Grab’s $100 million investment in Oyo is designed to help the budget hotel chain scale quicker in Southeast Asia and is in line with SoftBank Group’s vision for portfolio companies to help one another and soar together. SoftBank is a major investor in both the ridehailing company and hospitality player.

A stake in Oyo, on the other hand, will help Grab inch closer towards its ambition to be the everyday super app used by Southeast Asian consumers to book, and pay, for a range of services using its e-wallet, GrabPay. Travel and hotel booking is a key service and a core growth sector — particularly the budget hotel segment, according to a recent joint Google/Temasek study on the internet economy in Southeast Asia.

“Many hotels in Southeast Asia, particularly in the budget segment and in ‘off-the-beaten’ path locations, still receive the majority of bookings through offline channels, though they are poised to increasingly go online in the years ahead,” said the study, which estimates online hotel booking in the region is worth $14 billion this year and rising at a compounded annual growth rate of 18 percent.

Birds of the same feather flock together

According to a Bloomberg report, SoftBank is encouraging the creation of “unicorn farms,” where companies in its $100 billion Vision Fund partner each other in the way birds of the same feather flock together.

Aside from Oyo, Vision Fund portfolio companies, now around 65, include shared office space firm WeWork, Ping An Healthcare Technology and Ping An Good Doctor, and Slack Technologies.

In Southeast Asia, SoftBank has tasked Grab’s CEO Anthony Tan to form joint ventures with a handful of portfolio companies to help those startups break into the region, according to the article.

“You don’t want to go into every little country to try and fight. You should go there and partner with Grab and the Vision Fund will invest,” said SoftBank CEO, Masayoshi Son, who was interviewed in the report.

Amit Saberwal, founder and CEO of RedDoorz, the incumbent budget accommodation player in Southeast Asia, calls these partnerships “surgical strike teams” and said he won’t be surprised if more such alliances will form in the months ahead.

On the Grab/Oyo deal, he said: “There is no official information on the deal mechanics but it shows validation in the huge opportunity in the Southeast Asia affordable hotel market, which is three times that of India. It also proves that Southeast Asia requires a highly hyper-local approach and this partnership may be just for that.”

Why OYO needs Grab IN SOUTHEAST ASIA and vice versa

Oyo is now bigger in China than in India but has not a lot to show for yet in Southeast Asia despite an announcement in January that it would ramp up expansion in Malaysia. This was followed by another statement in October that it would invest $100 million in Indonesia, starting with over 30 hotels and 1,000 rooms in three cities, Jakarta, Surabaya and Palembang.

According to RedDoorz, there are more than 120,000 two-star hotels and below in Southeast Asia. In three years of operation, RedDoorz has signed up 680 properties with 17,000 rooms in 40 cities in Indonesia, Vietnam, the Philippines and Singapore.

Oyo presumably will benefit from Grab’s local knowledge of the region to plant its flags, and gains an instant South-east Asian customer base for these hotels when it appears as a tile on the Grab app which boasts over 125 million mobile downloads in the region.

A Grab spokesperson, while confirming its $100 million investment in Oyo with Skift, declined to comment how it plans to work closely with Oyo, or the main benefits Grab hopes to derive from OYO, saying the partnership has just closed.

A source close to Grab however said there are many synergies to be had. “This partnership makes sense from both the perspective of creating more use cases and more acceptance of GrabPay, increasingly not just on the Grab app, but off of it as well, for example, for GrabPay to become the preferred online payment method for OYO and for GrabPay to be accepted in all OYO hotels in Southeast Asia.

“This creates another powerful use case for GrabPay in the rapidly growing travel market in the region,” said the source.

“For Grab, it’s about being accepted as the main method to pay in all kinds of core services for the growing middle class in Southeast Asia,” added the source.

Beyond online transport and online food delivery, Grab and its fiercest competitor, Go-Jek, are in a neck-to-neck race to be the preferred app for other popular services, especially after Go-Jek has announced expansion in the Philippines, Singapore, Thailand and Vietnam, in addition to its own Indonesia market.

Acceptance as the main and convenient payment mode is critical, considering the low penetration of credit cards and e-wallets in the region. This pits GrabPay and Go-Jek’s GoPay in a mighty battle that has spilled over into financial services.

GrabPay, for instance, has partnered UOB Bank and is reportedly launching co-branded credit cards and introducing a top-up method where GrabPay users can top-up their e-wallet directly from their UOB bank account.

Go-Jek, on the other hand, has tied up with DBS Bank ahead of its Singapore entry and will extend the partnership to other countries in South-east Asia.

Grab estimates the payments market in Asia is worth $500 billion. Global non-cash transactions reached a volume of more than $433 billion in 2016 while transaction volume in emerging Asia has grown by 43.4 per cent from 2014-2015, it said.

Along with that, smartphone penetration is expected to double in the next five years in Indonesia, Myanmar and the Philippines, while in Malaysia, Thailand and Singapore, it exceeds 100 percent.

A good reason why birds of the same feather should flock together.

Photo Credit: An OYO room. To expand in Southeast Asia, OYO can do with Grab’s local knowledge Skift