This time around we take a look at OYO Hotels, for our Startup Of The Month segment which looks at businesses within Malaysia.
OYO hotels are budget hotels which have partnered with and enlisted the services of OYO Rooms Malaysia. We speak to Tan Ming Luk, the country head for OYO Malaysia and Singapore to find out more about the business model, and how despite the pandemic, OYO hotels can help spur domestic tourism back to life once interstate borders reopen.
Many would have heard or read about Ritesh Agarwal, the founder of OYO Rooms, who was at one point the world’s youngest billionaire. The concept for OYO Rooms came to him during his travels, in which he realised that there was not one standard chain or brand for hotels in the budget segment.
“And the fragmentation of budget hotels meant that standard within each hotel would vary in terms of quality and pricing, because no one actually ‘governs’ the budget hotels, because it’s not a star hotel,” shares Ming Luk.
“Thus he [Ritesh] started the business with the hope that he could unify and help budget hotel operators to elevate their business in terms of operations and customer acquisition. Therefore, each property would then have a certain fixed standard, and in every OYO hotel guests go to, they can expect a certain level of hospitality. Essentially making these properties clean and cosy; providing core values for the right price,” he explains.
Thus OYO Rooms signs up the hotels, provides the branding and the SOPs in order to help uplift the property to the OYO hotels standard. And once the building is transformed, OYO aids the hotel to bring in more customers than it typically does. “At the end of the day, we’re also about helping smaller business thrive – we help these entrepreneurs or business owners by providing a pricing algorithm and to run promotion to increase their profitability,” shares Ming Luk.
We then went on to ask Tan Ming Luk a number of quick fire questions:
How can OYO hotels help revive the local tourism industry?
With the business having begun back in 2017, and although OYO only acquired their first hotel a year later in 2018, the amount of OYO hotels in Malaysia alone account for around 800 hotels, which translates to over 20,000 rooms, spread across all the states.
What that means is that locals can essentially tour around Malaysia on a budget, and in doing so, they would be able to experience and enjoy the many specialities that each state has to offer while there. Be it if you’re travelling up north to Penang to feast on Nasi Kandar, or down South to Johor to try their version of laksa, or whichever small businesses you come across the way.
Plus, the good thing about OYO hotels are that we’re not just concentrated in urban areas, but also in tier 2 and tier 3 cities which aren’t overcrowded and have its own charm.
How profitable is OYO Rooms thus far?
OYO Rooms have yet to turn profitable, but have so far been able to sustain itself. We were expected to break even some time this year, but sadly the pandemic came about. We’re probably looking at some time next year to break even, and then perhaps turn profitable in the next couple of years’ time.
What would make a guest pick OYO hotels aside from another hotel?
Well we can’t compare with starred hotels, but if someone is on a budget and needs a place to stay, they will know that they can get core values that are expected at a certain price. Obviously when you pick an OYO hotel, you’re guaranteed a clean, cosy room, hot shower, air condition, wifi and such.
Also, at this point of time, we have implemented sanitised stays – where we implement comprehensive hygiene protocols and step up measures of guests’ pre- and post-check-in to curb any potential spread of Covid-19.
What would make a hotel partner with OYO?
Well, apart from the brand which has grown rather large and well-known, at the end of the day, I think it’s because we’ve proven to be able to help OYO hotels grow its revenue through higher customer acquisition.
Could you tell us a bit about your CSR initiatives.
Sure, the most recent would have been our effort helping students who ended up being stranded due to the confusion of tertiary schools opening. Some NGOs reached out to us to help house them for a few days, and we reached out to our hotel partners and they were willing to help.
Previously we also housed our frontliners during the start of the MCO, we reached out to government hospitals in Kuala Lumpur. While most of the hospitals have hostels, due to the surge of cases, they needed these extra spaces, and even the IJN director wrote us a letter of appreciation.