Skift Take

Oyo has been making upbeat announcements more than usual in the past few weeks. Is it building itself up toward an IPO or more funding, or is it fending off critics, skeptics, and issues in India and China?

It sure feels like Oyo Hotels and Homes is on a roadshow. The budget hotel chain has been stepping up its public relations machinery aggressively in the last few weeks. It has announced entry into the U.S. and Vietnam; a restructuring into three units, India, international, and technology and brand licensing; the hiring of new leaders, and the tying up of new distribution partner Meituan in China last month after signing up Ctrip in May, to name a few.

On Wednesday, it announced itself as the third largest hotel chain in the world in terms of room count, certain to fuel skeptics wary of the company’s lightning-fast growth.

Going by Oyo’s chart, that means it has leapt three positions from the sixth largest chain with 636,000 rooms in April, to the third largest with 850,000 rooms in June. In a matter of two months, according to Oyo, it has overtaken Accor Hotels, Wyndham Hotels & Resorts and InterContinental Hotels Group to rise to number three.

To get to the top, it needs to elbow out Hilton Hotels and Marriott International. Oyo’s founder and CEO Ritesh Agarwal has said the budget chain will be the world’s largest hotel chain in scale, revenue and margin by 2023, with over two million rooms in Southeast Asia alone. Marriott hasn’t got even that globally, with Oyo’s chart showing it has 1.3 million rooms currently.

Oyo accounts for the swift jump in rooms in two months to China where, in a press statement on June 25 it claimed to have more than 500,000 rooms, making it the country’s largest hotel brand. It also announced an investment of $100 million to improve customer experience, technology and talent in the mainland; the appointment of a chief revenue officer of Oyo Jiudian (Oyo’s Chinese name), Zhu Lei; and plans to increase the number of full-time employees, which stood at over 10,000.

That, however, came after the Chinese press alleged that Oyo Jiudian was planning to lay off around 1,000 employees from its development team. The reports, which Oyo refuted, came within two months after Oyo Jiudian said it had fired 25 employees and issued warnings to over 100 more, as part of a crackdown on “unethical practices.” In a statement in April, Oyo said it had formed an “integrity committee” to weed out malpractices although it declined to elaborate what they were.

In India, its biggest market, Oyo continues to face the wrath of several hotel associations in the different states that said their members are complaining about Oyo’s deep discounting, high commissions, arbitrary changes in contract, among others.

The challenges in India and China could be a reason why Oyo has set its PR machinery whirling faster than usual. However, the unicorn is also said to be seeking to raise funds at a valuation of $10 billion. Another speculation is, it is building up the momentum for an IPO. According to a report in LiveMint on July 8, Oyo is preparing a listing in the next two to three years, eyeing a valuation of up to $18 billion.

According to the report, Oyo is most likely to list its shares overseas as it is not yet profitable “and the US markets seem to be more receptive to such business models.”

Oyo did not respond to the report. Agarwal, at Skift Forum Asia, also chose to sidestep the IPO question when asked.

One thing is clear. Oyo is making a point it is strong, and getting stronger. As to why the need for a unicorn to do so, that remains to be seen.

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Tags: budget hotels, ihg, oyo

Photo credit: Oyo Townhouse in Dallas, Texas. Oyo Hotels & Homes

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