Business Model of Oyo Rooms – How Oyo Rooms Work

Oyo Rooms is the largest branded network of hotels currently operating 450,000 listings in 5,000 cities in India, Malaysia, UAE, Nepal, China and Indonesia. The company started off its operations by building its business model around the aggregator business model but things have changed since 2018.

Earlier, the company used to organize the partner with hotels, lease some rooms, and sell them under its own brand. Even though the process is still the same, Oyo’s business model has changed its route to a new structure.

The main focus, however, still is the quality of the service provided. Hence, to maintain the brand image, they make the partners provide services at predetermined standards while they make them more visible to their user-base.

Oyo Rooms – An Aggregator or A Franchisor?

Oyo Rooms Business Model used to be a hotel aggregator. However, it was different from Airbnb’s business model as Oyo didn’t focus just on the discoverability of the partners among the users but also on the standardized quality of the services provided.Business Model of Oyo Rooms - How Oyo Rooms Work 1

The customers used to buy the services from the brand Oyo rooms and didn’t care who the partner was. Just like Uber, Oyo provided rooms with standardized quality and price.

This model was a mix of aggregator business model and franchise business model.

But as time passed, the company built its brand equity and the founders decided to pivot its business model to a pure franchise business model. The company now gets 90% of its revenue from hotels under the franchise model.

Business Model of Oyo Rooms

Oyo Rooms business model was similar to the usual aggregator business model (Uber for x business model) but had the essence of the franchise business model as well. The company used to –

  1. Lease a part of Hotel’s inventory beforehand,
  2. Organize those hotel rooms under their brand name – Oyo Rooms
  3. These partner hotels provided standardized service to customers of those rooms as it was decided in a contract with Oyo
  4. Bookings were made through the Oyo Rooms website and mobile application.
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The current operating model of Oyo Rooms is similar to what it was before. It’s just the company doesn’t lease the hotel rooms anymore, but ask the hotel partners to operate them as franchise. They have good brand equity and boasts a 100% increase in revenue to their partner hotels.

oyo business model

Partnership Model

Oyo Rooms provide visitors with quality hotel room stays at different places around India. They have partnered with hotels and made them work with them under their name.

Services Provided By Oyo Rooms

Oyo Rooms, started and famous as branded hotel rooms aggregator, provides many more services than just hotel rooms to visitors.

The services included in the Oyo Rooms business model are –

Hotel Rooms

Oyo’s earlier strategy was to book a part of the hotels’ inventory, to maintain it as per the quality standards, and to hold it captive exclusively for Oyo customers. That is, they used to lease some rooms every month and provide them to their own customers at profits.

The only thing that has changed is that the rooms are now not leased but operated as Oyo Rooms franchise. Since the hotels and place owners act as the franchisee, they are bound to operate as per the pre-determined standards. The company even offers plans where it runs the place instead of the hotel staff or owner.

Oyo Flagship

The partners used to book their own hotels when they used to see less prices on the Oyo’s platform and this became malpractice benefiting the partners while burning holes in Oyo’s pockets. To curb this, and to expand the business, Oyo Rooms has started leasing of hotels and places where it has full control over the day-to-day operations of these establishments.

Oyo Townhouse

The company has recently launched the Oyo Townhouse to hone its value proposition and stand out of the competition when it comes to standardised hospitality. Oyo Townhouse is based on the needs of the millennial traveller. These hotels are planned and built based on the needs and wants of the millennials. They have –

Smarter Rooms – with specially designed beds, showers, sockets, and internet infrastructure. Even TVs have Netflix installed.

Smarter Spaces – common spaces designed to have meetings. Free printer, business services, magazines, coffee and tea in the common area.

Smarter Menus – 24 x 7 Kitchen which lets you order from the mobile application.

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.. and many more smart services.

Studio Stays

Apart from providing hotel rooms, Oyo Rooms also provides fully furnished rooms and flats for long stays like internships, corporate stays, etc. The rooms/flats can be rented on single occupancy as well as on twin sharing basis as well (other provisions are also applicable). Rents are paid monthly. Commission (take-up rate) is charged from the owners if the customer comes through Oyo rooms.

Events & Other Long Stays

Just like studio stays. There are many family functions(weddings, parties) as well as corporate functions (seminars, meetings, parties) which involve hotel rooms for their guests to stay for long. This service is also provided by Oyo.

Commercial Places

Oyo has expanded its branches in the domain of the commercial places as well. Now the customers can even book office spaces on Oyo as well.

Oyo Wizard

The company has also launched a subscription model where the subscribers get exclusive discounts, deals, and cashback offers.

Oyo Wizard

Revenue Model of Oyo Rooms

Earlier the brand used to lease hotels at a predetermined price and offered them to the users at a take-up rate. This has been changed to a commission-based revenue model.

Oyo rooms charges a commission of 22% from its hotel partners. However, this commission does vary according to the services provided by the brand.

