth in the particular segment rather than broadening of
business. OYO itself has created a brand image to the customers which help them to
collaborate with most of the hotels in hospitality segment and to be as a market leader even
after a strong competition with its rivals in the budgeted aggregation space.