Oyo sees a $26 billion opportunity in India by 2030 as it considers India its main growth

Oyo sees a $26 billion opportunity in India by 2030 as it considers India its main growth area, which contributes over 90% to its revenues, Bernstein says.

Oyo’s decision to focus on markets with the best scale and economics, namely India, Malaysia, Indonesia, and Europe instead of 35 countries helped the hotel room aggregator survive during the Covid-19 pandemic, said global equity research firm Bernstein.

The short-stay accommodation market's global total addressable market opportunity is expected to increase from $1,267 billion in 2019 to $ 1,907 billion by 2030. Oyo sees a $26 billion opportunity in India by 2030 as it considers India its main growth area, which contributes over 90% to its revenues, the research firm said in a report.

“The global travel and tourism industry and the short-stay market have several favourable trends for Oyo. The world is getting wealthier, increased per capita income, and growing middle-class means increased traveling demand,” according to Bernstein.

According to Bernstein, Oyo’s unit economics has improved with contribution profit, increasing from 5.1% in FY20 to 18.4% in FY21, driven by stable take rates, lower discounts, and no minimum guarantee. Oyo's gross booking value grew 170% in FY20, led by an increase in storefronts but declined 67% in FY21 due to storefronts ceasing operations due to Covid-19. Gross margins stood stable at 33%, with substantial cost management, said the research firm.

Oyo Hotels & Homes filed its draft prospectus with the country’s capital market regulator last week, aiming to raise Rs 8,430 crore ($1.2 billion) through a public issue as it joins a growing number of local startups tapping the public markets. The hospitality startup expects to raise around Rs 7,000 crore ($950 million) through new shares, while the balance will come through secondary share sales (offer for sale or OFS).

The company’s total income fell by nearly 70% to Rs 4,157 crore in FY21 due to the pandemic, but it also made progress in cutting down on its losses. Its loss for the same period narrowed to Rs 3,943 crore compared to Rs 13,122 crore a year ago.

However, strong return on investment for hotel/homeowners helped them increase revenue by 1.5 times to 1.9 times compared to revenue at independent hotels, said Bernstein.

For Oyo, one of the main ways to acquire consumers has been through marketing and promotions, and it cut down on this vertical as well in FY21. It spent Rs 542.6 crore for marketing and promotions in FY21 compared to Rs 1,879.7 crore a year ago. Oyo said it cut down its employee benefits expenses by 63% to Rs 1,742.1 crore in FY21 against Rs 4,765.2 crore in FY20.

“Oyo's strong revenue retention cohort is a clear demonstration of its customer stickiness. Over 80% of the company's revenues come from repeat and organic customers. The measure of direct demand on the platform measured as a percentage of booked nights was 90% in India,” said Bernstein.

Oyo addresses the pain points of hotels and homes across key markets. The company offers offline to online on-boarding tools, 3rd party distribution and demand, online revenue management, operations management, and customer service, all integrated into a single place.

Putting aside Covid-19, the world is more accessible due to the increased connectivity and awareness of tourist destinations via social media. New generations are traveling more as they have a higher propensity to travel, and there are more affordable travel options.

The research firm said that Covid-19 had brought higher prominence to domestic travel, especially with the work from home formats. “Globally stayed nights per capita in 2019 (total of all room nights divided by population) is expected to reach 1.67x in 2025 from 1.5x in 2019. Global trips are expected to expand to $16.7 billion in 2025 and stay nights to $13.6 billion.

OYO Files DRHP with SEBI for

 OYO Files DRHP with SEBI for IPO

 ●        OYO files DRHP to raise INR 8430 cr (~$1.2 bn^^)

●        OYO’s IPO consists 83% fresh issue (INR 7000 cr) and 17% offer for sale (INR 1430 cr)

●        OYO has improved its adjusted gross margin from 10% in FY20 to 33% in FY21

●        With over 70% of employees based in India, OYO is building products in India for the world

Global travel technology company, OYO (Oravel Stays Limited) has filed its draft red herring prospectus (DRHP) for its initial public offering (IPO) of INR 8,430 cr ($1.2bn) with the Securities and Exchange Board of India (SEBI).

