OYO makes room for business travellers


Softbank-backed OYO is looking to expand its Townhouse brand aggressively, with plans to take the number of OYO Townhouse hotels to 400-500 by next year, up from 45 at present, Ankit Tandon, COO, OYO Townhouse, told ET.

OYO ventured into the UK last month by launching Townhouse hotels in London, and will deepen the Townhouse presence in the UK as well as in Indian cities such as Guwahati, Vijaywada, Lucknow, Surat, Nagpur and Pondicherry among others, Tandon explained.

“The growth will be deeper and sharper and Townhouse hotels will increase month on month. We are aggressively pushing this product. By 2019, Townhouse will expand to many more cities in India, and also grow aggressively in foreign markets,” he said.

1.1OYO operates the Townhouse brand on the leasing and management contract models with 60% management contracts and 40% leased arrangements. The brand, priced higher than the more pocket-friendly OYO Rooms, is targeted at millennial business travellers and offers amenities like a café, 24/7 kitchen, printer, white boards and other business services.

“We expect the structure to continue in a similar way. We are open to both models. With funds coming in, we are looking at investing a significant share in the Townhouse brand,” he said.

A week ago, OYO announced it had secured $1 billion in additional funding to grow its business in China and for expansion in other international markets.

A new report by management consulting firm RedSeer on the mid segment hotels titled ‘Room for Millenials in a $4 billion Industry’ launched on Thursday said the growth of rooms for OYO Townhouse was more than 3x the growth of chains such as Lemon Tree and Ginger operating mostly on the conventional owned or leased models, and that other entities are spending 3-4% of their top line to compete with OYO’s tech capabilities.

Occupancy rates for OYO’s Townhouse model are 90% compared with 65-75% for Lemon Tree and Ginger, as per the report which pegs the size of the Indian mid-market hotel segment at $ 4 billion.

According to the report, as of financial year 2018, Lemon Tree had a total room inventory of 4900 with about 60% of them owned, 30% managed, and the remainder leased. Ginger had 70% of its inventory under the leased model and 20% managed. Ginger and Lemon Tree have been expanding inventory by 12-17% from last year with a high focus on management contracts.

OYO Townhouse has expanded its inventory by 55% from last year owing to its choice of operating model, according to the report. Other factors that attributed to OYO’s edge in the Townhouse model are property turnaround time, operational efficiencies and distribution capabilities.

OYO currently operates in more than 349 cities across India, China, Malaysia, Nepal, and the UK, and is backed by Greenoak Capital, Sequoia India, Lightspeed India, Hero Enterprise and China Lodging Group besides Softbank.