Oravel Stays Limited

Summary

Oravel Stays Limited is a unique two-sided technology platform that transforms fragmented and unbranded hospitality assets into branded, digitally-enabled hotels and homes

About Company :

The company's main business is providing packages and planning conferences, meetings, and event-related activities at hotels run by different hotel owners. The business functions as a distinctive two-sided technology platform that helps owners of hotels and homes convert their dispersed and unbranded hospitality assets into branded, digitally enabled establishments. Increased potential for revenue generation is made possible by this transformation. Additionally, Oravel Stays Limited offers its clientele a wide variety of hotels and residences. The company had 124 joint ventures, subsidiaries, and associates as of March 2023. In FY2022-23, the company established three new subsidiaries: Bornholmske Feriehuse, Ancient Comfort Private Limited, and Lugos B.V.

Major shareholders in the company are Ritesh Aggarwal and RA Hospitality Holdings(Cayman) having a shareholding of 39.30 and 43.93% respectively 

Product & Services 

1.  Hotel Room: OYO gives customers a variety of lodging options by offering a large selection of hotel rooms ranging from affordable to luxurious.
2.  OYO Flagship: OYO Flagship guarantees a consistent experience for guests by providing high-quality lodging with uniform amenities and services.
3. Oyo Townhouse: This unique lodging option stands out for its uniform hospitality and is tailored to the needs of millennial tourists. It provides meeting rooms, well-appointed rooms, and round-the-clock culinary services.
4.  Studio Stays: OYO offers fully furnished rooms and apartments for extended stays, like internships or business stays. Rent for these rooms is due each month, and they can be used for single occupancy or twin sharing. 
5. Event & Extended Stay: OYO provides lodging for a range of occasions, such as business and family gatherings. Long-term visitors are catered to with these services.
6. Commercial Space: OYO offers its services to businesses, enabling clients to reserve office space via its platform.
7. Oyo Wizard: a subscription service that improves the general customer experience by offering members special advantages.
8. Opening of a New Branch: OYO launched Palette, a premium traveler destination featuring upmarket hotels and resorts.

Business Model:

The biggest branded hotel network, Oyo Rooms, has properties in 5,000 cities and operates in India, Malaysia, the United Arab Emirates, Nepal, China, and Indonesia, among other countries. Oyo's business strategy has changed over time, and it now mostly relies on franchising. Let's examine Oyo Rooms' business model in more detail.

Transition from Aggregator to Franchisor:

Oyo Rooms used to run on a business model that was a cross between an aggregator and a franchise. They would rent out rooms from affiliated hotels, uphold their brand's standards of quality, and resell them..Oyo took a similar approach to Uber in that it prioritized discoverability along with standardized quality of services. With Oyo's growing brand equity, the company gradually moved to a pure franchise model. At the moment, 90% of Oyo's income comes from hotels that use the franchise system. revenue from lodging establishments using the franchise system.

   Core Business Model:

The main business strategy of Oyo Rooms is to collaborate with hotels and other properties to sell them under the Oyo name..To guarantee that these rooms fulfilled Oyo's quality requirements, the company used to lease a portion of the hotel's inventory..As per the terms of the contracts, these partner hotels offered Oyo's customers standardized services.Reservations were made via the Oyo Rooms mobile app and website.

Revenue Model:

 Oyo Rooms switched to a commission-based revenue model from renting out rooms at a set price. When a reservation is made through its platform, the company charges a commission to its hotel partners of twenty-two percent. Commission amounts might change depending on the services rendered

  Future Outlook:

.Oyo Rooms has grown significantly and is still growing at a rapid pace. Even though expansion has come at a price, Oyo wants to keep up its standing as a superior network of inexpensive hotels. The adoption of the franchise model could contribute to price stability and affordability

  OYO's Accelerator Program Expansion: In March, OYO initiated its Accelerator Program to assist thirty hoteliers who are first-generation. Since the program's inception, OYO has added more than 300 hotels run by 30 hoteliers, exceeding its original goal.To add more than 1,000 hotels and more than 100 first-generation hoteliers by December 2023, OYO now intends to further expand the Accelerator Program.

An Examination of the Industry and a Novel Program:

OYO's Accelerator Program Expansion: In March, OYO initiated its Accelerator Program to assist thirty hoteliers who are first generation.Since the program's inception, OYO has added more than 300 hotels run by 30 hoteliers, exceeding its original goal..To add more than 1,000 hotels and more than 100 first-generation hoteliers by December 2023, OYO now intends to further expand the Accelerator Program.

Revenue Growth for Participants: Hoteliers who have participated in the Accelerator Program have experienced impressive results, with approximately a 20% increase in revenue within just three months.

 Regional Growth: In Delhi NCR, the Accelerator Program has grown significantly, now making up 40% of all hotels.40% more hotels have been added to the program by Hyderabad and Bangalore, which have also made a substantial contribution. The remaining growth in the program has come from other regions of India.

  Benefits for First-Generation Hoteliers :

The goal of OYO's Accelerator Program is to enable first-generation hoteliers to grow their portfolios of properties. In addition to financial support and access to OYO's vast network of corporate accounts and travel agents, participants receive mentorship, access to technology, and dedicated relationship managers. The resources and tools required to attain long-term profitability and higher earnings are provided to participants.

Positive Feedback from Participants:  First-generation hoteliers have been happy with the program, stating that it has improved hotel occupancy, helped them with operational problems, and given them access to insightful guest feedback. To maximize occupancy rates and optimize pricing, participants have also made use of OYO's sophisticated revenue management capabilities.

