[YS Exclusive] After his letter to employees, OYO's Ritesh Agarwal pens another letter charting 2020 plans
In a townhall mail to all of its employees, Ritesh Agarwal, Founder and Group CEO, OYO Hotels and Homes, spoke of the company's 2020 plans and its way forward.
Wednesday February 05, 2020,
20 min Read
It hasn't been the best start of the year for the homegrown unicorn. The first two weeks of the year has been about mass layoffs, IT raids, and vendor fallouts. Within these two weeks, OYO's Founder and Group CEO, Ritesh Agarwal has written to his employees, given assurances, held town halls, and met different people in his team.
After an email sent out to its employees, Ritesh has now addressed his team on the way forward. In this town hall mail, Ritesh has emphasised the importance of profitability along with sustainable growth.
He even spoke about right-sizing in the OYO team, and said, "Recent efforts at right-sizing the organisation have been a significant chapter in our evolution as a company. It has not been an easy decision at all. I want to thank every OYOpreneur for their efforts and fully understand the impact this may have caused. About 69 percent of the impacted OYOpreneurs opted for outplacement support that OYO offered. We have been in touch with over 48 companies and shared around 900 profiles with them. The positive reception by other companies towards OYOpreneurs has overwhelmed me."
Edited excerpts of the townhall mail:
It's been an eventful start to 2020 and I have a lot to fill you in on. For some of you, it may have been emotionally tough; it’s certainly been so for me. Earlier last month, I shared our vision for 2020 and how globally we are applying our learnings from 2019 into a focussed roadmap — we look to ensure sustainable growth and operational excellence, pivot on strong partner relationships and customer experience, and chart a clear path to profitability.
In the coming days, we will also issue our annual report like we have been doing in the past. While we are under no obligation to share this widely, as an organisation, this is one of the many ways in which we demonstrate our commitment towards building an organisation centred on the highest standards of transparency and corporate governance. The report will showcase the significant strides we have made in creating a sustainable business and our focus for 2020 and beyond.
I also believe that today it is more important than ever before, that we supplement our strong business plans with an uncompromising commitment to building an employee-first culture, with significant investment in continually improving our governance framework.
We are now implementing elements of our 2020 strategic objectives across geographies and categories to strengthen our value proposition for owners and customers, and above all, ensuring that each and every OYOpreneur continues to feel proud of being a part of our core mission — creating quality spaces for millions of middle-income people around the world.
January 2020 ended on a promising note for us. I met OYOpreneurs across India, China, Japan and US offices over the past month, and everybody was curious about the results of other regions or teams. I felt I should write a note that puts all this in perspective. It is key to remember that we are building a business of real impact and real value where the opportunities of change and disruption are significant.
Thanks to every OYOpreneur’s support in helping us achieve the mission of offering better living spaces to people. We have had to make some really tough decisions in the interest of the business and, as I shared earlier, I am thankful to all the OYOpreneurs who walked this journey so far and wish them all the very best.
Rightsizing the right way
Recent efforts at right-sizing the organisation have been a significant chapter in our evolution as a company. It has not been an easy decision at all. I want to thank every OYOpreneur for their efforts and fully understand the impact this may have caused. About 69 percent of the impacted OYOpreneurs opted for outplacement support that OYO offered. We have been in touch with over 48 companies and shared around 900 profiles with them. The positive reception by other companies towards OYOpreneurs has overwhelmed me.
We did this very difficult exercise while giving the utmost attention to the larger health, spirit, and integrity of OYOprenuers. We ensured high fairness in how impacted OYOprenuers were compensated and given benefits and support, and it’s great to see the way the industry responded by opening its arms to absorb our former colleagues.
One testimonial came my way from a BD manager in Mumbai, who recently got placed at Anarock. He said, “[I] have learnt a lot at OYO and that learning has helped me crack lots of interviews and get a job. If there is ever an opportunity to rejoin OYO, I will be very happy to join back”. Anecdotes like these continue to inspire all of us. I, too, hope that we will get a chance to work together again in future.
We have also made strategic changes to the roles of individuals to direct and shape our journey as a leaner, more efficient, and sustainably growing organisation. Our employee-first agenda is a realisation of how our talent-driven capabilities have charted the OYO story so far, and it is this irreplaceable factor that needs to be leveraged to express what OYO truly is and stands for.
Strong focus on governance
OYO has been continuously investing in strengthening its corporate governance. We recently welcomed Betsy Atkins, CEO and Founder of Baja Corporation, as an Independent Director on the company’s Board of Directors. Given her expertise on corporate governance matters, Betsy is also going to chair the ethics and integrity committee of our Board. We also recently elevated Aditya Ghosh to the Board to benefit from the depth of his experience in running successful public companies.
