Why Oyo and Ctrip Need Each Other: Bigger Reach in Asia

Oyo has inked a strategic partnership with China’s Ctrip, Oyo founder Ritesh Agarwal announced at Skift Forum Asia in Singapore on Monday. The deal is meant to help elevate the budget hotel chain’s business in China, where Oyo has more rooms than it does in India but sees a lower yield in the mainland than in its homeland.

In an interview after his session at Skift Forum Asia, Agarwal said he expects Ctrip, China’s largest online travel player, to generate demand for Oyo in China and globally.

“Oyo is becoming very popular with young people there (in China),” said Agarwal. “How do we create a unique experience at a price point of 100 to 150 yuan ($15) per night, which is what they appreciate? So it makes sense for Oyo Jiudian (Oyo’s name in China) and Ctrip to form a deeper relationship.”

Agarwal pointed out that Ctrip is focused on secondary and smaller cities in China, which complements Oyo’s supply.

“Ctrip gets access to our quality inventory in tier two to tier five markets in China,” he said. “Additionally, China is the world’s fastest-growing outbound travel market, so we expect more traffic for India, UK, Southeast Asia, and other markets where Oyo is present.”

In China, Oyo said it has become the second largest hotel chain in room count over the past 18 months. It claims 450,000 rooms in China from 10,000 hotels in 320 cities, surpassing the scale of traditional and established hotel chain brands in the country such as Home Inn and Hanting.

Agarwal said Oyo enjoys a good relationship with online travel agencies in China, including Fliggy. “Ctrip is a completely new size and impact,” he said.

He claimed that Oyo’s occupancies in China are going up “roughly twice in every three months” now, and expects a further increase in occupancy, which in turn will generate new supply. Even though it has 450,000 rooms, that figure is less than 2 percent of China’s accommodation market, which stands at more than 35 million rooms, according to Oyo.

Sam Shih, the chief operating officer at Oyo China, said in a statement: “With Oyo Jiudian, we’ve built a brand that is synonymous with quality accommodations. Our multi-brand strategy enables us to meet the needs of every type of traveler and this partnership with Ctrip gives us an opportunity to extend our offerings to millions of discerning Chinese travelers looking for standardized, quality offerings.

“As China’s second-largest hotel chain, we are determined to soldier on in our mission of creating quality living spaces and the exceptional reach that Ctrip enjoys as China’s largest OTA will steer us closer to travelers who can choose from Oyo’s 10,000 hotels in the country located across 320 cities. We look forward to working together and transforming China’s hospitality industry.’’

Other Potential Deals?

During his session onstage at the forum, Agarwal completely sidestepped the possibility of Accor taking a stake in Oyo when queried by Skift founder Rafat Ali.

“The only reason I continue to be excited about what I’m doing is the potential impact it has [on people],” he said. “It’s an amazing opportunity that every street across the world can have a beautiful living space. I think that’s unique. I’m only focused on that.”

Accor is speculated to be keen on investing in Indian budget hotel brand Treebo, but is also believed to be in talks with Oyo. Michael Issenberg, Accor Asia-Pacific’s CEO, declined to comment when approached by Skift on Monday.

During his session, Agarwal let it slip that Oyo now has 750,000 rooms, which makes it the sixth largest hotel chain in the world. This means it has surpassed Accor in room count for the first time. Internal Oyo research, based on brokers and Bloomberg figures, shows Accor has around 685,000 rooms.

Oyo may also be attractive to Accor because it is narrowing losses. Agarwal said last year that losses narrowed to 20 percent of sales from 45 percent, and that this year he expects to cut losses further to 10 percent of sales.

And asked when Oyo would go for a public listing, he said, “At some point, we’d consider.”