Oyo says bye to aggregation model, steps into pure-play franchise business

After aggregating budget hotels for over three years, Oyo has pivoted to become full stack hospitality company. The Gurugram-based company is now pure-play franchise business which allows hotel partners to become Oyo branded hotel.

The move is largely seen as company’s effort to cut losses and deliver uniform experience and pricing. The hotels that were part of the aggregation model have converted into franchises, reports Economic Times.

The Softbank-backed company had introduced franchise model in May 2016 to provide a more premium offering with the experience controlled entirely by Oyo. Last year, there were several aggregators turned wary of the aggregation model and junking it for a brand-centric franchisee format.

Oyo’s rival Fab Hotels had shifted from aggregation model to franchise model early last year. Treebo follows franchise model too.

“In the last two years, we have evolved our business to 100% exclusive franchise, manage or operating. We do not anymore do aggregation and have become a full-scale hospitality company,”  said Oyo founder Ritesh Agarwal to ET.

Launched in 2013 by Ritesh Agarwal, OYO so far has secured about $442 million from likes of Softbank, China Lodging Group. The company also launched its new vertical OYO Townhouse in April this year. It takes complete operations under Townhouse and manages everything right from the interior, exterior to services.

Presently, it claims to operate 8,500 hotels and 70,000 rooms in more than 230 cities in India. However, it’s not clear that how many hotels have actually embraced franchise model

Franchising will help Oyo to curb potential malpractices by some hotel owners, which in the past have caused significant cash burn for the company. Earlier it used to book a part of the hotels’ inventory and holding it captive for its customers. This often resulted in hotels making fake bookings, which led to Oyo bleeding more money.

It also struggled to offer customers a standardized service across all its properties. Franchise model will enable it to have greater control over experiences.