The OYO Story: Rooms of Opportunity and Lessons Learned

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Remember the days when budget travel meant sacrificing comfort for affordability? Small rooms, unpredictable service, and hit-or-miss experiences were just part of the package. Then came OYO, with a bold promise to change it all. What started as one young founder’s mission to find affordable, reliable places to stay quickly turned into a movement to transform the hotel industry itself. With a goal to standardize budget accommodations, OYO didn’t just enter the market; it shook things up, offering clean, consistent stays at prices travelers could afford. Expanding across India and soon far beyond, OYO captured imaginations and bookings worldwide. But like any ambitious journey, OYO’s story is filled with highs and lows, wins and hard-won lessons—a thrilling tale of reinventing budget travel, one room at a time.

Without further ado, let’s begin

A Young founder and “The Dream“: Early days of OYO

OYO, officially known as as OYO Hotels & Homes, was founded in 2013 by Ritesh Agarwal. He was born in Bissam Cuttack, Odisha, into a Marwari family that ran a small shop. His upbringing was modest, and he attended Sacred Heart School in Rayagada. From a young age itself Ritesh exhibited an affinity for technology, often experimenting with computers and software. This early interest laid the groundwork for his future entrepreneurial endeavors.

In 2009, he moved to Kota, Rajasthan, to prepare for the IIT-JEE entrance exam, a stepping stone for many aspiring engineers in India. However, Ritesh soon realized that traditional education did not align with his entrepreneurial aspirations. He soon dropped out of college to pursue his high ambitions, a decision that would significantly impact his future.

Ritesh's path was not without challenges. To support himself financially while navigating the startup landscape, he sold SIM cards. This experience taught him resilience and self-reliance, as he avoided asking his family for financial help. During this time, he also taught himself software development, acquiring skills that would prove extremely invaluable later on. Listen to Ritesh Agarwal talking about his journey in detail in this podcast.

The Birth of Oravel Stays

In 2012, at just 17 years old, Ritesh founded Oravel Stays, a platform designed to provide budget accommodations similar to Airbnb. His experiences as a traveler highlighted the lack of quality and affordable lodging options across India. Oravel aimed to address this gap by connecting travelers with budget hotels while ensuring consistent service standards. The concept caught the attention of Venture Nursery, an accelerator program that provided him with crucial seed funding early on. This support allowed Ritesh to refine his business model and gain traction in the competitive hospitality market.

Ritesh's breakthrough came when he became the first Indian recipient of the prestigious Thiel Fellowship in 2013. This program, founded by PayPal co-founder Peter Thiel, offers $100,000 to young entrepreneurs willing to drop out of college to pursue their business ideas. With this funding, Ritesh officially launched OYO Rooms in May 2013. OYO aimed to revolutionize the budget accommodation sector by partnering with existing hotels and standardizing their offerings. The model focused on providing quality service at affordable prices, which resonated well with travelers seeking reliable lodging options.

Early Success: The time of growth

Under Ritesh's leadership, OYO quickly gained popularity. One example is this is a struggling hotel in Gurgaon which quickly gained popularity by improving its interiors and offering rooms at competitive rates. This strategic move increased occupancy rates from 20% to 90%, demonstrating Ritesh’s ability to identify opportunities for improvement. By leveraging technology for operations management and customer engagement, OYO expanded rapidly across India and eventually into international markets.

This success was a result of the founder’s vision and several rounds of funding that followed it. Here is a brief of the funding journey its effect on OYO’s growth:

• Thiel Fellowship (2013): Ritesh Agarwal received a $100,000 grant from Peter Thiel's Thiel Fellowship, which provided initial financial support and mentorship.

• Series A (2014): OYO raised ₹4 crore (approximately $650,000) from Lightspeed Venture Partners and DSG Consumer Partners.

• Series B (2015): In March 2015, OYO secured $25 million from investors including Lightspeed India and Sequoia Capital. Later that year, it raised an additional $100 million in July from SoftBank.

• Series C (2016): OYO raised $200 million in this round, further solidifying its position in the market.

• Series D (2017): The company raised approximately $1 billion from SoftBank's Vision Fund, marking a significant milestone as it became one of the first Indian startups to reach unicorn status.

• Series E (2019): In October 2019, OYO raised $1.5 billion led by SoftBank Group, Lightspeed Venture Partners, and Sequoia India. This round was crucial for supporting its international expansion efforts.

• Subsequent Rounds:

  • In September 2021, OYO raised $5 million from Microsoft.

  • In August 2024, OYO completed a Series G funding round, raising ₹1,457 crore (approximately $175 million) from investors including InCred Wealth and Patient Capital. This round valued the company at around $2.4 billion but reflected a significant decline from its peak valuation of $10 billion in 2019 due to market conditions and operational challenges.

The funds raised through these rounds have been instrumental in expanding OYO's property portfolio across new markets, enhancing technology infrastructure for better customer experience, supporting marketing efforts to increase brand visibility and last but not the least investing in operational efficiencies to improve service standards. After its tremendous early success came the downfall.

The Fall: Phase of Decline

Like any other fast-growing company, OYO too faced it’s share of challenges. This can be attributed to several interrelated factors that have impacted its operational efficiency, financial health, and market perception. Some of these factors are:

• Over-dependence on Funding: The company relied heavily on external funding from investors like SoftBank. Following the failures of other high-profile startups, such as WeWork, investor sentiment shifted, leading to reduced funding availability for OYO.

