OYO founders admit, without reservations, there’s room for improvement

OYO founders admit, without reservations, there’s room for improvement

Monday April 25, 2016,

9 min Read

It was 1 am by the time Ashwini S, a Bengaluru-based marketing professional, checked into the hotel in Mumbai. Business travel was routine for her and she wasn’t worried as, over the past few months, her OYO Rooms booking had gone through without a hitch. But this time around, she didn’t feel the same comfort. The room wasn’t clean, the hotel looked seedy and there was no hot water. It wasn’t the OYO experience she was used to. What had gone wrong, she wondered.

The past few months have been rickety for OYO. There have been negative reviews on room standards, Wi-Fi connectivity, quality of service and also about the bookings. The tipping point was a Facebook rant by Manoj Thelakkat, which went viral on social media, detailing his ordeal, right from the wrong hotel room booking to multiple shifts to rooms that didn’t meet basic cleanliness standards to the lousy breakfast he was served. The post ignited speculation of whether OYO had lost its focus somewhere along the way.


A lot riding on their shoulders

From starting Oravel to changing it to to OYO and getting Softbank on board, Ritesh Agarwal just had one dream: making budget travel and stay easy for the Indian traveller.

“There was a time when we booked a hotel room and didn’t expect much. Today the world is different, and I would like to believe we have contributed to it in some way,” says Ritesh. He and Abhinav Sinha, COO, OYO Rooms, gamely took part in a candid conversation with YourStory on customer complaints and challenges of scale.

We conducted a 100 percent re-audit of every hotel in the country, run by both Abhinav and me. It wasn’t just (Manoj’s) post, but a complete purge exercise to ensure we get back on track,” says Ritesh. On its part, OYO refunded the money to Manoj and after due feedback, shut out the hotel from its operations the same day. He points out it was a bold move for the team, as the owner of that particular hotel happens to be the head of the Indian Hotel Associations.

A popular belief in the hospitality industry is that models like OYO don’t work because aggregators have little control as own the property. “The quality of all the rooms and selection of hotels cannot be ensured at all times, especially when you are looking at scale,” says a customer who doesn’t want to be named.


From 72 to 4,200 in a year

It has been a fast growth for OYO, which began operations in 2014 from one city – Guragaon. Today it claims to partner 4,200 hotels in over 170 cities, booking close to a million room nights a month. Quarterly cohort analysis puts the repeat rates at 20 to 25 per cent. The year the team stayed in Gurgaon, it ensured that hotel occupancies, reviews and repeat rates increased.

After the market validation in Gurgaon, the team decided to scale up and from January 2015, began to expand to other cities, starting with Bengaluru, Mumbai and Delhi. By March 2015, OYO had already raised three rounds of investment -- from Lightspeed Ventures, Sequoia Capital and Greenoaks Capital -- and by August 2015, raised another $100 million from Softbank. These investments went a long way in helping it scale rapidly across the country and even look at the Southeast Asian markets.

By December 2015, OYO had touched 150 cities. The number of hotel tie-ups, a mere 72 that January, rose to 4,200 by the end of the year. The bookings saw a growth of close to 110x. But such overwhelming scale and pace brought their own challenges and OYO began face problems and rising customer complaints.

Competition snapping at the heels

Simultaneously, from being one of the earliest players in the market, today it has stiff competition from other brands like Zip Rooms, Treebo Hotels, Stayzilla and even from Paytm, which is now entering the last-minute hotel booking space. These players are not only giving OYO a run for its money but are also making biggies like MakeMyTrip and Goibibo sit up and take notice.

With rising competition, many players are now realising the need to go that extra mile to impress customers with value and service. Zip Rooms, for example invested considerably in training and monitoring hotel staff and management.

Treebo Hotels has a ‘Friends of Treebo’ system, a crowd-sourced quality audit program which includes students, travellers, corporates, and even freelancers, who can conduct a mystery audit on any of its properties and give the feedback to the team. MakeMyTrip has gone that extra mile by creating a dedicated Value+ category to go head-to-head with these new-age brands. All the more reason for OYO to focus on customer service.