More recently, we have also appointed Gerardo I. (Gerry) Lopez as a Director, nominated by SB Vision Fund, on the company’s Board. Gerry Lopez is a global business executive with over 33 years of experience in leading transformations and creating shareholder value across diverse businesses and industries, including hospitality (Extended Stay America), entertainment (AMC Theatres), multi-unit retail (Starbucks), food & beverage (PepsiCo, International Home Foods), consumer packaged goods (Procter & Gamble), and supply chain (Handleman Company).
Delivering value to our owners
Capitalising on the extensive market-level insights, our focus is to streamline supply so that we deliver on the promise of exceeding expectations of our hotel partners. OYO India continued to sign 800-1,200 rooms per day in January 2020 in the franchise business while gaining relative speed. We have also actively pursued partners who had parted ways with us, after ensuring their commitment to service quality is high, and I am happy to inform you that we have seen over 100 hotels choosing to return to OYO in January 2019. It is also heartening to hear some of the stories of why these partners chose us again while committing to ensuring customers get the best service.
For example, in Siliguri, we worked with Jaswinder Punia, of Prince Lodge and Prince Guest House, an asset owner to address his concerns around clarity and reconciliation. Like you know, we have made changes in the recon format and the early results of this change look good, however, there is more to do. As a result of OYO’s efforts, the hotel is now driving good business, and the owner has also given us another hotel to manage. I want to congratulate all our teams that made this possible.
Neetesh Chandel from our BD team actively engaged with the owner of one of our oldest hotels in Rewa, Madhya Pradesh (India), and resolved all his concerns in three-four meetings. The hotel recently went live with OYO again.
You may have also grown familiarity with Captain Solanky from the recent OYO coverage in NYT, ET, and other news articles. You will be happy to know that following our Gurugram Hub Head Mr Sangwan’s recent engagement with Captain Solanky, the latter has suggested resolution of his past concerns.
As we aim for sustained growth with a strong focus on service excellence with sound margins and profitability, we are also evaluating and optimising our network. In South Asia, we had a total of approximately 300,000 rooms as of December 2019.
This is a 2.1x increase (year-on-year) with India being one of our mature markets. As a result, we are now present in 415+ Indian cities with 18,000 buildings. We are proactively working on ways to customise agreements and reconcile areas of dispute from owners in the best possible way. A practical and enforceable alignment strategy through centralised operations and communications is being rolled out across geographies through our renewed Service Account Management (SAM) system.
In newer markets like the US, in less than 10 months (March to December 2019), OYO expanded presence across 39 states and it continues to grow. Our value propositions to the customer and our technology capabilities forged through key partnerships are viewed as unique developments in the industry. There are also a few owners who, having had a successful run with OYO, have opened multiple buildings with us.
We signed over 2,000 rooms in just one week of the month and have seen good progress. We have further progress to make in improving partner experience by making OS improvements etc, which Abhinav and the partner experience team are actively working on.
Increasing customer preferences
Customers are at the heart of everything we do. Our app was downloaded 4.1 million times in the last quarter, which makes it one of the top three hotel booking apps globally (not factoring in China). The OYO app has been downloaded a total of 82 million times and has around 41 million customers* (assuming all customers are single occupancy, however, we see about 60 percent double occupancy, leading to 65 million expected customers), who have checked in to an OYO at least once. We are able to generate business through higher repeat rates. For instance, even in January 2020, in one of our mature markets, India, more than 90 percent of the business for OYO Hotels was generated by repeat and word-of-mouth guests.
In the same period, sales for OYO Vacation Homes grew about 1.9x (MOM over December 19) just in January 2020. In just six months of operation, we have doubled the growth rate for the full year in FY19 vs FY18. This is a direct result of the great work being done by our BD teams in both Belvilla and DanCenter brands. The results of Traum are improving as well here.
We also witnessed an 80 percent increase in revenue from business-to-business (B2B) or corporate customers in 2019 on a year-on-year basis. This needs to be highlighted to bring perspective on our strong corporate sales, especially in view of misleading and unsubstantiated claims that OYO’s corporate accounts have shrunk. Globally, we have also seen an increase in corporate customers in 2019.
I would like to give a shout-out to OYOprenuers Saurabh Doshi (contracts with HDFC, P&G, Godrej) and Vishesh Mathur (about 3.8x growth in revenue) from India, Diaz Pharikesit (contract with AXA Mandiri) and Yusnida Situmorang (contracts with various corporates and travel agents including the event ‘Asia Mission Camp 2020’) from Indonesia and Prawit (contracts with Biblio and Ilves) from Thailand, and many others for taking ownership in driving our corporate sales.