• Overcommitment to Partners: The company initially promised guaranteed payments to hotel partners, which it struggled to fulfill later on. This created dissatisfaction among hotel owners and led to numerous complaints and legal action against OYO for mismanagement and contractual disputes, further damaging its reputation in the hospitality industry.

• Shift in Focus: The company attempted to diversify into various verticals such as co-working spaces and food services without a clear strategy. This led to confusion among customers regarding OYO's core offerings.

• Declining Travel Demand: The Covid-19 pandemic severely impacted travel and accommodation bookings, leading to decreased occupancy rates and revenue losses for OYO. This particular problem was so severe that many people were skeptical about OYO’s survival post the pandemic.

• Management Strain: The swift expansion into various international markets caused management crises and negatively affected user experience, as OYO was unable to maintain consistent service quality across its properties.

• Executive Departures: High-profile exits from the company, including the resignation of India CEO Ankit Gupta and the head of Europe Mandar Vaidya, raised concerns about internal stability and strategic direction.

Reviving OYO: Commitment to growth

Despite all the challenges, Ristesh Agarwal navigated OYO through significant challenges and a period of decline by implementing strategic changes aimed at revitalizing the company. What are these changes? Here is detailed overview:

• Restructuring Hotel Inventory: OYO reduced its low-performing properties, reducing its hotel count from 12,000 to 8,000. This cleanup was aimed at improving customer experience and operational efficiency, allowing the company to concentrate on high-quality partnerships and properties that aligned with its brand values.

• Revenue-sharing model: The company transitioned from a minimum guarantee model to a revenue-sharing approach. This change placed more responsibility on hotel partners to enhance their offerings while allowing OYO to charge commissions based on performance, thus reducing cash burn and improving financial sustainability.

• Difficult yet important decisions: OYO laid off nearly 600 employees as part of its restructuring efforts. While this was a difficult decision, it was deemed necessary to streamline operations and reduce overhead costs.

• Debt Refinancing: The company undertook a significant refinancing of around $660 million in loans, which is expected to save substantial amounts in interest payments and improve cash flow.

• Scaling Back International Presence: OYO reduced its presence from 80 countries to about 35, concentrating efforts on markets like the UK and US where it sees potential for profitability

• Acquisitions: To strengthen its position in weaker markets like Western Europe, OYO acquired companies such as Paris-based Checkmyguest for $27.4 million.

Apart from all these measures, OYO also undertook measures like increasing presence on digital platform, retaining their long-term executives, venturing into spiritual tourism and premium hotel segments. Read about these changes in detail. Through these strategic changes, Ritesh agarwal successfully steered OYO towards recovery. The company is now poised for a more sustainable future as it prepares for an anticipated IPO while maintaining a sharp focus on enhancing its financial fundamentals.

OYO’s current standing?

OYO have had a great turnaround from a net loss of INR 1,287 crore in FY23 to a net profit of INR100 crore in FY24. The company generated revenues of ₹5,464 crore in FY23, up from ₹4,781 crore the previous year. This upward trend indicates a recovery in demand and operational efficiency. As far as valuation goes, it has dropped significantly to approximately $2.4 billion from a previous high of $10 billion.

Overall, OYO's current condition indicates a positive trajectory as it moves towards profitability, implements strategic operational changes, and prepares for an IPO. While challenges remain—particularly regarding debt management and market competition—the company's focus on cost efficiency and targeted growth strategies suggests a renewed commitment to stabilizing its business model and enhancing investor confidence.

This brings us to an end of this case study and now its time for the business lessons we can learn form the story of OYO.

The Business Lessons:

To be honest, there are a multitude of basic but very important lessons we can learn from this case study. But here are some of my personal favorites:

• Adapt Fast, Even If It Means Backtracking: OYO expanded quickly, often too quickly. Recognizing this, the company scaled back on properties and reduced its international presence to prioritize quality over quantity. Sometimes, taking a step back to refine what’s already there can be more powerful than constant expansion. True adaptability is learning when and where to pivot, even if it involves revisiting past decisions.

• Refine Your Core Before You Diversify: OYO’s attempt to enter co-working spaces and food services diluted its brand identity. Before diversifying, it is better to focus on solidifying core offerings until they’re foolproof. Expansion is exciting, but it’s the consistency in your core that builds a trustworthy reputation.

• Growth at All Costs Can Cost You: OYO’s heavy dependence on investor funding came with high expectations for growth, which sometimes pushed them beyond sustainable limits. This strategy backfired when market conditions changed. Lesson? Controlled growth may seem less glamorous but can ensure your company’s health, independence, and resilience in the long run.

• Fail Forward, But Own It: OYO’s rapid expansion brought with it challenges in management, quality control, and consistency. Rather than shying away from its mistakes, OYO openly admitted them and undertook visible corrective actions, such as restructuring and reducing hotel counts. Failure isn’t fatal, but transparency in failure builds credibility and allows you to shape the narrative.

• Listen Beyond the Praise: OYO’s early years were filled with positive headlines, but behind the scenes, there were growing complaints from partners about payment guarantees and management issues. The lesson? Listen to the uncomfortable feedback and watch out for patterns of criticism. In the long run, honest feedback can be more valuable than praise—it helps build lasting partnerships and sustainable operations.

Well, that’s it for this issue. I hope I was able to provide some value to your knowledge base by bringing this case study to you. If I did, share this within your network, and I will give you a special shout out with your message in my next issue. Don’t miss this chance to appear in front of an audience of 1600+ subscribers.

I will get back to you with more stories like these. In the meantime, take a look at these other interesting case studies:

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Until then,

Keep thinking!