When Sri Harichandana, a 19-year-old law student at VIT University in
Vellore, near Chennai, was planning a trip to Bengaluru, she downloaded
the Oyo Rooms app to find a room that would cost less than Rs 2,000.
"I was a little apprehensive booking through an app," Harichandana says. Nevertheless, she went ahead and got confirmation from the hotel right away. She paid Rs 1,900 for a 3-in-1 room, but got Rs 500 back when her father cancelled his trip. "For a student, Oyo is good on the wallet," she says.
Ritesh Agarwal's Oyo was among the first to spot the opportunity to brand India's budget hotel segment, those with per room tariffs in the Rs 1,000 to Rs 3,000 range.
This
is a segment where quality and standards were always hazy, and where
pictures of rooms, beds and bathrooms on brochures and websites rarely
conveyed the real picture. Now, Oyo and a host of others -including Zo
Rooms, Treebo, Vista Rooms, ZipRoom and WudStay -are creating a network
of branded hotels much like Taj, ITC, Hilton, Marriott and
InterContinental did decades ago in the premium segment.
They work with small hotel entrepreneurs to standardize offerings, conduct physical quality checks every three to seven days, and bring technology to automate many processes. They train the staff on etiquette and give them cash benefits when customers give them good ratings. Their technology platforms handle the inventory, predicting and generating demand, and adjusting prices accordingly. And for all this, the firms charge between 15% and 20% as commission on every booking.
"We have made an impact because we did what nobody has ever done before," says 21-year-old Ritesh Agarwal, founder of Oyo. That's probably true. At a time when new-age Indian entrepreneurs are criticized by some for copying Western ideas, Agarwal's was a truly innovative idea. "The use of technology in the hospitality industry was negligible before we entered the space. Customers can even order room service by touching their phones," says Agarwal.
Room aggregators also help hotels up their game. Dharamveer Chouhan, CEO and co-founder of Zo Rooms, says they are able to get the hotels crockery and furniture at cheaper rates as they work with large-scale vendors, assuring them a purchase of a certain minimum number of units." At the rate we are growing, we are going to overshoot the promise," he says.
The hotels, too, are happy. Bengaluru-based Bharti Diva Residency listed under Zo Rooms six months ago. Its general manager, Bharti Prakash Vazirani, says the 40-room hotel's occupancy has shot up from 50% to 100%. "Sometimes we are overbooked," she says, adding that some staff received cash benefits from Zo Rooms after good ratings by consumers.
The budget hotel accommodation segment is estimated to be worth Rs 88,000 crore. So the new players are sitting on a potential gold mine. No wonder investors are putting tonnes of money into these ventures. Oyo, which has 27,000 rooms under management, has received $126 million and its investors include Japanese internet firm Softbank. It is likely to be valued at over $1 billion soon. Zo has 6,600 rooms under management and has received funding of $47 million.
Zen Rooms, the largest budget hotel chain in South East Asia, has raised $10 million for its Indian operations.
"This segment cannot have many players in the long run and will see consolidation. However, if you take the current growth rate and the increase in the country's purchasing power, the market is only going to get bigger," says Gopal Modi, president of investments at Orios Venture Partners, a VC firm that has put money in Zo Rooms.
But not everybody is as gung-ho nor is everything going right. S Ramaswamy is an unhappy customer. The 50-year-old spends just 125 days at home as he's crisscrossing the country on work the rest of the year. Flight costs are high, so he stays in branded mid-market hotels.
Ramaswamy's experiences with both Oyo and Zo were bad. The Zo Room he booked in Mumbai turned out to be completely different from what was shown on the website. "The room was full of mosquitoes and the sheets smelt. It was so bad that I cancelled my booking for the second day .I did not get my money back," he says.
So he experimented with Oyo in Bengaluru. It was no different. Although both the companies apologized, Ramaswamy is left with a bad taste. "Once you have a bad experience, you don't want to go back," he says.