Growth in the Hospitality Sector:  It is anticipated that over the next two to five years, the Indian hospitality industry will draw in over $2.3 billion in investments. An estimated 12,000 new hotel rooms are anticipated in 2023 alone, suggesting a recovery in the industry.

Focus on Leisure Travel Destinations: OYO is currently concentrating on growing its Accelerator Program in well-known travel locations like Goa, Shimla, Amritsar, Udaipur, Mysore, Gangtok, Puri, Tirupati, and Udaipur.
This growth aligns with OYO's objective for 2023, which is to add more upscale hotel brands.

Financial Highlights 

Financial Analysis 

1. Revenue: Although the company's revenue grew in FY22 and FY23, it is still less than its peak revenue from FY20.
2. Expenses: Gross margins have improved as a result of operating expenses rising more slowly than revenue.
3. Profitability: For every year listed, the company's EBITDA and PAT have been negative, indicating a loss.
   But from FY22 to FY23, the loss has shrunk, suggesting some advancements in cost control or operational effectiveness.

Future Performance Indicator 

1. Positive Indicators: Revenue growth that is steady, improvements in operating and gross profit margins, and a drop in losses (EBITDA and PAT).

Concerns: Despite improvements, the company's profitability remains low due to negative EBITDA and PAT, elevated employee benefits and other expenses, and negative EPS.

1. Recommendations: Emphasize cost control to cut operating costs, keep up revenue growth plans, put profitability measures in place, and plan on adding value for shareholders.

SWOT Analysis :

Strength:

1. Diversified Offerings: The business provides a large range of services and goods, including long-term stays, event hosting, business spaces, and lodgings ranging from low-cost to high-end.
2. Global Presence: It has operations in several nations and a vast network of 450,000 properties spread across 5,000 cities.
3. Robust Brand Equity: Having transitioned from an aggregator to a franchisor, OYO garners 90% of its revenue from the franchise model, indicating robust brand awareness and confidence among hotel associates.
4. Technology-driven: To standardize and improve the hospitality experience for partners and clients alike, the platform makes use of technology.
5. Revenue Growth: A steady rise in earnings over time, along with improved gross margins and declining losses.
6. Strategic initiatives: include the introduction of new brands, such as Palette, and initiatives, such as the Accelerator Program, to broaden the company's offerings and assist hoteliers.

Weaknesses:

1. Financial Losses: The company has been losing money, with negative EBITDA and PAT, despite revenue growth.
2. High Operating Expenses: Notable expenditures for other operating costs and employee benefits.
3. A negative earnings per share (EPS) could worry investors and stockholders.

Opportunities :

1. Market Expansion: Possibility of growth in important markets such as the US and the UK, along with plans to introduce novel service offerings to cater to changing customer demands.
2. Growth of the Hospitality Sector: Shortly, thousands more hotel rooms and significant investments are anticipated in India's hospitality sector.
3. Accommodation for Foreigners: OYO can capitalize on the rising demand for accommodations for foreigners by launching apartments in Abu Dhabi.
4. Growth of Corporate Clients: The business has been successful in expanding its clientele and generating new sources of income by bringing on corporate clients.
5. Accelerator Program: By empowering more hoteliers and enhancing their businesses, this program can be expanded, broadening OYO's network of affiliated hotel

Threats

1. Challenges with Profitability: In order to ensure sustainable operations, OYO must strategically turn its negative EBITDA and PAT into positive figures.
2. Market Competition: A number of significant companies are fighting for market share in the fiercely competitive hospitality and lodging industry.
3. Operational Costs: Improving profitability will depend on controlling and lowering operational costs as the business expands.
4. Economic and Market Conditions: The company's performance may be negatively impacted by external factors such as recessions or a downturn in the travel and tourism sector.\

The company's accomplishments:

1. First Profitable Quarter: According to CEO Ritesh Agarwal, Oravel Stays is anticipated to report its first-ever Profit After Tax (PAT) in Q2 FY24, with a projected PAT of more than Rs 16 crore.
2. Future Growth Markets: According to CEO Ritesh Agarwal, there is a lot of room for expansion in the US and the UK in particular. The company wants to give customers confidence and to meet their changing needs, they plan to use cutting-edge technologies like contactless check-in.
3. Hotel Network Rationalization: The number of hotels was reduced from 18,037 in FY22 to 12,938 in FY23, to grow the network once more after eliminating incompatible properties.
4. Biggest Footprint: Among full-stack short-stay lodging providers, Oravel Stays asserts that as of June 2023, it has the biggest hotel footprint in India and Southeast Asia (SEA).
5. Growth in Gross Booking Value: The Gross Booking Value (GBV) of hotels grew by 35% year over year, while the GBV of the industry as a whole increased by 25% to around Rs 10,000 crore. In FY23, GBV per storefront in hotels experienced a record growth of 82%.
   approximately 2,800 corporate clients were successfully added by OYO between January and July 2023, an increase in corporate client acquisition of 11.75% over the same period the previous year. The strong demand from a variety of sectors, including startups, film production companies, and travel management companies, is what is driving the growth in corporate clients and revenue. Small and medium-sized businesses (SMEs), as well as conventional corporations and business houses.
6. New Additions: To meet the rising demand for accommodations for expatriates, OYO intends to build 2,000 new apartments in Abu Dhabi.

Conclusion 

Although OYO's finances have fluctuated in the past and included losses, the company's recent positive cash flow is encouraging. Before making any investment decisions, investors should carefully consider OYO's business model, financial performance, and the risks associated with the hospitality industry.