OYO Rooms Founded by RiteshAgarwal Oyo rooms is a hotel aggregator headquartered in Gurugram, Hariyana. Thecompany was launched in the year 2012 with the name Oravel stays. Initially itprovided a website which listed and enabled people to book low costaccommodations.
This followed a marketplace type business model which wassimilar to Airbnb.Thecompany then changed its business model to hotel aggregation to become Oyorooms in the beginning of the year 2013. The aim of the company is to providestandardised services in all the hotels present in its network at an affordablecost. The company started its network with a single property in January 2013and is reported to have formed a network of over 8000 properties by the end of2017.Theinitial strategy of the company was they entered into a contract with thehotels according to which the company hired a portion of the hotel’s rooms andorganised these rooms under the brand Oyo rooms.
The service provided by thehotels to these rooms was supposed to follow the brand standards which were setby Oyo. In order to maintain the standard throughout all its partners thecompany assists the hotels by providing them with the necessary training inservice and the supplies required. These registered rooms were supposed to beprovided for the customers who had made their bookings via the Oyo roomswebsite or the mobile app.Oyolaunched its official mobile app in the android platform on April, 2015. Inaddition to booking the app also provides the user with the facilities to orderroom service during the stay period, early morning check in etc. In 2016 thecompany started a programme called as Oyo Flagship following which the companystarted to lease entire properties such as hotels and guest houses.
This ledthe company to hire its own staff in these properties thus enabling them tocontrol the day to day operations. In June 2016 Oyo launched its own onlinemarketplace called Oyo Bazar. The main aim of this brand is to provide a onestop shop for procurement of supplies which are essential for the seamless dayto day operation of hotels. In January2017, Oyo launched the Townhouse, a brand which was entirely operated by thecompany. By the end of 2017 the company has its townhouse services in elevenmajor cities in India.
OYO rooms beforeGST Oyorooms ears its revenues through a take up rate basis where the company chargesa commission to the partners of the firm when it is bringing customers. The nettake up rate is calculated as Althoughthe company initially started up with a negative net take up rate it managed tobring up the take up rate to positive in the last quarter of the financial year2016 and it has been steadily increasing in the following quarters. In additionto this the quarterly realised revenue of the company which has seen a steady increasehas reached a value which equals almost twelve times in the past two years. Duringthe financial year 2014-15 Oyo suffered a loss of INR 21 crores which almostincreased 25 times to INR 496 crores in thenext financial year with an annual income of INR 32 crores according tobusiness research platform Tofler.
This was mainly due to increasing expensesand investment into the firm. However in the financial year. However Oyo wasable to prune the losses by 35 percent resulting in a loss of INR 325 Crores. Impact of GST onOyo rooms Oyo rooms hasbeen focussing on budget hotel rooms within the price range of INR 1000- 2500and hence they attract a tax rate of 12%. Even though this is lower than theprevious taxation in several states in states where there was an absence ofluxury tax have seen a considerable increase on the tax to be paid. It was alsomentioned by the government that the government does not consider the discountprovided by the hotel aggregators which meant that the tax which is levied isbased on the actual price of the service and not the price paid by the customer. Another major issue faced by thecompany was tax collection at source (TCS). GST classified the online travelaggregators as e-commerce operators which meant that they would have to deducttax collection at source.
As the company had to work with multiple travelaggregators they faced some difficulty on deciding on how TCS was supposed tobe levied. Despite these initial complicationsfaced Oyo rooms have been working hard and have adapted to the new GST regime.The company has taken several steps to give a hassle free experience to itscustomers and partners. Unlike several other travel aggregators who are chargingIGST Oyo rooms have registered to GSTN in 28 states across the country and areable to charge SGST thus providing a considerable tax advantage. This can beseen as an advantage to the small and medium scale enterprises when they needto make hotel arrangements for their employees.
The company used its efficientvendor network to its advantage by providing a single vendor registrationfacility to its partners. Thus when a company is getting registered with Oyonot only they get access to its comprehensive vendor network but also they neednot face the hassle of registering to new vendors in the future as the companywould take care of all its future bookings. This facility will encourageseveral properties to partner with Oyo as it greatly simplifies bookkeeping.