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From the official beginning of the pandemic in China, one of Oyo’s core markets, at the end of the year, 2020 has been a year of reset for the India-headquartered budget hotelier.
In the interim, Oyo has recast its business model from a minimum guarantee for hoteliers in exchange for Oyo taking total pricing control, to a revenue share business model and a degree of rate flexibility.
In the video below, Wall Street Journal reporter Rolfe Winkler subjects Oyo founder and CEO Ritesh Agarwal to a hard-hitting series of questions about the lows of the pandemic, the recovery, cash burn, fake listings (denied), and valuation.
Here are some key takeaways from this interview at the WSJ Tech Live conference, which took place last week.
- Takeaway: Agarwal claimed that Oyo’s room numbers in India, Southeast Asia, the U.S. and Europe are back up to pre-pandemic levels, and that the only ongoing losses are in China. Oyo’s overall room count fell around 16 percent to about 1 million rooms today, he said, adding that at the end of August, Oyo recorded about 80 percent of gross margins, compared with January levels.
Skift Take: Although the budget hotel sector rebounded faster than others in markets such as the United States, the numbers are hard to believe. Not referring to the room count specifically, renowned hotelier Barry Sternlicht, CEO of Starwood Capital Group, said at the Future of Hospitality Summit Monday: “I’m an investor in Oyo, and Ritesh is a friend. We’re all kind of like, ‘Can anyone grow that fast and do what he says they can do?’” Sternlicht declined to elaborate.
- Takeaway: Agarwal seemed to acknowledge that Oyo tried to grow too fast, especially starting in 2017, and now needs to focus on improving its products, tech systems, and customer experience.
Skift Take: We’ve been saying for some time that despite positioning itself as a technology company, that Oyo’s tech was subpar, and it was emphasizing growth at all costs. So amen to fixing operations and downplaying hyper-growth goals, but we’ll believe it when we see it.
- Takeaway: Oyo’s CEO conceded the company burned through $500 million this year, said it has about $1 billion cash on hand, and he’ll leave its valuation, which was $10 biillion at some point last year, to investors to figure out. Agarwal said Oyo can be “substantially valuable.”
Skift Take: Oyo’s valuation started plummeting last year, when it was experiencing deep problems well before the pandemic, and has obviously dropped further. That’s totally understandable.
- Takeaway: When arguing that he’s an operator and is focusing on business dynamics rather than valuations, Agarwal ended the interview saying, “I’m an operator and I will hang onto that job for now.”
Skift Take: That was a curious way for Agarwal to phrase his job security prospects. Is there board pressure for a change at the top?
Correction: Skift incorrectly reported Agarwal as saying Oyo’s revenue at the end of August was 80 percent of January levels. Instead, he said it was gross margins that were 80 percent of January levels.