OYO Dominates As Startups Tackle India’s Hospitality Gaps

Angel investor and entrepreneur Pankaj Jain said no to investing in hotel startup OYO, twice.

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Back then, OYO was just the ambitious idea of a 19-year-old entrepreneur, Ritesh Agarwal. Now, it’s India’s hotel startup market leader worth $5 billion, according to some reports.

“So I’m basically an idiot,” Jain said from New York, during a phone call with Crunchbase News.

OYO has raised so much money that the company is distorting India’s venture market, accounting for 92 percent of the past year’s total funding in India’s hospitality startups. The chart below shows venture funding in the past few years.

But OYO’s market and funding dominance doesn’t mean Jain and investors don’t have other options.

Jain, at least, has noticed people working on hospitality within India since 2007 because of a slew of issues with distribution and under utilization of resources.

So while “everyone piles into the one winner they see” because “no one wants to back a distant number two,” smaller startups in India’s hotel market are focusing on tourists craving an experiential, easy-going trip within India.

Room For Others

Chennai-based PickYourtrail, considers itself a OYO competitor from a customer perspective. The startup focuses on helping customers customize their vacations.

“Unlike food or travel ticketing, the [vacation] market is not a winner takes it all market,” said

Hari Ganapathy, CEO of PickYourtrail. Although OYO’s presence is good for the industry, he thinks his company can shift consumer behavior faster.

Even OYO’s CEO Ritesh Agarwal agreed that there are still gaps within India’s hotel market.

“There is a huge disconnect between demand and supply of quality living spaces, forcing travellers and city-dwellers to compromise on location, quality, and price,” he said in statement for Crunchbase News.

“Almost a decade ago, travelers were unsure about the kind of room and amenities they would get until they reached the hotel,” Agarwal wrote. Here’s a chart of other venture-backed hospitality startups within India.

For a sense of OYO’s scale, the company hosts guests from around the world in over 20,000 franchised and leased hotels, and over 700,000 rooms. They add 75,000 rooms to their offerings every month, globally, according to company figures. CEO Agarwal credits the company’s proprietary technology with its competitive edge.

The company isn’t stopping short with hotels either as it also apparently eyes coworking spaces.

From a “user experience” perspective entrepreneur Krishna Murari (who has no connection to the company) said OYO’s biggest selling point is that there’s a high density of rooms, which promise basic things like linen and wifi, and have an app-based concierge.

He personally had a moderate OYO experience during his stay. The room was okay, but nothing close to the pictures (it never is), he said. The beds were clean and although he was missing towels and toiletries he was able to request them via the OYO app.

Even with a behemoth like OYO, basic issues around hospitality remain, as Murari experienced first-hand. Those issues could translate into opportunities for runner-up companies looking to break in the industry.

Illustration: Li-Anne Dias.