Oyo was founded in 2013 and based in Gurugram, a tech hub in North India. The brand is among the world's largest hotel chains, including both hotels and homes. Operating primarily in South Asia, it manages upwards of 458,000 rooms across multiple countries, including India, China and Malaysia. And its geographic growth is clearly part of the appeal. Greg Greeley, Airbnb's president of homes, said in a statement that "emerging markets like India and China are some of Airbnb's fastest-growing," per The Wall Street Journal. This new investment is seen as a potential attempt to tap into Oyo's mounting presence in the area as Airbnb continues its focus on expansion.
Here a few key things to know about the investment, including how two VC-backed businesses with significant market shares in the hospitality space could rely on each other's expertise.
Standardization vs. discoverabilityRitesh Agarwal was only 19 years old when he was accepted into the Thiel Fellowship program, per CNBC, with the idea for Oyo already beginning to percolate. And while his company has often been touted as India's answer to Airbnb, its business model is quite different.
Initially launched as a hotel aggregator, Oyo would lease a part of a hotel's inventory beforehand and organize the hotel rooms up to a quality standard set by the company. Next, it would partner with hotels to provide standardized services, amenities and in-room experiences. Similar to traditional hotels, Oyo allows customers to use its app to search and book rooms, request room service, book a cab and more.
That model changed in 2017 when Oyo decided to not lease the hotel rooms anymore, but rather only enter partnerships with hotels to operate them as franchises. Agarwal told the Economic Times that the company had spent the previous two years shifting the business to the franchise-only focus.
While both Airbnb and Oyo offer services under the umbrella of accommodation, Airbnb is focused on discovering properties by connecting hosts and travelers. As maintaining a quality standard has been pivotal to Oyo's growth, the investment will give Airbnb access to a variety of franchised or leased hotels for travelers who may be hesitant to rent privately owned properties from strangers.
Oyo is growing at breakneck speedOyo touts itself as the world's fastest-growing chain of leased and franchised hotels. So far this year, Oyo has expanded into Saudi Arabia and the Philippines, launched a new partnership in Japan, and added to its hotel offerings in Nepal. Its 2018 growth included expanding in China, and the hotel aggregator already has a presence across 285 Chinese cities, with the ability to add 35,000 rooms a month, according to Forbes.
Since its launch in 2013, the company has raised more than $1.5 billion in funding from investors including Sequoia, Lightspeed and Greenoaks Capital. Oyo also reportedly raised a $1 billion round led by SoftBank in September last year, which was said to value the company at about $5 billion.
The investment by Airbnb is the second time that Oyo has drawn the interest of a VC-backed business. In December, Reuters reported that Singapore-based ridehailing business Grab had invested $100 million in the company.
A pre-IPO eye to the futureAirbnb is one of the few profit-making tech unicorns prepping for an IPO this year. The business reportedly brought in over $1 billion in revenue during 3Q 2018, more than any other quarter in its history. With cash available to spend, a stake in Oyo is the latest in a string of investments by the vacation rental company. Airbnb agreed in March to acquire discounted last-minute hotel booking platform HotelTonight.
In January, Airbnb also bought Gaest.com, a Danish website for booking meeting spaces, and it also reportedly acquired high-end travel website Luxury Retreats for about $300 million in 2017. While it hasn't been among the most acquisitive companies, Airbnb's recent string of deals show a tactical eye to expanding its footprint.
Featured image courtesy of Airbnb.