The curious case of room shifts

One of the common complaints was shifting of rooms. Customers would say when they went to the hotel they did not get the room they were promised, admits Ritesh. The team saw that close to 3.8 per cent of the total customer base had been shifted to another room, or had got one that wasn’t standardised as per OYO’s requirements.

The three core promises OYO upholds are ‘Availability, Predictability and Affordability’ and two of them weren’t being upheld. So in order to standardise the process, the team went back to the drawing board.

The purging process: shutting out 200 hotels

The team realised that close to seven to eight percent of the hotels, which took in 10 to 15 percent of the business, had 95 per cent of the complaints. “We felt that the easiest way to solve the problem was churn these guys out,” says Ritesh.

The team built a 3C (3 Crosses) scoring system, which measures complaints-based weightages. Each complaint against a hotel is given a cross basis the weightage given. If a hotel gets 20 crosses, it is removed from OYO’s system.

For example, Ritesh says, shifting a room is the biggest complaint with the highest weightage, and it gets saddled with four crosses. So if a hotel gets the same complaint five times, it is removed from the system. There are different deltas for each issue. Like, say, unclean rooms get between 3.5 and 4 crosses. With this 3C audit process in place, OYO Rooms today has shut out close to 200 hotels across the country.

Abhinav adds, We have a built an app for the owners, which is now used to effectively communicate every problem with the hotel. Only 200 of the 4,200 hotels needed to churned, because the others improved. We realised there was need for effective communication with the on-ground and hotel owners; they just needed the right information to see and improve.

Technology and data to the aid

With the aid of technology, the team does a root-cause analysis and educates hotel owners how mistakes can be rectified. There is an auditor for every 40 hotels, and each property goes through a strict audit every three to four days on a 30-point checklist. Each auditor has a dedicated app garnering intelligence from occupancy reports and customer feedback and tells these auditors what to do on a day-to-day basis. The auditor cannot file his/her report on the app until and unless he/she is on the geo-fencing of the hotel. Audit timings aren’t fixed.

Even as the fixes on the hotel and property side were being made, the team realised that customer service challenges needed to be addressed immediately. To ensure this, it began to keep a closer watch on the hotels, checking the number of calls made each day, the number of issues resolved and those that weren’t and why.

In cases where the issues aren’t resolved, I handle it with the team personally. In many cases, it is my call if I need to personally contact the customer myself or monitor the team during the conversation, says Ritesh.

Tipping the domino

After mapping every room and a 100 percent re-audit, the team has marked rooms that aren’t standardised, ensuring they’re not made available to guests. So now on the mobile app, people have an option of various different rooms while these ‘black rooms’ cannot be chosen.

Explaining this experience, Ritesh says that if the hotel has agreed to a green room 104 but gives the guest a black room 105, within 10 minutes the guest gets an SMS that states, ‘OYO is happy to host you in room 104 and we hope you’ve checked into your room. If not, please give us a missed call on the number.’ If the guest gives a missed call, the hotel is marked and crosses given under the audit. The auditor nearest responds immediately and helps the guest check into the right room.

Challenges of scale

The challenge of scale, however, was multi-pronged for OYO. The team started to notice that towards 2015 end, newer hotel owners, unlike their early predecessors, began to view the aggregator as a commercial partner. This meant that the team had to work even on the hotel owners’ side. So it began by holding celebration programmes with all staff whenever any hotel touched the 100-day mark of partnership.

All this, say Ritesh and Abhinav, helps build great chemistry both internally and with the partners. OYO is now building a stronger focus on technology and using data to create better customer experience. Its mobile app, available on Google Play Store, already has one to five million downloads OYO is now eyeing the Southeast Asian markets and plans to penetrate deeper into different levels of hotel experiences and services.

Says Ritesh, We’ve made mistakes and, yes, there are issues. In hospitality, there are some very tough and subjective issues: the whiteness of the sheets and even water temperature. We as entrepreneurs take these very seriously and are working to ensure that the customers get the best experience. There were mistakes made; we accept them and are ready to resolve them and change. Our focus even today remains on ensuring a traveller gets a decent budget hotel stay experience in every corner of India.