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OYO Rooms: Start-up to Branded Budget Hotels, What Next?*

CASE STUDY, STRATEGY
ET Cases - FLAME, 13 Pages
AUTHOR(S) : Dr. Manisha Paliwal, Professor, Sinhgad Institute of Management, Pune, Dr. Nutan H Samdani, Associate Professor, SKN Sinhgad School of Business Management, Pune

Case Preview

OYO Rooms: Start-up to Branded Budget Hotels, What Next?

 

According to report in The Hindu, India is home to the third largest Internet user-base worldwide.1 However, as per a Pew survey, its Internet penetration rate at 17% is much lower than the average of 34% across several aspiring countries.2 According to a statistics report, the number of Internet users in India is estimated to reach 407.11 mn in 2019 from 259.88 mn in 2015, primarily led by affordable access and improved awareness (Exhibit I). This indicates significant potential for growth in online marketing over the next few years. Mobile Internet usage has been growing rapidly over the past few years and continues to present huge opportunities. India has over 850 mn mobile subscriptions, more than 4x the number of Internet users.3 Driven by the availability of cheap smart phones and affordable Internet data plans, the number of mobile Internet users in India is expected to reach 462.26 mn by 2021 (Exhibit II).

The phenomenal increase in the number of internet users in India has deeply impacted the Indian online travel industry. According to a report titled ‘Indian Online Travel Industry’, 41% of travel gross bookings are taking place online, and the increasing Internet and mobile Internet penetration rates could play a vital role in the Indian online travel market growth story.4

 

Exhibits

Exhibit I: Number of Internet users in India (2015-2022)

Exhibit II: Number of Mobile Phone Internet users in India (2015-2022)

Exhibit III: Contribution of Tourism and Hospitality to India’s GDP ($ billion)

Exhibit IV: Online Budget Room Aggregators (OBA)

Exhibit V: Online Travel Agencies (OTA)

Exhibit VI : OYO’s Story Line


1 “India is now world’s third largest Internet user after U.S., China”, http://www.thehindu.com/sci-tech/technology/internet/india-is-now-worlds-third-largest-internet-user-after-us-china/article5053115.ece, 24th August 2014 (Accessed date: 25th March 2017)

2 Venkat Ananth, “Only 17% Indians own smartphones: survey”, http://www.livemint.com/Consumer/yT14OgtSC7dyywWSynWOKN/Only-17-Indians-own-smartphones-survey.html, 24th February 2016 (Accessed date:25th March 2017)

3 KunalD., “Investment Research”, http://www.travelbizmonitor.com/images/India_Online_Travel_Industry.pdf (Accesseddate: 4th April 2017)

4 Divya Sathyanarayanan, “Tech access, low airfares boost online tourism; 41% of gross travel bookings take place online”, http://economictimes.indiatimes.com/industry/services/travel/tech-access-low-airfares-boost-online-tourism-41-of-grosstravel-bookings-take-place-online/articleshow/49280437.cms, 9th October 2015 (Accessed date: 23rd March 2016)

Teaching Note Preview

OYO Rooms: Start-up to Branded Budget Hotels, What Next?

 

Case Synopsis

In a technology enabled competition it is very challenging to be highly sustainable in the long run. Customers expect fast-paced response, quality, low cost, transparency and ease of operations. Hotel accommodation service is no exception to all these challenges. In fact, looking at the dense network of available hotels and the service options provided by them makes the task of choosing the right hotel accommodation difficult for the customer.

This case study highlights how a 19-year old entrepreneur, Ritesh Agarwal (Ritesh), tried to bridge the gap between the hotels and the customers with his start-up, OYO Rooms (OYO). OYO is India’s largest branded hotel chain with about 6500+ hotels (as on April 2017) spread across 200 towns and cities in the country since its inception in May 2013.

The hotel industry in India majorly consists of unorganized hotels and a few brands dealing in budget hotels. There has been a rise in the number of domestic as well as international travellers. Moreover, many travellers opt for budget hotels, thus increasing the scope for budget hotels. OYO is India’s largest network of branded hotels. OYO has been successful in creating a model in the hospitality sector for others to follow.

OYO Rooms has made a good use of technology to provide customers hassle-free standardized hospitality experience. OYO’s innovative business model has set-up a trend in budget hotel accommodation, which has been adopted by many others. However, this poses a threat to OYO Rooms for long term sustainability. The case details the startup’s growth story, its business model, and the issues and challenges faced by OYO. This case mainly focuses on exploring the sustainable competitive strategies adopted by OYO and analyzes the key competitors in the strategic group of budget hotels.

Prerequisite Reading Sources

• Kazmi, Azhar. (2011). Chapter 9 Strategic Analysis and Choice. Strategic Management and Business Policy (pp 275-306) 3rd Edition New Delhi: TataMcGraw Hill Education Pvt. Ltd.
• Wheelen, T. & Hunger, J. (2013) Chapter 6 & 7 Strategy Formulation. Concepts in Strategic Management and Business Policy (pp 204-262). 13th Edition New Delhi: Pearson Education

Case Positioning

This case can be used for MBA Programme covering topics on Strategic Management and Entrepreneurship.

Case Objectives

This case is mainly written with the following objectives:

• To study the business model of OYO Rooms
• To analyze the growth strategy of OYO Rooms
• To focus on exploring the sustainable competitive strategies adopted by OYO Rooms

Assignment Questions

I. Analyze the hotel industry using Porter’s Five Forces Model.
II. What are the competencies of OYO Rooms that strengthen its business model?
III. Discuss Blue Ocean Strategy at OYO Rooms.
IV...........

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Abstract

In a technology enabled competition it is very challenging to be highly sustainable in the long run. Customers expect fast-paced response, quality, low cost, transparency and ease of operations. Hotel accommodation service is no exception to all these challenges. In fact, looking at the dense network of available hotels and the service options provided by them makes the task of choosing the right hotel accommodation difficult for the customer.

This case study highlights how a 19-year old entrepreneur, Ritesh Agarwal (Ritesh), tried to bridge the gap between the hotels and the customers with his start-up, OYO Rooms (OYO). OYO is India’s largest branded hotel chain with about 6500+ hotels (as on April 2017) spread across 200 towns and cities in the country since its inception in May 2013.

The hotel industry in India majorly consists of unorganized hotels and a few brands dealing in budget hotels. There has been a rise in the number of domestic as well as international travellers. Moreover, many travellers opt for budget hotels, thus increasing the scope for budget hotels. OYO is India’s largest network of branded hotels. OYO has been successful in creating a model in the hospitality sector for others to follow.

OYO Rooms has made a good use of technology to provide customers hassle-free standardized hospitality experience. OYO’s innovative business model has set-up a trend in budget hotel accommodation, which has been adopted by many others. However, this poses a threat to OYO Rooms for long term sustainability. The case details the startup’s growth story, its business model, and the issues and challenges faced by OYO. This case mainly focuses on exploring the sustainable competitive strategies adopted by OYO and analyzes the key competitors in the strategic group of budget hotels.



Case Objectives

This case is mainly written with the following objectives:

  • To study the business model of OYO Rooms
  • To analyze the growth strategy of OYO Rooms
  • To focus on exploring the sustainable competitive strategies adopted by OYO Rooms

Case Positioning

This case can be used for MBA Programme covering topics on Strategic Management and Entrepreneurship.

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