Reported Airbnb deal would put Oyo into disruptor space

It’s no April Fool’s Day gag: Just days ago, rumors were buzzing that Airbnb had cast its eyes on Indian hotel-management startup Oyo Hotels & Homes, and was looking to acquire a stake in the fast-growing company. Today, the deal appears to have gone through, and while the financial details of the deal were not disclosed, an industry source told technology site TechCrunch that it was likely between $150 million and $200 million. Neither Oyo nor Airbnb had any information on their respective websites confirming the deal or any details on a transaction.

Oyo, valued at $5 billion by existing investors, has raised nearly $1.5 billion to date from SoftBank, Sequoia Capital and Grab, among others—not including this reported new deal. By room count, it is reportedly the largest hotel company in India. It expanded into China in November 2017 and a year later, the company reportedly had 180,000 rooms and more than 4,000 hotels in major cities like Hangzhou, Xian, Nanjing, Guangzhou, Chengdu, Shenzhen, Xiamen and Kunming under franchise, manchise (a hybrid of franchise and management) and lease agreements, making it one of China’s top-five hotel chains.

Both parties are reportedly exploring opportunities to collaborate on a range of projects, including making Oyo’s accommodations available on Airbnb’s platform, a source told local paper The Hindu.

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While Oyo and Airbnb have operated in much the same space up until now—affordable and localized accommodations—Oyo has been focusing more on traditional hospitality options, including logistics and management, rather than aggregating budget hotels. It operates by rebranding small and independent hotels, primarily via a franchise model. Local entrepreneurs are required to have their properties refurbished to Oyo’s specifications and pay a commission on each booking. The majority have a few dozen rooms and the company lets owners franchise, lease and renovate hotels in between three and 14 days.

And as evidenced by its recent acquisition of booking platform HotelTonight, Airbnb clearly wants to operate across a range of verticals beyond home-sharing.

Expansion Plans

In a statement, Maninder Gulati, global chief strategy officer at Oyo Hotels & Homes, said Airbnb’s existing global footprint and access to local communities would open up new opportunities for Oyo, which already is expanding into the Middle East and Europe. 

Greg Greeley, president of homes at Airbnb, also in a statement said emerging markets like India and China are among Airbnb’s fastest-growing markets, and the company’s growth is increasingly powered by tourism to and from these markets. “In many of these markets, Oyo is empowering local hospitality entrepreneurs to provide more options to more travelers,” he said.

Last November, Oyo Hotels and Homes founder/group CEO Ritesh Agarwal said during the company’s last round of funding, the team committed approximately $600 million to the China market, of which $300 million will be used for renovation and infrastructure investments. He noted additional investment will help the company drive the next wave of growth in China, which is already ahead of India, he claimed, adding as many as 30,000 rooms per month.

The deal also could boost Oyo’s growth plans for the United States. In February, a spokesperson for the company said it was “in the early stages” of rolling out the first Oyo Townhouses in the country. “We see great opportunity in this market but also appreciate the competitive nature of franchising and uniqueness of the U.S. We will bring learnings from building similar markets like the U.K. and constantly learn and modify our strategy to suit the needs of the U.S. market like we did to succeed in the U.K.” 

In February, Robert Cole, Phocuswright’s senior research analyst for lodging and leisure travel, shared a prescient observation with Phocuswire: “Oyo won’t kill the major hotel brands in the U.S., but if they execute well, they can have a successful business that will present the major hotel brands with some challenges, similar to the way Airbnb is creating issues.”