Partnerships and acquisitions for competency building
Our approach towards partnerships is guided by identifying synergies between the core capabilities of OYO and various partners. Recently, we signed a long-term partnership agreement with Sabre Corporation. With this partnership, OYO will be connected to almost 900,000 travel agents globally.
Another significant update is that OYO Vacation Homes (OVH) recently entered into a strategic alliance with German-based e-domizil to acquire TUI Woltors Home Management Company. The transaction is subject to approval by the relevant antitrust authorities. The acquisition is intended to enable OYO to significantly grow its holiday home operator business in Europe by expanding portfolio with 17,000 additional units to over 50,000 properties.
As a result, we will also expand our presence in Europe from 22 to 26 countries. In future, OYO will be increasingly represented in Germany, France and Italy. Our current offerings in Poland, Greece, Great Britain, Portugal, Norway and the Czech Republic will also expand.
I would also like to take this opportunity to provide a quick update on our businesses in our high-priority markets:
We continue to invest in the United States — OYO USA was launched in March 2019 and we ended the year with close to280+ buildings in 35+ states, increasing our nation-wide reach.
Annualised revenue has grown from $1 million in March 2019 to $178 million in December 2019. We have already committed $300 million to this market and are going full steam ahead with our plans – no change whatsoever.
With two of our strong global leaders - Abhinav and Abhishek - now being based in the US, I am confident that they along with the strong local leadership team and OYOpreneurs will continue to build a future-ready and future-proof business in the market.
The response from our asset owners and guests in the US has been encouraging. We recently hosted the OYO Utsavevent in Surat, Gujarat (India), with about 300 of our partners from the US and markets to recognise our partnership. It is also worth highlighting that we receive 30 percent demand from OYO direct channels like our app and call centres in cities like Houston. Some of our assets, like OYO hotel Denham Springs I-12, or OYO Townhouse Tusla Airport, have seen 37-65 percent direct demand (from app and call centre).
OYO Vacation Homes continues its strong growth momentum with ~1.9x (MOM over December 19) in Jan 2020. On the customer side, we recently revamped the consumer website ‘Belvilla’ with a complete revamp of UI / UX, intelligent search experience, and faster browsing and frictionless checkout experience.
With the new website, the bounce rate has reduced to 2.10 percent, pages per session improved by 25 percent and load time improved by 20 percent. If you or your friends are considering a European holiday at one of our awarded vacation homes, do check it out
We continue to work closely with holiday home owners in Europe and earn their trust. One of the owners, Chantal, is all praises for our dynamic pricing, while another owner, Betty, has given us the opportunity to partner for three homes or more.
Our shareholders conducted a survey across our China hotels where customers rated OYO on par with market leaders on the parameters of cleanliness, good surrounding environment, location and pricing. OYO customers identify us the most by affordability (80 percent), and also align well with cleanliness (55 percent), good location (38 percent) and good customer service (23 percent).
With the OYO Simple deal (Win+), we have earned back aproximately 8,50,000 rooms of those lost in Q4 2019. We are positive about maintaining a stable and deeper relationship going forward.
I would also like to share an update on the novel Coronavirus crisis that is gripping China at the moment. I want to emphasise that the health and wellness of OYOprenuers and all our stakeholders is a key priority for us. We have already restricted work travel to and from China, with only a few business-critical exceptions.
We will continue to stand strong with our teams, guests, partners and the country and support them in various ways. We understand that the current situation would impact OYO’s business and operations in the country. But that does not mean that we will compromise on the wellbeing of our teams, guests or partners at any cost. We will soon announce some measures that OYO intends to take in China during this difficult phase.
In January 2020, we served about 6.5 million customers. As many of you may be aware, our hotels have a check-in experience tab that reflects customer check-in experience. We track it daily at the hotel level and continuously work with hotel owners to improve and offer a superior guest experience.
We have started experimenting for a small group of customers, giving the power of choice to customers, who will be able to choose their hotel based on a check-in experience score. This would also dis-incentivise partners from providing a less than great experience at check-ins, as it would impact their scores and restrict customers from willfully booking their hotels.
We are also actively engaging with our partners through improved monthly statements that offer a new version of reconciliations and settlements of assets. We now transact with our partners on a weekly basis. Initiatives such as Club Red have proven to be effective in nurturing our partner network.
OYO Asset Managers from partner support teams have started hand-holding partners who have a new or grave complaint to ensure direct and full-scale management of escalations.
We will further double down efforts on the OYO Partner Engagement Network (OPEN) so that OYOpreneurs will engage with franchisee partners spread across India on a one-on-one basis. Our purpose of these engagements is to communicate a set of structured and planned agenda items, covering multiple areas of our partnership, where we currently find gaps and perhaps, misalignment, in a trusting environment.
