Indian hotel Behemoth Oyo targets us in the vacation rental market
Indian hotel giant Oyo Hotels & Homes is expanding its vacation home rental business in the United States, another sign that competition in this segment of the accommodation market is intensifying.
A number of venture-backed companies are looking to expand into the short-term rental market, either managing vacation homes or apartments for their owners or renting apartments for sub-letting by as de facto hotel suites.
Companies like Portland, Oregon-based Vacasa focus on non-urban vacation homes, while companies like Sonder and Domio focus more on urban apartments.
Oyo primarily runs budget hotels, but the company is looking to bring its brand and economies of scale to the vacation rental industry. It entered the European vacation rental market last year when it acquired Amsterdam-based Leisure Group for $415 million.
The company said it operates more than 50 vacation homes in more than 15 US cities and is looking to expand. Oyo said it hopes to expand its business by welcoming not only leisure travelers, but also business travelers and groups.
“We don’t see hotels and vacation homes as two different businesses,” Oyo chief executive Ritesh Agarwal said.
From a regulatory perspective, the vacation home rental industry faces fewer hurdles than equivalent short-term rentals in major US urban centers, Agarwal said. A number of cities have banned certain types of commercial short-term rental listings, fearing they could reduce housing supply and drive up rents. But vacation homes in smaller towns often face fewer restrictions.
Oyo, which was founded in 2013, has raised more than $3 billion in venture capital and has Japan’s SoftBank Group Corp. and short-term rental company Airbnb Inc. among its investors.
While it has been one of the fastest growing hotel companies in the world, more recently it has been holding back. Oyo is laying off 5,000 of its approximately 30,000 employees, pulling out of many cities and signaling that it needs to moderate its breakneck pace of growth.
“There’s been a significant amount of commentary among high-growth companies around the world, basically saying the market is appreciating a trend towards profitability very significantly,” Mr. Agarwal said in an interview.
He said the company’s more mature Indian operations have seen their losses diminish, but “there is still a long way to go”.
Oyo’s foray into the US vacation rental market comes as the novel coronavirus outbreak upends the hospitality industry. The recent spread of the virus in Asia, Europe and the United States has led businesses to restrict travel and prompted tourists in China and elsewhere to cancel vacation plans.
But recent disruptions aside, short-term rentals aimed at holidaymakers are on the rise. Last year there were 414,845 short-term rental listings in markets where leisure travel dominates, up more than a third from 302,220 in 2017, according to data firm Transparent Intelligence. Inc.
Other startups are also competing in the vacation rental space. Vacasa manages over 23,000 registrations in the United States. The company raised $319 million in a venture funding round last year, valuing it at over $1 billion.
Last month, former OpenTable CEO Matt Roberts became interim CEO of Vacasa, replacing founder Eric Breon. “At this point, it really makes sense to bring in someone who has experience leading a business of this scale,” Roberts said, citing the company’s rapid growth.
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