Indian hotel chain Oyo launches in the United States with an investment of 300 million dollars, its home port in Dallas
One of the world’s fastest growing hotel brands, India-based Oyo, is gearing up for a $ 300 million expansion in the United States.
And Dallas will be its home port, Oyo COO Abhinav Sinha said.
The hotel chain, founded in 2013 by Ritesh Agarwal, then 19 years old, operates 23,000 hotels and 46,000 vacation homes in Europe, Asia and the Middle East. In September 2018, it raised $ 1 billion for its international expansion from major investors Softbank Group, Sequoia Capital and Lightspeed Venture Partners.
“We have created a niche in the hospitality industry by providing chic hospitality and design at great prices,” said Sinha, based in India.
The company is partnering with existing hotels, rebranding them as Oyo franchises, and streamlining reservation, pricing and technology services. In return, he gets a percentage of the monthly income. He adds one hotel partner per day in the United States, but wants to increase it to three or four. It has been operating in the United States for about four months, signing deals with 50 hotels in 10 states.
A search of Oyos in North Texas identifies two properties in Dallas and one in Fort Worth and Irving. The company said eight more properties are in the works in North Texas. This would add to Oyo’s burgeoning presence elsewhere in Texas, with hotels in Houston, San Antonio, Killeen, Tyler, Groesbeck, Texarkana and Wichita Falls.
Oyo is entering an already crowded US hotel market, where demand for rooms remains at record levels and many budget hotels have one owner.
Jan Freitag, accommodation expert at research firm STR, said room growth has slowed and demand has increased, but prices and incomes haven’t risen much.
In the budget segment, Frietag said hotels are increasingly converting to big chains or closing, giving survivors a price advantage. Branded hotels also tend to be more successful, although he said it depends on the brand.
Sinha said the US budget market is “a great place that works very well with Oyo’s capabilities.”
Oyo provides hotels with global brand recognition and more efficient systems, Sinha said. Its partner hotels are managed and booked through the Oyo website and app or other travel sites.
Sinah did not provide details on what percentage of revenue the company derives from its hotel partners, saying it varies by deal depending on the hotel and Oyo’s investment. His contracts are generally for five years.
Oyo’s reservation system uses dynamic pricing, similar to that of airlines or other demand-driven industries where what consumers pay can fluctuate throughout the day. Sinha said US hotels in Oyo are seeing occupancy increases of 30% to 40% and average revenue peaks of over 60%.
Hasubhai Patel, owner of Oyo South in Dallas, said in a statement provided by Oyo that the company had helped it increase its occupancy rate.
“I’ve been in the hospitality business since 1982, and my brother has been in this business since 1978. We decided to donate some of our independent hotels in Oyo because… it felt more like a real partnership,” Patel said in the statement. . “Today, when I look back, we are very happy now that the activity of our hotel, which was poor before, has increased significantly. The occupancy rate has increased by over 50%.”
Patel said he was considering converting another of his hotels to Oyo. “We believe this relationship will only get stronger in the long run,” he said.
But management at two other North Texas Oyo locations – Dallas Love Field and Fort Worth East Gateway Ball Park – gave the company less stellar reviews in interviews with The morning news from Dallas. They complained about Oyo’s pricing practices, its demands for increased revenue, and its reservation services.
Manan Patel, director of Love Field Oyo, said the only reason his hotel was still working with Oyo was because of the contract. He said Oyo had “no idea how the market worked.”
The Love Field Hotel has been operating under the Oyo name for a few months, but Patel said he stopped accepting guests who booked Oyo due to losses resulting from extremely low price and payment issues.
Hotel reservations have increased, but Manan Patel said rooms cost as little as $ 15 or $ 20 a night. He said the hotel had also seen an increase in damage to rooms and had a television stolen.
“Ultimately it turned out to be a nightmare for all of us,” Patel said. Oyo still receives a portion of all monthly income and the hotel will remain in the name of the company until the end of his contract early next year.
A representative from Oyo said the company was working with the owner of the Love Field hotel and was only aware of the concerns recently.
Pete Jariwala, owner of a Fort Worth Oyo, said he had mixed feelings about the signing. Oyo has promised him renovations and an increase in bookings under a four-year contract, he said.
“The only good thing is [Oyo] invest money in the property, ”he said.
Jariwala said the renovations took longer than expected and Oyo tried to book rooms before completing the work, forcing him to turn away guests. He also said he was surprised by the steep discounts on room prices.
Previously, his hotel had rooms at $ 60 a night. Oyo dropped it as low as $ 15 to $ 20 in the first two months. He said bookings could have been boosted by dropping prices as much as $ 10 below local competitors – without hurting his bottom line.
“We have bills to pay,” Jariwala said.
A representative from the company described the Love Field and Fort Worth hotels as early stage properties and said the relationship between Oyo and the hotel may take time to solidify.
Sinha acknowledged that there could be “isolated cases” of disgruntled Oyo owners. “The main places where we have such a situation are where we do not find the commitment of hotel partners to our customers,” he said.
He also disagreed that lower prices mean losses for hoteliers, mainly because the costs of operating a hotel are relatively fixed across the industry. He said filling an extra room only adds $ 10 to $ 12 to that cost.
“These isolated cases are [hotel owners] not being clear about our value proposition, ”Sinha said. “I am very happy to have the majority of partners who are absolutely satisfied with the tariff positions. “