Oyo Hotels Eliminates U.S. and China as Focus for Growth

Oyo, the India-based budget hotel chain and booking platform, plans to focus its growth efforts on India, Southeast Asia, and Europe while pulling back on its former core markets of China and the U.S.

Ritesh Agarwal, Oyo’s founder and CEO, detailed that new strategy at a Reuters Next Newsmaker discussion Wednesday.

This doesn’t mean that Oyo, which seemed to value growth at all costs until late 2019 and into early 2020, when it carried out a series of restructurings around the world, will withdraw from the U.S. and China.

But Agarwal said Oyo plans to “double down” on India, Southeast Asia and Europe as focus areas.

In the six months ending in December 2019, according to Skift Research, Oyo’s largest geographies by contribution margin — which is revenue after segment-specific variable costs — were India (53 percent), China (25 percent) and then the United States (7.8 percent).

He said Oyo still has scale in China, but high customer acquisition costs there led to margins 4-5 percent lower than other markets.

“While we still continue to operate in China and grow, but at the same time, our capital allocation strategy is designed to double down in markets with market leadership as well as high economic strength,” Agarwal said.

Recalling how the company reeled in 2020, Agarwal said that in April of that year its revenue plummeted 66 percent in 30 days.

By October 2020, though, before India was overwhelmed by Covid-19, Oyo was talking of recovery, stating that its room count had fallen only about 16 percent to 1 million rooms. Agarwal didn’t provide an updated room count on Wednesday.

In the U.S. after Memorial Day, Oyo’s numbers “breached” pre-pandemic levels, Agarwal said.

In other news, Agarwal didn’t get specific about a timetable for potentially take Oyo public, but noted that the company is monitoring the India initial public offering market closely, and hasn’t ruled out merging with a special purpose acquisition company, or SPAC.

“So we are watching the updates very closely,” he said, referring to the India IPO market. “And I’m sure that our board will weigh in on both our business progress and the general listings of, you know, technology companies and potential.”