In what will be music to the ears of startup enthusiasts in India, the unicorn of the budget hotel business, Oyo Rooms, has turned profitable! Though the key financial data has not been shared by the company, the news in itself is huge and will give investors in the country hope of eventually getting a good return on their investment.
“Our team delivered 15x year-on-year growth with 2.3 million booked room-night transactions in Q1 Jan-Mar 2016…We plan to grow deeper in all key business and leisure cities and triple our inventory by December 2016”, Ritesh Agarwal, Oyo Rooms founder, and CEO said in a statement.
Another interesting thing of note shared by the young CEO is that 95 percent of the sales came in from Oyo Rooms own sales channels in the form of the app, the web, and call-center. While the 15x growth in itself is an achievement, the term ‘profitability’ hasn’t been associated with unicorns often. Though it will be difficult to predict ‘how’ profitable the company is without the data, Oyo Rooms did share that it were the cities of Delhi, Gurgaon, Hyderabad and Kolkata that were driving profitability.
Oyo Rooms began the year with the news of acquisition of ZO Rooms but the year had gone south thereafter with the financials not looking strong. The money crunch was such that the Zo Rooms deal was on brink of being fractured. It appears the company has upped its game in the last month or two to deliver something that the investors, especially Softbank, will be proud of.
Oyo Rooms recently started swimming in international waters as it launched its first hotel in Malaysia. Currently, the company has a partner hotel base of 5855 which have a total of 68,300 rooms and operates in 170 cities in India.
Speaking of the being profitable, Ritesh further added, “Profitability has come from innovating revenue-sharing models, a deep understanding of our markets and enabling new demand growth channels. These coupled with a strong data science driven approach help us dynamically control occupancy and room pricing. Far from being a hindrance, our large network and scale allow us to adopt a pricing portfolio approach and provide a wide inventory-choice for the guest. Our real-time demand prediction engine smartly balances revenue management versus an all-out discounting approach. This makes us the majority source of demand for our hotel partners and enables relationships that secure a superior experience for OYO’s guests.”
With a market of between $20 billion to $40 billion there is a lot of room for Oyo rooms to grow but the competition is stiff too. There are a number of startups that are operating in the budget hotel space including Stayzilla, Ziproom, treebo and the other unicorns too are looking to venture into the vertical. Then there are those who are trying to move away from the day to day model to hour to hour model for hotel rooms. It will be interesting to see who comes out victorious in this battle.