OYO forays into China, launches operations in 26 cities

OYO has announced its foray into China, marking the budget hospitality chain's expansion to a third international market.

The company said in a statement on Wednesday that it has established a chain of more than 11,000 exclusive rooms in 26 cities across the neighbouring country. This includes a combination of franchised as well as manchised — a hybrid of franchise and management — properties.

“The country’s tourism industry is on the cusp of booming and flourishing wherein it enjoys a strong influx of both domestic and international tourists,” said OYO founder and chief executive Ritesh Agarwal. “The market is as fragmented as the Indian hotel market.”

On the same day, Masayoshi Son, the chief executive of OYO backer SoftBank, said the Japanese conglomerate intended to support its Chinese expansion through a joint venture. However, he did not provide further details.

OYO, which counts Chinese hotel operator China Lodging Group Ltd among its investors., had made its international debut in January 2016 by starting operations in Malaysia. It expanded to Nepal in April last year.

OYO currently operates in more than 150 cities across India, Malaysia and Nepal with over 5,000 exclusive hotels in these countries.

Operated by Gurugram-headquartered Oravel Stays Pvt. Ltd, the startup initially aggregated hotel rooms under the OYO brand and blocked a few rooms in partner hotels. Under this model, OYO had around 70,000 rooms under its umbrella in just three years.

In January, Agarwal told VCCircle that OYO was on-boarding 10,000 rooms a month. He said OYO had repositioned itself as a franchisee/hotel operator and was moving its whole inventory in that direction.

OYO is the firm’s budget brand which follows the marketplace model. Townhouse, which OYO launched last January, is a managed hotel brand positioned as a friendly neighbourhood accommodation. OYO Home is its homestay arm.

Last September, OYO raised $250 million (Rs 1,600 crore) in a Series D round led by existing investor SoftBank. Its post-money valuation when it raised funds in 2016 was $500 million.

That same month, China Lodging Group Ltd picked up less than 5% stake in OYO for $10 million (around Rs 63.9 crore) as part of a strategic partnership. 

The company has cumulatively received around $473 million from investors.

Airbnb and its $1.5 billion-valued local rival Tujia are neck-and-neck in China’s fragmented online hospitality and accommodation segment, 

Xiaozhu, another player in the same segment, had raised $120 million in November last year led by Jack Ma’s Yunfeng Capital. With a valuation of over $1 billion, Xiaozhu is reportedly raising $100 million in a new funding round.

Startups expanding abroad

A few consumer-focused startups from India including Zomato, Ola, and Practo have expanded to the global markets in recent years.  

Homegrown ride-hailing unicorn Ola made its first overseas move in January this year by launching its services in Australia, rival where Uber is the dominant player.

Zomato offers a bunch of services including food delivery, restaurant listings platform, and table reservation across two dozen countries. 

Bengaluru-based digital healthcare platform Practo operates in the Philippines, Singapore, Indonesia, Malaysia and Brazil. 

Meanwhile, ed-tech startup Byju’s plans to launch its app for English-speaking international markets later this year.