Social media is full of negative comments about these brands from users, though Orios' Modi notes that Indians tend to write about bad experiences, not the good ones. Oyo, however, it must be said, responds elaborately to every single review about them on travel site TripAdvisor.
"I was a little apprehensive booking through an app," Harichandana says. Nevertheless, she went ahead and got confirmation from the hotel right away. She paid Rs 1,900 for a 3-in-1 room, but got Rs 500 back when her father cancelled his trip. "For a student, Oyo is good on the wallet," she says.
Ritesh Agarwal's Oyo was among the first to spot the opportunity to brand India's budget hotel segment, those with per room tariffs in the Rs 1,000 to Rs 3,000 range.
This
is a segment where quality and standards were always hazy, and where
pictures of rooms, beds and bathrooms on brochures and websites rarely
conveyed the real picture. Now, Oyo and a host of others -including Zo
Rooms, Treebo, Vista Rooms, ZipRoom and WudStay -are creating a network
of branded hotels much like Taj, ITC, Hilton, Marriott and
InterContinental did decades ago in the premium segment.They work with small hotel entrepreneurs to standardize offerings, conduct physical quality checks every three to seven days, and bring technology to automate many processes. They train the staff on etiquette and give them cash benefits when customers give them good ratings. Their technology platforms handle the inventory, predicting and generating demand, and adjusting prices accordingly. And for all this, the firms charge between 15% and 20% as commission on every booking.
"We have made an impact because we did what nobody has ever done before," says 21-year-old Ritesh Agarwal, founder of Oyo. That's probably true. At a time when new-age Indian entrepreneurs are criticized by some for copying Western ideas, Agarwal's was a truly innovative idea. "The use of technology in the hospitality industry was negligible before we entered the space. Customers can even order room service by touching their phones," says Agarwal.
Room aggregators also help hotels up their game. Dharamveer Chouhan, CEO and co-founder of Zo Rooms, says they are able to get the hotels crockery and furniture at cheaper rates as they work with large-scale vendors, assuring them a purchase of a certain minimum number of units." At the rate we are growing, we are going to overshoot the promise," he says.
The hotels, too, are happy. Bengaluru-based Bharti Diva Residency listed under Zo Rooms six months ago. Its general manager, Bharti Prakash Vazirani, says the 40-room hotel's occupancy has shot up from 50% to 100%. "Sometimes we are overbooked," she says, adding that some staff received cash benefits from Zo Rooms after good ratings by consumers.
The budget hotel accommodation segment is estimated to be worth Rs 88,000 crore. So the new players are sitting on a potential gold mine. No wonder investors are putting tonnes of money into these ventures. Oyo, which has 27,000 rooms under management, has received $126 million and its investors include Japanese internet firm Softbank. It is likely to be valued at over $1 billion soon. Zo has 6,600 rooms under management and has received funding of $47 million.
Zen Rooms, the largest budget hotel chain in South East Asia, has raised $10 million for its Indian operations.
"This segment cannot have many players in the long run and will see consolidation. However, if you take the current growth rate and the increase in the country's purchasing power, the market is only going to get bigger," says Gopal Modi, president of investments at Orios Venture Partners, a VC firm that has put money in Zo Rooms.
But not everybody is as gung-ho nor is everything going right. S Ramaswamy is an unhappy customer. The 50-year-old spends just 125 days at home as he's crisscrossing the country on work the rest of the year. Flight costs are high, so he stays in branded mid-market hotels.
Ramaswamy's experiences with both Oyo and Zo were bad. The Zo Room he booked in Mumbai turned out to be completely different from what was shown on the website. "The room was full of mosquitoes and the sheets smelt. It was so bad that I cancelled my booking for the second day .I did not get my money back," he says.
So he experimented with Oyo in Bengaluru. It was no different. Although both the companies apologized, Ramaswamy is left with a bad taste. "Once you have a bad experience, you don't want to go back," he says.
Social media is full of negative comments about these brands from users, though Orios' Modi notes that Indians tend to write about bad experiences, not the good ones. Oyo, however, it must be said, responds elaborately to every single review about them on travel site TripAdvisor.
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