This 24-year-old Indian built a US$5 billion hotel start-up empire - this is how he did it
Five years ago, Ritesh Agarwal was a college dropout; today, Oyo – his chain of renovated hotels – is India’s biggest and is expanding overseas, including into China
Finding clean, affordable hotels in India can be a traveller’s nightmare. Too often, what looks good on a website turns out to be a roach-infested room in a crumbling building where water has to be schlepped to the bathroom in a bucket.
Ritesh Agarwal’s solution is a booking app that promises truth in advertising and branded hotels that don’t deliver unpleasant surprises. The chain he started in 2013, Oyo Hotels, has already become the largest in India, a chaotic market worth US$4.5 billion, according to New Delhi-based researcher Hotelivate.
Now Agarwal is going overseas with his franchise model, which combines a reservation site with a full stack of services for small hoteliers who want to up their game. The company has said it is raising US$1 billion from SoftBank Vision Fund, Sequoia Capital and other investors to fund expansion in countries including China, where Oyo opened in November. Last week it started service in the UK, bringing the business to a developed market for the first time.
“By 2023, we will be the world’s largest hotel chain,” the 24-year-old founder said in a recent interview at an Oyo hotel in a suburb of New Delhi, where the company is based. “We want to convert broken, unbranded assets around the globe into better-quality living spaces.”
Makeovers
Oyo employs hundreds of staffers in the field who evaluate properties on 200 factors, from the quality of mattresses and linens to water temperature. To get a listing, along with a bright red Oyo sign to hang on the street like a seal of good-housekeeping approval, most hoteliers must agree to a makeover that typically takes about a month. Oyo then gets 25 per cent of every booking. Rooms usually run between US$25 and US$85.
Oyo is going all out to build a very large base of hotel partners and become a bona fide brand
“Oyo is going all out to build a very large base of hotel partners and become a bona fide brand,” said Mrigank Gutgutia, an analyst with RedSeer Management Consulting. “Their app model works well because price-conscious travellers who search by location like to feel they have lots of choices.”
Agarwal wouldn’t give sales numbers, but he said the number of transactions has tripled in the last year, with 90 per cent coming from repeat travellers – and no money spent on advertising. There are now 10,000 hotels in 160 Indian cities, with more than 125,000 rooms, listed on the site, he said. That is about 5 per cent of India’s total room inventory, according to RedSeer estimates.
“Over 150,000 heads rest on our pillows every night,” said Agarwal, a trim man who tugs at a sore ear as he talks. Constant aeroplane travel has given him an ear ache – one unwanted side effect of the company’s hyper growth.