Future of Oyo Rooms

[Opinionated Content]

Oyo is growing. Though this growth is at a cost, it will be worth it afterwards. According to a source, Oyo Rooms has delivered a 15x annual growth with 2.3 million booked room-night transactions in the first quarter of the calendar year 2016 while its GMV continues to grow substantially every month. This shows the increasing brand equity and demand of Oyo.

Oyo has set its name as the high-quality budget hotel network, which might change in the near future as the prices might increase. But since Oyo has come up with a new franchise model, there are chances that the prices might be kept as they are now.

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30 Comments

  1. Oyo is pure fraud company. They are not safe for their partner and their customer. They didnot paid their Partners payment also. if any doubt check their webside about complaint.

    Reply
  2. Oyo is the worst hotel chain in the world. I’ve had the absolute worst experiences to date at this chain, and this is coming from a full-time world traveler.

    Did you know that if you book through one of their contracted booking agents and not directly through their “customer disservice” center that you will be denied wifi access in their rooms?

    Their customer call center will also not let you speak directly with the hotel and will put you on hold indefinitely, swear at you in Hindi, or just hang up on you…Even if you cannot find the hotel or have a specific question for the front desk. Unless you book directly through them, you’ll be treated like absolute trash and denied any semblance of human decency.

    My wife has been bitten by bedbugs at this chain. Filthy rooms with pillows and sheets that are dirty and smell like food. Mildew on the walls and horrifying stains on the toilet and all over the washroom in general. Trash littered on the filthy floor. Denied breakfast even though it was clearly paid for. All cringeworthy things like this you will find at this disgusting chain of ramshackle hovels.

    Oh, and what about the multiple murders and accidental deaths that have occurred at this chain? Read up on it yourself. Terrifying.

    Do yourself a favor, pass up on this chain. It’s not worth the infuriation and health hazzards.

    Reply
  3. OYO is going to die a certain death. If you’ve not followed the customer grievances, you won’t know that OYO has become highly unreliable to book. More often than not hoteliers don’t honor the booking through OYO as they can’t give bear the rate. Reaching out to customer care is a BIG issue. OYO is going to fail if they continue like this.

    Reply
  4. Thinking of Accepting a role in this company’s US market. Do you think this model can work in the US Market and what challenges do you see? Would you consider it a startup?

    Reply
  5. i have a resort at jaipur delhi road .its a valley surrounded with all side hillshaving 27 cottages and huge space . how can i give this property to OYO . ?

    Reply
  6. Thank you for the great article. In this model, who is paying for the refurbishments to get it up to OYO standard? The hotel owner or OYO?

    Reply
  7. How to be the host of OYO to rent the house, 3rooms, 2 toilets for 6persons? What the benefits between the host and the customer? Or benefits for the host?

    Reply
  8. I plans for 20 rooms hotel .what i do for contect to oyo rooms.what is the process for joint with oyo. What is oyo standered for rooms

    Reply
  9. I have tied with OYO and let me share my experience. I have a building, vacated the tenants and restructured it with huge cost. Totally lost rent was 4 months. Over the lease period OYO demanded free rent for three months. This was not in the original agreement. After the property became live this free rent was deducted from the start. Thus I lost 7 months rent and OYO is enjoying income. Then followed by deduction of small advance given for buying beds. Interesting model from OYO with its Muscle power and bullying and no one is there to hear your grievance. Had I known this I would have not tied up OYO. I cannot cancel contract as there is huge penalty clause but no penalty if the Owner cancel the contract. Now my income in Pocket is less than what I was getting by giving rooms locally. This is absolutely unfair!

    Reply
  10. Dear Sir/ Madam ,
    please call me/send contact information or msgs to me regarding oyo business i want join oyo hotels business ,please noted my cell number–8130107848

    Reply
  11. At Nagpur, Maharashtra,I owe an well furnished independent banglow with 4 bed rooms and a hall, kitchen & a 600 sq ft terrace on first floor.
    i wish to lend it to OYO Rooms.
    Let me know the procedure for the same.

    Reply
    • Hi Ujwal,

      My name is Nelson from SuperFly, we engage in providing affordable housing and accommodation services across the country.

      I would like to discuss with you for a partnership, please forward me your contact information or else get in touch with me.

      Following are my contact details.

      Phone: 8806853174
      Email: [email protected]

      Reply
  12. Quality and standard is what OYO maintains so while customers are getting huge discounts currently but once they get used to its standard, they won’t like booking any rooms other than OYO. And then OYO will be profit making business!!
    Best wishesh to OYO!!

    Reply
  13. It’s really disappointing to know such a good company is facing financial crisis. Nevermind, it will pass and I am sure OYO will grow and show its real potential to the world

    Reply
    • OYO divides the income on revenue share basis (70:30) where 70 percent goes to the owner & 30 percent remains with OYO. Additionally they charge ₹300-350 per used room/night from the owner. They say they charge this amount to pay the utilities bills such as dth, electricity,wifi, laundry etc.

      Reply
  14. I have a 4 bed room accommodation at Indore out of which I propose to hire 3 rooms to OYO. The accommodation is furnished and of a very good standard. Please let us know how we can work out partnership with you ?

    Reply
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