OYO – An Introduction
OYO is a tech platform that partners with hotels and vacation home-owners, making it easy for customers to book short-stay accommodations.
While many start-ups struggle to turn a profit, OYO’s remarkable comeback & the potential of growth in the tourism industry makes it a compelling investment opportunity.
Understanding OYO’s business model
OYO operates in two main segments – Hotels across India, South East Asia and United States & Homes in Europe.
OYO operates a franchise model that eliminates the need for fixed payouts to property owners (patrons). It partners with property owners exclusively, maximising revenues through dynamic pricing and effective inventory control.
OYO generates revenue from both property owners and customers through what is known as the “Take Rate.” OYO has stated that it can command a take rate of 33-37%, which encompasses fees from listings and bookings.
This higher take rate, compared to its peers, demonstrates strong loyalty from both property owners and customers.
Property owners benefit from OYO’s integrated tech platform for managing bookings, while customers prefer OYO for its wide range of options, standardized services, and easy booking process.
The Turnaround story
COVID dealt a major blow to hospitality businesses worldwide, including OYO. Despite the challenges, OYO continued to raise capital, benefiting from ample funding during that period.
However, the onset of the funding winter changed the landscape, cutting off easy access to capital. Investors shifted their focus from rapid growth to profitability, pushing startups across the board to deliver sustainable results.
OYO was up to the challenge and after taking the below steps, has transformed itself into a successfully profitable business.
These steps (including reducing headcount & employee expenses) have helped OYO improve its EBITDA* from -44% in FY20 to +16% by FY24.
We hope you found this helpful! In the next part, we will talk about the people behind the success of OYO.
Happy Investing,
Team InCred Money 💸
