Is Oyo making the right moves with aggressive overseas expansion, co-living, and event management?

Oyo

Oyo has changed immensely in the past eight months. The company made a successful pivot in November last year by moving to a franchise model from the aggregation one. It also started a slew of complimentary verticals including co-living (Oyo Living) and event planning (Auto Party By Oyo).

Of late, it’s been expanding into the overseas market. It has a presence in China, Dubai, Nepal, and is reportedly eyeing to set-up operations in European countries, including London. Rumours are rife that it has aspirations to explore the co-working space as well.

Why has Oyo been so aggressive in expanding overseas businesses while venturing into other verticals?

The answer is simple.

It is eyeing greater scale with aforementioned verticals. And, importantly, these verticals seem a logical expansion for the fulfilment of Oyo’s aspirations.

Over the past four years, it has created a strong brand in budget accommodation space and has appeared as a winner in the segment.

“Oyo has emerged as a winner over competition and with SoftBank’s support, going international and eyeing opportunities in other verticals are pretty obvious moves,” says Satish Meena, Forecast Analyst at Forrester.

If we look at budget accommodation for corporate travellers in Asia or even globally, there is no other brand that has emerged with a more trustworthy and pocket-friendly solution. While AirBnB is present across Asia and globally, it largely caters to tourists instead.

“Oyo wants to fill this gap across various geographies,” adds Meena.

Since its Indian business has matured to a large extent (in terms of processes and operations), Oyo has no major challenge in setting up operations in any native or foreign location. “With SoftBank as its backer, Oyo technically will have no problem in expanding to any country,” explains one of the venture capitalists that had bet on one of Oyo’s competitors.

“It has disrupted the affordably luxurious hospitality segment in India but if it’s looking for scale, the company needs to step out from the country and integrate other verticals,” he adds. Sooner than the later, clones of Oyo in several countries, including India, will come up.

“Oyo must move faster to maintain an upper hand on wannabe competitors,” says the VC.

Besides expansion in foreign markets, the company has ventured into co-living and event planning.

“Expertise in these segments require the same skill set which Oyo has been building with the hotel brand,” outlines Meena.

Following the pivot, it manages operations, branding, and revenue for the franchises. Managing events such as weddings, birthday and conference would be easy when you have control over the entire value chain.

Importantly, Oyo has built a brand that invites envy (not only in metros but in smaller cities too) in budget accommodation segment. This established branding will prove to be of value when Oyo starts selling the co-living and event planning verticals.

“Oyo has built a trustworthy relationship with customers by consistently working to improve their experience,” outlines the VC.

Because of the existing reputation, millennials or the younger generation at large would not hesitate in trying Oyo Living and Auto Party by Oyo.

While Oyo’s actions seem very ambitious with expansion in the pipeline, there are some instances where the company failed — with its initiatives such as on-demand food delivery and housekeeping. Three years ago, it started Oyo Cafe to deliver food prepared through its hotel kitchen while Oyo Care used to offer handyman service. Sadly, both experiments failed miserably for the lightspeed-funded company.

Since then Oyo has thrown its hats in co-living, event planning and aggressively expanding core hotel business in offshore markets.

It would be exciting to see how these initiatives pay Ritesh Agarwal and his company.

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