STARTUP SPECIAL .............Room at the Top

 Room at the Top





Nobody thought about aggregating budget hotel rooms online, until a 17-year-old sniffed out the opportunity five years ago

When a 22-year-old talks about his plans to build a billion dollar business, you'd be tempted to humour him. Till he lets on that his venture has raised $125 million, that its valuation has soared 15 times in a year and, well, that he is the proud founder of what has emerged as India's largest aggregator of online budget rooms, a business that didn't quite exist before OYO Rooms took shape in May 2013. For good measure, last month, OYO snapped up the second largest player in the seg ment, ZO Rooms.

“We have the world's leading investors (SoftBank, Light speed Ventures, Sequoia Capital and Greenoaks) backing our business model and management team,“ asserts Ritesh Agarwal, the 22-year-old in question. “Investors believe in the fundamentals of the business as we at tempt to solve a real customer problem through ex perimentation, innovation and ambitious disruption of the market.“ The investors, Agarwal elaborates, also facilitate learnings from global startups.

The growth metrics of OYO so far show its intent to build a robust business. From one hotel in Gurgaon in May 2013 to 4,000 properties, from less than 100 employees a year ago to 2,000 employees now, and with an inventory of 40,000 rooms across 150 cit ies, OYO has been working hard to tap the market potential which is immense, contends Agarwal. It estimated that 1.8 million Indian rooms are in unbranded hotels, compared with 1,12,000 in the branded category.

“Only about 2% of this has been tapped so far. So there is plenty of headroom for growth,“ asserts Agarwal. What made Agarwal realise the potential of the sector was when he travelled across India. “I was 17 and stayed in over 150 bed and breakfasts, guest houses and hotels across the country,“ he recalls, adding that he saw an opportunity to aggregate, list and promote little-or-lesser-known accommodation options to travellers. “From this idea, Oravel Stays was conceptualised in early 2012,“ he says.

However, as Agarwal got more entrenched in this business, he realised that on-ground experience was a major area of concern for travellers. Premium and chain hotels promised and delivered a largely standardised experience but there was no hotel that was doing this on any scale for the mass market, he contends.Upon booking a room at a budget hotel, a customer would be clueless about the kind of room and amenities he would get till he actually entered the hotel room. The real reason for the sluggish pace of growth in the budget hospitality sector was not discoverability of accommodation but rather lack of credibility around the offerings, he reckons.

“So I decided to pivot the business from a discovery marketplace to a managed marketplace for standardised hotels and launched OYO Rooms in May 2013,“ says Agarwal. The startup's twin strengths: an agile team and robust technology that are working in tandem to build a strong execution capability.

ETM3JAN16