Oyo Rooms invests $200M into Southeast Asia

January 6, 2019
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Indian hotel chain, Oyo Rooms' investment in Southeast Asia is doubling to $200 million, and the company says that that is just the tip of the ice berg. Oyo's goal, after becoming the largest chain of hotels in world, when i comes to scale, revenue, and margin, by 2023, it will consist of more than 2 million rooms from over 25,000 hotels in Southeast Asia, according to Oyo CEO Ritesh Agarwal.

No wonder no other name in the hotel industry today possibly raises as many emotions as Oyo does. There’s admiration and envy, but also skepticism and incredulity at the kind of numbers the 25-year-old college dropout is spewing, and whether Oyo’s eventual profitability will be fact — or fiction.

Oyo initially announced an investment of $100 million in Indonesi, Agarwal said it is committing $200 million to the broader Southeast Asia region, adding this “is only the initial commitment…our long-term ambition is to be the biggest hotel chain in Southeast Asia and the world.”

Southeast Asia has been “so fantastic,” he said, pointing to “attractive” initial results since entering Indonesia last October  with over 30 hotels and 1,000 rooms in Jakarta, Surabaya and Palembang. This has grown five times in just three months to over 4,100 rooms from more than 150 hotels in 16 cities, he said.

As with elsewhere, about 30 percent of the assets are leased, from partners such as real estate developer Adhi Persada Properti, while 70 percent are franchises.

Agarwal cited STR’s figure of 300,000 to 500,000 unbranded rooms in Indonesia, pointing out that this is only a fraction of Southeast Asia’s estimated 10 million unbranded rooms from 300,000 hotels.

“Of the 10 million unbranded rooms, 4.4 million can actually be found through online websites. So it’s a large market opportunity. I of course have a lot of appreciation for what Ibis and others have done but single-handedly they are not able to manage the requirements of young Indonesians, Vietnamese, Malaysians who need quality living spaces,” said Agarwal.

He said he would go “deep and wide” in Southeast Asia, and organically rather than through acquisitions. Already, Oyo has 300 development people in the region who “can sign a contract in less than eight days from the first meeting with the asset owner, because we can predict the kind of returns the property can make.”

“We like to acquire companies for competency, not market-share. If a company brings something so unique that we cannot do ourselves, an M&A then makes a lot of sense,” said Agarwal.

Oyo’s two acquisitions to-date were Chennai-based Novascotia Boutique Homes last March, for its expertise in managing the corporate and service apartment segments, followed last October by AblePlus Solutions, a Mumbai-based technology company that develops Internet of Things systems such as remote monitoring and control of utilities for the hospitality industry.

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