OYO Wants To Upgrade To Premium

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OYO, the SoftBank-backed startup known for budget hotel stays, is reportedly looking to onboard premium 3- and 4-star hotels in India and setting up its own properties to capture a significant portion of the country’s premium hospitality market. The move is a significant strategic shift for OYO, which was primarily founded as a budget hotel chain in 2012. OYO aims to expand in the premium segment amid the post-Covid surge in business travel, which has fuelled demand and growth in the premium segment in both the inbound and domestic categories of India’s hotel and travel segments. This expansion into the premium segment, however, will require a lot of capital infusion and a shift to an asset-heavy business model.According to a recent note by ICICI Securities, the luxury hotel segment in India has a positive outlook. The note stated that FY23 started on a strong note for the hotel sector in terms of growth and margin expansion, and with the full reopening, corporate demand and the MICE segment (meetings, incentives, conferences, and exhibitions) joined the growth bandwagon in Q1FY23 while leisure continued to perform well. The note added that many hotels have also raised room tariffs without disturbing demand, which has led to a sharp revenue rise of over 24% versus pre-Covid levels.

According to OYO, a lot of its corporate customers were conducting business over virtual meetings which was seen as a stopgap and sub-optimal solution. The company believes that with the reopening of the economy, there will be a surge in demand for business travel, meetings, incentives, conferences, and exhibitions, which will fuel the growth of the premium hospitality segment.