Founded in 2012, OYO is a leading new-age technology platform empowering the large yet highly fragmented global hospitality ecosystem. It has been focused on reshaping the short-stay accommodation space since its incorporation and has developed a unique two-sided technology platform focused on comprehensively addressing key pain points of Patrons (being the owners, lessors and/or operators of storefronts listed on our platform) on the supply side with our flagship products like Co OYO and OYO OS, and to Customers (being travellers and guests who book storefronts on the Company’s platform) on the demand side. OYO has more than 157,000** storefronts across more than 35 countries that benefit from its platform. On the consumer side, the OYO App has been rated as the most downloaded accommodation app in Asia and third largest in the world in 2020 as per Sensor Tower.

While OYO has a global footprint, its Core Growth Markets comprise India, Indonesia, Malaysia and Europe. These are the most mature markets in terms of scale and unit economics. OYO’s share** of the total addressable market in its Core Growth Markets is less than 1%*creating significant opportunities for it to grow its footprint. As of December 2019, the company’s Total Addressable Market opportunity consisted of 54 million* short-stay storefronts. Around 88%* global hotel storefronts are in the unorganized sector, thus creating significant opportunities for OYO. The scale of OYO’s business drives a self-reinforcing flywheel underpinned by strong local network effects and operating leverage. The virtuous cycle created by this flywheel effect enhances OYO’s platform stickiness and unit economics for both OYO and its patrons with an ever-increasing scale.

 OYO’s initial public offering consists of equity shares of face value of Re. 1 each of Oravel Stays Limited aggregated up to Rs. 8,430 cr (~$1,163 million) (the “Offer”). The offer comprises a fresh issuance up to Rs. 7,000 cr (~$966 million) (the “Fresh Issue”) and an offer for sale aggregating up to Rs. 1,430 cr (~$197 million). The IPO will consist of 83% fresh issue and 17% offer for sale. The Company and its stakeholders may, in consultation with Lead Managers, consider a further issue of equity shares for cash consideration aggregating up to Rs.1,400 million (~$193 million) (the “Pre-IPO placement”). The Pre-IPO placement, if undertaken, will be at a price to be decided by the company and its stakeholders in consultation with the Lead Managers and the Pre-IPO placement will be undertaken prior to filing of the Red Herring Prospectus with the ROC.

Over the past year, the Company implemented a number of measures as a part of its COVID-19 response strategy, including accelerated development and adoption of technology and products to reduce operating costs, and repositioning its offerings. The Company also streamlined strategic and shared services functions, such as revenue management, supply, human resources, legal and finance, from country teams to regional teams to streamline processes, create more efficiencies and reduce costs. As a result of various initiatives that the Company took, its Adjusted Gross Profit Margin improved from 9.7% in Fiscal 2020 to 33.2% in Fiscal 2021 along with ~79% reduction in EBITDA losses from FY20 to FY21 despite the pandemic.

The company has an asset light business model and a lean cost structure. As of March 31, 2021, 99.9% of the company’s storefronts did not have contracts with minimum guarantees or fixed payout commitments from the company, with any investments, capital expenditure, storefront employee costs borne largely by Patrons. This enables the company to be capital-efficient and scale its business with minimal marginal costs.

OYO is able to drive the highest share of Direct-to-Consumer (D2C) channel-led demand compared to other leading traditional hotel chains in India and quite high globally**. OYO was the 3rd^ most downloaded travel app globally in 2020. With over 9.2 million subscribers just in India, OYO Wizard, is the largest loyalty program among online hotel or food brands in India.

OYO is able to ensure higher repeat rates of around 68%, in comparison to various other travel D2C players in India as well as globally*. This is driven by OYO’s wide choice of storefronts, affordability, strength in D2C channel offering and the trust it has been able to generate in the customers’ mind over time, amongst other factors. This also fuels OYO’s revenue generating capability for its patrons.

OYO aims to increase its Patrons’ revenue generation potential by providing them with access to a large Customer base through its D2C direct channels, coupled with its suite of innovative products. In India, Indonesia and Malaysia, as per Redseer study, OYO storefronts that joined the platform in 2018 and 2019, performed better* than independent hotels of similar sizes in 2019 on average. After 12 weeks of joining the OYO platform, OYO hotel storefronts generated 1.5 to 1.9* times more revenue on average compared with the average revenue estimated at an independent hotel of a similar size. In Europe, OYO home storefronts earned an average of 2.4* times more revenue compared with the average revenue estimated at an independently managed home in 2019.

With over 70% of OYOpreneurs and most of the core engineering team based out of India, OYO is building its best in class technologies and products from India for the world.

OYO has proposed/plans to use the net proceeds from the Fresh Issue towards funding the following objects: (i) Prepayment or repayment, in part, of certain borrowings availed by certain Subsidiaries; (ii) Funding organic and inorganic growth initiatives; and (iii) General corporate purposes.

