India's Oyo Enters UK Hotel Market With First Expansion Outside Asia

OYO, India's fast-growing hybrid online travel agency hotel company, is entering the UK market with a plan to open properties in 10 cities over the next 18 months.

The company will use a franchising and marketing strategy in the hope of signing up 300 independent hotels, according to Reuters.

The announcement marks the company’s first expansion outside of its Southeast Asian heartland where it has a presence in India, China, Malaysia, and Nepal.

OYO’s first opening will be in London with four properties and it has plans for other cities, including Manchester, Birmingham, Glasgow, and Edinburgh. 

By 2020, OYO intends to hire 100 people and offer more than 5,000 rooms with an initial investment of $53 million (£40 million).

The company started life as a room aggregator but quickly grew into something resembling a traditional asset-light hotel operator. It claims to be world’s largest digital hotel chain and has a slightly different model compared to traditional hotel chains.

“The UK has been the topmost international travel destination for several years and last year hosted over 19 million tourists from around the world," said Ritesh Agarwal, founder and CEO of Oyo.

"Driven by its booming domestic and international travel and budget hospitality needs, the UK presents a multi-billion dollar opportunity for Oyo. We are thrilled to now be able to offer Oyo’s affordable, hassle-free and quality living experiences to guests across the UK," he said, "and to be empowering the UK independent hoteliers with the technology and operational expertise that helps them focus on customer experience and thereby generate increased, sustainable incomes.”

A Threat to Premier Inn

Whitbread-owned Premier Inn is the dominant player in the UK budget market and Oyo's move presents something of a threat. The likes of private equity-backed Travelodge, as well as the bigger hotel chains with a strong footprint, such as InterContinental Hotels Group, will also no doubt keep a close eye on proceedings.

"Oyo's brands mainly target this budget segment and is aiming for 300 hotels, which would make it the number three player and provides a new challenger to Premier Inn," Richard Clarke, senior analyst at Bernstein, said in a note to investors.

"Notably for Whitbread, management's description of the structural opportunity in the UK is about winning share from independents, and Oyo will provide another option for independents."

What is Oyo's Model?

Clarke calls Oyo a "hybrid online travel agency/brand network". It runs an online marketplace called Oyo Rooms, and although the hotels on it are independently owned, Oyo offers design standardization services and has its own loyalty scheme.

The company has since moved into franchising and some properties will carry the Oyo brand.

Oyo has raised $446 million to date with investments from the likes of SoftBank Group and China Lodging Group.