Strong team helping OYO operate in multiple geographies: Ritesh Agarwal

OYO Rooms founder and CEO Ritesh Agarwal
SoftBank-funded home-grown budget hospitality start-up OYO Rooms has surprised everyone with a $5-billion valuation in its recent funding round. Ritesh Agarwal, the founder and chief executive officer at the country’s biggest hospitality company, tells Ajay Modi his ambition is to make this five-year-old firm the world’s biggest hotel chain by the number of rooms. He talks about the challenges of operating in multiple geographies, including China, and the evolution of the start-up ecosystem in India. Edited excerpts:

OYO is now valued at $5 billion, the highest for any Indian hospitality player. Does it excite you?

We have never looked at valuation as a measure of success. We look at the impact we are making, and measure it by the scale of having over 300,000 keys under management and over 200,000 heads on OYO pillows every night and the 160,000-plus jobs we created worldwide. That is the measure of our success. Having said that, I have a fiduciary duty towards our shareholders to ensure we create more value for them. The world’s largest hotel chain, which OYO will eventually become, with millions of rooms under management should be highly valuable. We leave that for the financial investors to decide. We remain focused on execution to create great quality-living spaces and that is what we enjoy the most.

What is driving OYO to multiple geographies?

It has to make sense for us from an occupancy point. We have been able to create strong competencies in renovation, asset management, revenue management, and skilling. Any activity we do revolve around these competencies. We expand to other markets only when a product is mature in our home market. The first thing is to create competencies and then scale in a product in the home market. We believe in doing a few things right.

Is there a challenge in operating in multiple geographies?

That is always a big challenge, but OYO has been lucky to have a strong team in all these geographies, in the UK, in Indonesia and the UAE. It is hard but we have been able to get on board a strong group of leaders. There is an opportunity for an Asian-built hotel chain to become the world’s largest chain in the years to come. We will do it in the Asian way of being humble, competent but very aggressive in execution.

China seems to emerge a bigger market for OYO than India. How are you dividing your time between India and China?

We do not like comparing the two markets because they both are large and impactful in their own ways. China will be a very big market for us but that is also a function of the size of the market there and the number of assets available and the population staying in hotels. 

Any surprises for OYO in China?

We have learnt a lot in the last one year. OYO has grown due to the support of a strong management team who have been able to respond to the challenges we had in multiple situations in the market related to the quality of interiors, the pitch that inspires as asset owner to come to you. China has a completely different way of operating. The team made sure they learn and use their capabilities. We see a great opportunity in investing in the infrastructure of China like we did in India and upgrade the living spaces for the middle-income group.

OYO started as a budget chain but now caters to mid- and upper-end travellers through Townhouse and Palette Resorts. Is luxury stay also on the cards?

Earlier, we were only focused on economy but that is changing. The Revpar (revenue per available room) of OYO Townhouse is close to what a Lemon Tree does while our staff per key ratio is probably one-third of theirs. We are able to operate efficiently while proving a great experience in a segment where we did not operate earlier. We today feel confident about our own capabilities to execute and work across segments. But we feel that the opportunity in economy and mid-scale is very large and sizeable. As far as the luxury segment is concerned, I should never say never.

How do you see the Indian start-up economy? In your view, are some of the start-ups, including OYO, coming of age and need no longer be called start-ups?

We think of ourselves as a very small part of the ecosystem. The quality of entrepreneurs and scale of their ambition along with an ability to execute ideas is fast growing. That inspires me every day. I have looked at a lot of young companies around me such as Page Industries and got inspired. They may not be known as start-ups. I see a much sharper focus among entrepreneurs today who can thing big and at the same time execute profitably. The young grads today have a great ecosystem around them in form of incubators, young mentors and corporate firms are ready to support. The ecosystem is mature and for a young graduate, an ambition to be an entrepreneur is a very relevant option.

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