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OYO exits from hotel aggregation model: Report

OYO has changed its business model to franchise from being an aggregator earlier, reports The Economic Times. Under its new model, company’s partner hotels have now converted into franchises, and operates under OYO brand.

Speaking with the publication, OYO’s founder Ritesh Agarwal said that the company does not do aggregation anymore and and have become a hospitality company with these franchise hotels.  The company currently claims to have around 8,500 hotel partners (it is unclear, how many of them are franchisee) in 230 cities across India, with presence in Malaysia and Nepal.

Exit from aggregation

OYO has been tagging off itself from aggregation model. The company launched self-operated hotel brand Townhouse in January this year. OYO Townhouses are entirely operated by OYO, giving the company more control over its operations. The company has since than expanded its townhouse to ten cities including Hyderabad, Delhi, Kolkata amongst others.

Why? –The financial daily reports that the shift in business model will help the company to “reduce its operational costs and improve serviceability”.
-Besides, the hotel aggregation space is getting crowded and this move may help OYO  to stand out from the crowd. Other than OTAs like MakeMyTrip, Yatra etc airlines too have started to tap hotel aggregation. Spicejet recently said that it has a new website called Spicevacations for booking hotel rooms and buying hotel packages.  Other airlines like Indigo and GoAir also has hotels and packages websites as well.
-Also, note that we had pointed out earlier that the hotel aggregation space is currently unregulated in India and is currently working on guidelines for accommodation aggregators, which hotel aggregators will be impacted by.

OYO’s Financials and Highlights

In July, OYO had announced that its losses has narrowed down to Rs 325 crore for the year ended March 2017, from Rs 496 crore in the previous year. And at that time, it attributed its positive performance to a business model that doesn’t emulate any global template, and said that is “unique and indigenous to India”. It also added that “the positive indicators on growth and burn-reduction are a clear validation of the unit economics and business model, which has a high degree of operating leverage. Due to our supply side moats and direct distribution platform, we are creating liquidity and value for our hotel partners.”

OYO has also opened a new technology development centre in Hyderabad, which will focus on building supply chain and technology teams for the company. The company said in a statement that it will grow to 300 engineers by 2018-end. This is company’s second office in the country after its Gurgaon office.

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