Investors including Ritesh Agarwal, Lightspeed Venture Partners, Sequoia Capital, Star Virtue Investment Limited (Didi), Greenoaks Capital, AirBnB, HT Media and Microsoft are not diluting their shareholding. The offer for sale comprises of aggregate shares from a small part of SVF India (Softbank), A1 Holdings Inc. (Grab), China Lodging, and Global IVY Ventures LLP.

The Global Co-ordinators and Book Running Lead Managers to the offer are Kotak Mahindra Capital Company Limited, J.P. Morgan India Private Limited and Citigroup Global Markets India Private Limited. The Book Running Lead Managers to the offer are ICICI Securities Limited, Nomura Financial Advisory and Securities (India) Private Limited, JM Financial Limited and Deutsche Equities India Private Limited.

OYO’s Weddingz.in Wows Report 2019 reveals

OYO’s Weddingz.in Wows Report 2019 reveals,
How India tied the knot this year

• Mumbai prefers indoor weddings, while Delhi prefers the outdoors; Goa emerges as the most popular wedding destination
• Tourist hotspots like Goa, Udaipur, Jaipur, Jim Corbett, Agra, Igatpuri, Lonavala emerged as the most popular wedding destinations of 2019
• Lucknow witnessed the maximum growth for wedding services, with a whopping 824.90% increase in user base in 2019 as compared to last year

OYO’s Weddingz.in, India’s largest wedding company launched the first edition of Weddingz.in Wows Report 2019, a snapshot of how India tied the knot this year. Data collated between 01 January 2019 and 26 December 2019 reveals that among destination weddings, Goa topped charts as the most sought-after location, followed by other tourist hotspots such as Udaipur, Jaipur, Jim Corbett, Agra, Igatpuri and Lonavala. 

Another interesting finding revealed that Delhi and Mumbai saw the maximum number of weddings take place in 2019. However, the industry observed a huge gap in the kind of events preferred by both the metro cities. On one hand, Delhiites preferred a grand affair with lavish outdoor celebrations at a farmhouse or a lawn, comprising of elaborate rituals, decor and food choices. On the other, Mumbai opted to host simpler and elegant indoor wedding functions, with an inclination towards banquet halls. 

Sharing his insights on wedding trends observed in 2019, Sandeep Lodha, CEO, Weddingz.in said, “This year has been extremely fruitful for the Indian wedding industry. We’ve observed that couples today are demanding a wide range of services to choose from, opting for an amalgamation of traditional and contemporary offerings and embracing new concepts. This opens up a huge opportunity for the industry. As far as 2020 is concerned, we will continue to keep consumer delight and satisfaction at the heart of everything we do. We will focus on widening our services, offer an omnichannel experience for customers as well as expand our footprint across newer cities in India.”

Weddingz.in Wows 2019 (Interesting trends)

Destination weddings of the year: Organising weddings at picturesque locations was a trend that took the entire segment by storm, and became a fad amongst new-age couples — working millennials. The most popular wedding destinations included beaches, especially in Goa. Among hilly locations, cities in North India including Shimla, Dehradun and Mussoorie were the most popular choices. For elaborate destination weddings that exhibit old world charm, forts in Udaipur and Jaipur proved to be the premier choice of consumers.

How millennial couples capture moments: Additionally, to add an extra oomph factor to their wedding celebrations, services like photography, videography and make-up emerged as the most demanded by to-be-wed Indian couples. Among photography trends, pre-wedding shoots, candids and traditional shots were on the rise this year.

Bride-in-command: Contrary to traditional times, today the bride is the primary decision-maker with a dominant say over the aesthetic requirements of her wedding, like the decor, stage requirements, etc. Interestingly, pastel theme decor was a hot trend in 2019, with most couples opting for subtle hues instead of the more traditional color schemes. Indian weddings are known to be week-long affairs, with several elaborate pre-wedding functions. In 2019, the traditional Mehendi function topped charts as the most held pre-wedding ceremony, closely followed by Haldi (including Chuda), Sangeet and Cocktail parties. 

Weddingz.in guest lists in 2019: In the past couple of years, smaller and close-knit weddings have been the norm. This year, an average Indian wedding hosted 250 people. Among Weddingz.in executed weddings, the smallest guestlist comprised of only 50 guests, whereas the biggest guest list saw about 650 people attend an elaborate wedding. 

Interestingly, 1st December, 2019 was the day maximum number of Weddingz.in couples chose to get married.