For OYOprenuers, we are taking several measures to simplify work culture, ensure their holistic career development, instill a fresh sense of pride and belonging for OYO and drive further happiness and well-being. Our aim is to make OYO an even better place to work for every OYOpreneur. In the coming days and weeks, we will engage with their family members and give them a chance to experience OYO products; we will involve all teams in activities that will make a difference to our environment and society. There will be clearly defined KRAs for everyone and we will introduce or update OYO policies to iron out some common challenges.
South-East Asia and the Middle-East
OYO continues to be a market leader in SEA with 3,300 buildings with over 100K rooms, commanding an average rating of 7.92/10 from customers. OYO SEA has more than 200 properties and 4.6 times more 9+/10 rated hotels than all peers combined!
OYO SEA was the winner of the ASEAN-India Excellence and Achievement Award 2019 and Business Excellence Award at the 4th ASEAN-India Business Summit held in Manila, the Philippines.
In the Middle-East, we grew to 17,000+ rooms in 32 cities by the end of 2019. We also actively worked with the government of the Kingdom of Saudi Arabia and used our technology to audit 450,000+ rooms in Makkah and Medina to make them more hospitable and comfortable for pilgrims visiting from across the globe.
Brazil and Mexico
Latin America is emerging as one of our high-potential markets in the months to come. OYO Brazil is now 400 buildings strong and leads the market in terms of occupancy with a high gross margin. OYO stands at 334 buildings in Mexico with a presence in more than 40 cities.
OYO Life Japan has gone through its highs and lows and is now at $45 million in annualised revenue with 6,000+ apartments. In a nutshell, we have witnessed 11X annualised growth in a period of 8 months!
At the end of 2019, we had 190 hotels in Japan across 70+ cities in less than a year’s time, which have more than 5,800 rooms.
There is a lot that has been said about OYO’s reputation among partners in Japan. I had requested a few OYO leaders to tour the market and hear from partners. It is intriguing and humbling at the same time to learn that our partners continue to be quite enthused about their association with OYO and looking forward to the opportunity of a long-term partnership opportunity with us.
Of course, partners were worried about some of the news reports and our re-assurance meant a lot to them. The interest OYO has generated from the business community in Japan is immense and real estate groups are keen on learning from our business model.
Our guest ratings (8.3/10) on booking.com are significantly higher than those of prominent competitors in Japan (APA 7.6/10)
We are privileged that both our businesses in Japan are led by some of the most dynamic, capable and experienced leaders such as Yamamoto-san, Takeuchi-san, Dohi-san, Junichi-san, Tahara-san, Futasaku-san, Sakishima-san, Shigeto san, Teshima-san, Hori-san, and Yoshino-san.
OYO UK is now 200+ buildings strong and growing steadily. In London alone, we manage over 46 OYO hotels. We also recently welcomed Rishabh Gupta, a seasoned OYOpreneur, as the Head of UK and Ireland to script the next phase of our growth in the market. The UK team has also reworked our deal structure and has added 700+ rooms to the portfolio in January 2020.
Recent recognitions and media coverage
As a startup, we have grown in public limelight since our inception. Though you may be privy to most of the coverage on OYO in the last few weeks, some of which have been critical, I would also like to mention a few newsworthy recognitions that continue to remind that we have a big opportunity, we just need to put our head down and execute.
As you may be aware, OYO Hotels & Homes is now part of the curriculum of the prestigious Harvard Business School. OYO is only the second Indian startup to have achieved this feat. Titled OYO: Creating Effective Spaces, the case study talks about OYO’s inspiring journey, growth and challenges. It encourages budding entrepreneurs at Harvard Business School to pursue their entrepreneurial dreams and work hard to achieve them.
Also, Chitra Narayanan’s new book published in January 2020 has OYO on its title - 'From Oberoi to Oyo' I have not had the chance to read the full book yet, but based on what I have heard about it, the book highlights the evolving saga of the hospitality industry in India.
Her elaborate understanding of how we are entering a new terrain with a robust supply network is an inviting experience for anyone who is interested to learn about a business of scale and customer engagement. I would like to thank Chitra for her insights, and in recognising OYO as befitting to be on the title of her book.
Shifting gears to the US, the Los Angeles Times featured us in an article about the new developments in Las Vegas, highlighting that the former Hooters Hotel and Casino is now OYO Hotels and Casino.
I want to emphasise that we are - and will always be - committed to growing OYO the right way. As we move forward in our journey, we will do so by staying focussed on our first principles of ensuring trust, being respectful and resilient at all times. 2020 is going to be a landmark year, and I am excited. Let us all come together, put our heads down, execute and serve our customers and partners. We have a long way to go, and it is still Day 0!
You will hear more often from me on topics that matter to OYO, you and me. Until next time, if you have any questions, suggestions or feedback, please share them with me.
(Edited by Suman Singh)