Is OYO Hotels the next WeWork of the hospitality industry?
— 8 experts shared their view
Funded by SoftBank, which also bankrolled WeWork, today OYO has a a valuation of $10 billion (more than Choice Hotels and Wyndham Hotels combined) and boasts being the fastest growing chain in the world with over 1 million rooms in its portfolio. Beneath the PR glitz some industry experts see major structural and business model flaws: overhyped tech stack that often fails, "novel" revenue management approach of pursuing occupancy at any cost by lowering rates in periods of peak demand without the approval by ownership, as well as lack of brand recognition among the traveling public, forcing Oyo to rely on third-part resellers like Airbnb, HotelBeds, OTAs, etc. Is Oyo Hotels and Homes a great success story or is it another example of a cash-burning startup that will crash the moment cash infusions dry up?
Adjunct Professor NYU Tisch Center for Hospitality and Hospitality & Online Travel Tech Consultant
OYO Hotels' meteoric rise resembles a great extent the hyper-growth of WeWork. The question is: Is this rapid growth a good thing, especially in a traditional industry like hospitality? I believe Oyo's growth came at the expense of cutting corners, some big corners at that.
Technology: Oyo's mandated cloud PMS is basic at best, lacks the depth and breadth of functionality expected from a PMS today and “often crashes.” Oyo's Channel Manager and CRS are basic at best, hoteliers complain Oyo's APIs with third-parties do not synch availability and pricing in a timely manner.
Business Model: Oyo's obsession with boosting occupancy at any cost by lowering rates even in peak demand at the expense of ADRs is against basic principles of economics and time-tested industry best practices.
Brand Equity: Oyo has no brand recognition, at least not in North America, which forces it to distribute its franchisees' inventory primarily through the major OTAs, Airbnb and the bed banks. Where is the value here to the hotel owner? Why do you need Oyo for your property to be on Expedia or Hotels.com - all you need is a Channel Manager like SiteMinder, which comes at a much lower cost.
How sustainable are Oyo Hotels with all of the above deficiencies, without a serious Book Direct strategy, without a repeat customer base of 50%-55% of room nights booked, without a recognized loyalty program? Oyo Hotels is clearly another WeWork in the making, so hoteliers beware!