Success Story Of OYO: How It Started? – Business Case Study

Ritesh Agarwal is the 21-year-old founder and CEO of OYO Rooms has led OYO to a 12 billion dollar valuation in just 10 years, with operations in over 80 countries and more than 33 lakh rooms.

Ritesh’s journey with OYO began when he was just 18 years old, earning 1 lakh rupees per month. But he had a vision for what his company could become, and through hard work, dedication, and a powerful business strategy, he was able to turn that vision into reality.

In this blog, I’ll be exploring OYO’s business strategy and the valuable lessons we can all learn from it, as well as sharing insights into Ritesh’s journey and the framework he used to build a company that has changed the face of the hotel industry. So stay tuned for a fascinating and inspiring story of entrepreneurship, innovation, and success.

How OYO Started?

In 2007, Ritesh Agarwal began his career at the young age of 12 by selling sim cards. He developed a passion for traveling and often found himself on the move, but as a student he faced the familiar challenges of balancing the pressure of making a career with loose pants and empty pockets. It was during this time that he was introduced to a new problem: the lack of good and affordable accommodations. The ones that were good were not affordable, and the ones that were affordable were not worth living. And it was from this problem that OYO was born.

The story began in Gurgaon’s Hooda city center, where Ritesh invested 35,000 rupees in a small hotel with only 15 rooms, which had an occupancy rate of just 19%. By refurnishing the rooms and listing them at 999 rupees, the occupancy rate quickly increased to 90%. Ritesh realized that if they provided people with good rooms at good prices, they would always prefer taking it. And with this realization, OYO’s first strategy was made.

What is OYO’s Two Powerful Strategy?

Before Oyo, customers had no idea of what to expect when staying at affordable hotels. Sometimes the bedsheets were not clean, the AC was not working, the bathrooms were not clean, or there was no water. Oyo’s first strategy was to provide predictability for customers. By ensuring that the basics, such as clean bedsheets and functional AC, are always provided, Oyo aims to give customers a sense of what they can expect when they book a room. In the same way that a burger without a patty would be disappointing, a hotel without basic amenities can also be a letdown. Oyo aims to eliminate this uncertainty and provide a better experience for customers.

Ritesh sir, the founder of Oyo, created the Oyo standard, which includes 6 promises for customers.

  • No matter which Oyo room you book
  • You will always get 3-click booking
  • Spotless linen
  • Free wifi
  • AC
  • Early check-in

He also discovered the concept of the value life cycle, which refers to the process of creating and selling a product or service. For example, Apple’s value life cycle includes deciding on features, designing, manufacturing, adding the operating system, packaging, and hosting an event to market the product. Similarly, Oyo’s value life cycle includes signing up a property, standardizing it to meet Oyo’s standards, refurbishing, selling it, and providing good service to customers. To master the value life cycle, it was important to make the two heaviest and most important tasks error-proof.

Another Two Strategy that used by OYO to Become Successful:

Oyo used two strategies to become successful. The first strategy was identifying key stakeholders in their ecosystem and understanding their requirements. Oyo identified three key stakeholders: hotel owners, who want more revenue; managing staff, who want ease of work and respect; and customers, who want quality places at affordable prices. To manage these requirements, Oyo built a technology infrastructure and appointed cluster managers at every six hotels. They also provided hotel partners with this technology to easily manage their hotels. They also made the customer application user-interface/user-experience easy to use, allowing customers to book a room in just three clicks.

The second strategy was Playbookization, which helped Oyo standardize and sign up properties quickly and efficiently. Playbooks were created for tasks such as signing up properties, transforming properties, and recruiting staff. Properties were identified in one area, signed up on the first day, audited on the second day, transformed on the third day, and made live on the app on the fourth day. This allowed Oyo to acquire 100 properties in just 15 days, compared to the 3-4 months it took their competitors. Due to these strategies, Oyo’s business started growing at a rapid pace.

Problems that OYO Fetched and How Solved?

Oyo’s business model initially had a loophole where hotel owners would book Oyo rooms at a cheaper rate and then sell them at a higher price to customers, resulting in Oyo’s profit being taken by the hotel owners and customers paying more for rooms. In 2018, Oyo found a solution and switched to a Franchise Business model. In this model, Oyo partners with hotels and gives them a franchise, taking a 22% commission on every room booking. This ensured that Oyo’s profit was secure.

Additionally, Oyo uses the Power of Motion Study & Self-Esteem strategy to increase productivity and efficiency. This strategy is based on the principles of scientific management, where unproductive motions are eliminated, incidental motions are reduced, and productive motions are increased. Oyo eliminated unproductive motions such as unnecessary conversations between employees and keeping written records, and provided training to staff and created 26 training institutes to increase productive motions. They also introduced the Oyo toolkit to minimize incidental motions. The toolkit is given to customers at check-in and includes items such as shampoo, soap, and toothpaste, saving staff time. The toolkit also includes coupons, mostly Oyo’s discount coupons, which serve as a form of self-esteem for the customers.

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