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Oyo will flood Japan with budget hotels through a new joint venture with SoftBank and SoftBank Vision Fund.
Details, such as the financial investment poured into the joint venture company, Oyo Hotels Japan, were not disclosed.
The new agreement is hard on the heels of Oyo’s recent partnership with Yahoo Japan, which will bring, specifically, its home-rental model Oyo Living to Japan.
The latest deal will focus on expanding Oyo Hotels, the fastest-growing budget accommodation brand in the world that has turned its founder Ritesh Agarwal into something of a “one to watch” in the hospitality world.
Expansion details, such as number of budget hotels and rooms it expects to have in Japan, were also not available at press time. Oyo has appointed Prasun Choudhary, an Oyo founding member who it said has successfully executed a number of global Oyo businesses, as operating partner to lead the venture.
“I think there’s room for them in the Japanese market,” said Kei Shibata, CEO of Venture Republic based in Tokyo, a company that runs a group of online travel websites, including Line Travel jp, a leading travel metasearch in Japan.
“As the inbound tourism is growing significantly in Japan, more tourists would come from many countries, including those in Asia, who often look for an affordable accommodation.
“Since private accommodation was regulated, there is an extra demand for affordable hotels now. The hospitality industry in Japan is far from consolidated, i.e., there are many small independent properties, including ryokans, around that are struggling with operational efficiencies. This is where Oyo can find their value as well.”
The size of the unbranded budget accommodation market in Japan is hard to come by, however.
What’s more, a worsening staff shortage amid a large impending supply of rooms may serve to enhance Oyo’s model of renovating an asset and using technologies to reduce the cost of labor, operations, distribution, and marketing.
A February 2019 report by Savills Research shows the largest increases will be in Tokyo, which is estimated to increase its room stock by 25 percent from 2018 to 2020, while Greater Osaka and Okinawa are expected to see increases of 23 percent and 19 percent, respectively. Most of the supply to Tokyo and Osaka are already limited-service hotels due to the labor shortage.
Tokyo-based SoftBank believes the Oyo model can disrupt the market in Japan.
“Combining Oyo’s most advanced business model with SoftBank Corp.’s knowledge of the Japanese market, we will provide brand-new hotel experience to travelers in Japan. Moreover, Oyo Hotels Japan offers various values for owners, such as dynamic pricing and reservation systems, [eliminating] labor shortages, and [offering] flexible pricing.
“We are sure that Oyo Hotels Japan will contribute to the revitalization of the travel market, including inbound tourism and regional revitalization in Japan,” said Ken Miyauchi, president and CEO of SoftBank Corp.
Savills believes more supply may stimulate more demand. “Large upcoming supply of limited-service hotels could very well crowd the market. On the other hand, Tokyo is still expected to have a shortage of rooms during the 2020 Olympics. As with the logistics sector in the past, supply may in fact serve to induce more demand. With available accommodation in Japan still comparatively sparse, additional flexibility in booking rooms could draw in more tourists,” it said.
Agarwal is excited to play a role in the home of its biggest backer.
“Japan is fast emerging as one of the most popular tourist destinations in Asia. We see this as a huge opportunity and are excited to contribute toward the growth of the local economy by promoting tourism.
“We are thrilled to now be able to offer Oyo’s affordable, hassle-free, and quality living experiences to guests across Japan. And to empower Japan’s independent hoteliers with the latest technology innovations like AI [artificial intelligence] and machine learning-powered hotel/ryokan management system, predictive analytics-led pricing and revenue management, and seamless operational expertise that will help them focus on customer experience and thereby generate increased, sustainable income,” he said.