Overnight success takes at least 5 to 10 years, says Ritesh Agarwal of OYO Rooms
Ritesh Agarwal, Founder and CEO ofRooms, has been in the news for all the wrong reasons the past year. On Money Matters, Ritesh answers questions around dealing with this negative press with candour and patience, in an unfiltered conversation with Shradha Sharma, Founder and CEO of YourStory.
The young entrepreneur speaks about making mistakes and learning from them. According to Ritesh, one of his biggest learnings is that “Perseverance is the single biggest trait of an entrepreneur.”
He also offers insights into the future of the hospitality industry, which has been severely impacted by coronavirus. Ritesh also has some real advice and suggestions for his hotel partners and all the small business owners deeply affected by the pandemic.
Being in the news for the wrong reasons
2019 was a major milestone in OYO’s global expansion plans. But the year also saw the startup being in the news for all the wrong reasons — from layoffs to bad guest experiences.
Admitting that they could have done things differently, Ritesh says, “In 2019, we were growing so fast that it was challenging to share core cultural values of the company so quickly with team members and partners who are critical in our ecosystem. We realise that we could have improved our engagement and communication. So, the lesson learnt is that going forward we will look at relatively measured growth.”
He says criticism only helps him reflect on how to improve, adding, “The first time the media was critical of me was when I was 19. At the time, many people wrote me off. But I truly believe that if we work hard, focus on our consumers and partners we will come back. While OYO’s repeat rate and customer loyalty are high, we have to remember that at our scale, even if one percent of our customers are unhappy, that’s a huge number. We served 40 million customers in 2019, but there are things we could have definitely done better.”
Impact of COVID-19 on business
According to CII, the projected losses for the tourism, travel, and hospitality sector due to COVID-19 is Rs 1.58 lakh crore.
As far as the impact on OYO’s business, Ritesh says they have seen over a 50 to 60 percent drop in revenues since April.
He says, “The good news, however, is that we are starting to see small green shoots of recovery from across the world. In India, we have been working with hospitals, embassies, and companies, helping people who are stranded. We are critical partners for the Vande Bharat mission. Though our business has been heavily impacted, our job is to bring people together, and ensure that we can see this crisis through. We will recover in the long term, but nobody knows when that will be.”
Some measures they have taken to manage this downturn include cutting down controllable costs such as travel and expense costs, capex and marketing expenses, founders and business leaders taking pay cuts ranging from 25 percent to 100 percent, and putting people on furloughs.
“Honestly all of these were bad options and we had to go with the least bad option,” he says.
When to scale up
From starting small with just one OYO in Gurugram to having a presence in over 80 countries, and becoming a unicorn in the process, what goes into making decisions around scale?
According to Ritesh, “You need to earn your way to long-term impact. Every overnight success is a five to 10-year-old story, and takes the blood and sweat of hundreds of team members. As the company grows, you become more calculative in decisions, as your responsibility towards stakeholders is much higher.”
When the first OYO was launched in Gurugram, the speed with which the team saw results was amazing. That’s when Ritesh decided to scale up the business.
He explains, “Every entrepreneur genuinely aspires to take their product or service to millions of consumers across the world. So, do you take a product and experience that consumers and partners are appreciating? Absolutely. If not, you should learn and go back to the drawing board. When you see your product or service working is when you should start growing, rather than growing without seeing initial results.”
Being in control of money
“I didn’t go to IIT or IIM to get a seed cheque of $15 million before I started the company. I had to sweat it out for a few years and already had a proven business in place before Bejul [of Lightspeed Ventures] wrote us a cheque,” he says.
Last year, when Ritesh decided to buy back shares worth over $2 billion to increase his stake in the company to 30 percent, eyebrows were raised. But he is very clear about the direction in which he wants to go.
He says, “For entrepreneurs, the reality is that a lot of your ownership is only on paper. You need to create value to bring it up. I want to be someone who confidently backs my company by myself for a very long time. While numbers are important, my primary reason for doing this is my belief and commitment towards my business.”
Bringing money back to travel and hospitality
Post COVID-19, coming back to business as usual is a tough ask for all industries, more so for the travel and hospitality sector. But Ritesh is not overly worried.
He says, “OYO has large cash reserves since we raised capital pre-COVID-19 and are confident that we will come out of this crisis. We are very confident that people will travel again. But the next few months could put our partner hotels under significant stress,” adding that the company is supporting its partners in these tough times.
He acknowledges that there will be significant challenges going forward. “Earlier, getting a customer at a certain price required ‘X’; now it will require 1.3X effort. But we are committed to doing it. If we can serve our customers in these times, we are creating immense goodwill.”
What will it be like to stay at an OYO in future
While COVID-19 has temporarily put a spanner in the works, Ritesh says they will bounce back in a few quarters. He describes their current goals as “in operational execution mode, focussed on improvement and doing right by partners, customers, and employees.”
To this end, OYO has launched the “Sanitised Stay” tag, which is meant to instil confidence in customers. He promises a more seamless experience from booking to the in-hotel experience.
“Our new Sanitised Stay tag preempts what the new world of hospitality will look like. From temperature checks to contactless check-ins, our aim is to give the customer confidence that if they genuinely need to travel they can potentially choose OYO,” says the entrepreneur.
“One thing you can’t fault us for is resilience. Mehnat se haemin kabhi bhi darr nahi laga (We have never been afraid of hard work). We have been through some very tough times. We may fall but we always came back and worked harder to land on our feet,” he says.
On following his dream
Had Ritesh gone along with his parents’ dream for him, which was to find a job in an IT company, the Indian startup ecosystem may have just missed out on an exciting narrative.
All his older siblings studied engineering and MBA, the pinnacle of middle-class India’s aspirations, while young Ritesh dropped out of college to start a small business.
“My parents thought that I wouldn’t get anywhere in life. For them, if I had got a job at an IT company, I would have done very well,” chuckles the Founder and CEO of OYO Rooms.
Instead, he went on to disrupt the hospitality sector in 2013. Today, he is a poster boy for the Indian entrepreneurship story, and one of the youngest self-made billionaires in the country.