Saturday, March 4, 2017

After StayZilla, Are next 11 Months crucial for OYO rooms?

After StayZilla,
Are next 11 Months crucial for OYO rooms?

After StayZilla,  Are next 11 Months crucial for OYO rooms?

In last week of February 2017, OYO Rooms received two good news and one bad news. First good news that it is getting additional funding of $500 million from Softbank and second is its rival StayZilla decided to close down. If you remember OYO rooms and StayZilla had twitter war last year.

What is the bad news? Unfortunately, the good news is the bad one too! StayZilla closing has set alarming bells to OYO rooms if it will follow the same path or will sustain its pace towards profitability. Remember OYO rooms showed his earnings of ₹2.4 crores (see tofler story) and a loss of ₹350 crores. (see inc42 story)

What are the challenges for OYO rooms?

Funding and More Funding

OYO rooms is burning cash at a higher rate and continuously since it is brandifying local hotels with its name. A customer may get a handsome discount on the hotel room under the brand of OYO but may get disillusioned after finding the hotel he had rejected earlier for its bad reputation. OYO rooms have to spend on improving customer experience, monitoring and auditing hotels. Funding prefers numbers (Quantity) rather than quality. Like other hotel aggregators, OYO rooms has to focus more on introducing more properties and penetrating new cities or towns.

Business Model and Competition
In nutshell, OYO or its competitors are hotel aggregators but there are differences in their business models. OYO sell hotel-stays under its own brand while there are competitors like HotelBids that book hotel rooms by the bidding process. e.g. A customer asks for a price, then various hotels bid for that price and offer their rooms. All these companies mainly drive their business through their mobile Apps or web Apps. Oyo tried to brandify low star hotels and standardise services. Oyo-rooms is trying to create a blue ocean market, still, it is a cut-throat red ocean. e.g. Oyo acquires Zo hotels to cut competition.

As StayZilla Head Yogi said, "A homestays marketplace needs to invest in educating the market on the concept and even [on] using the internet and not just the product. The costs, both financial and opportunity costs, creep up on you over a period of time and get rationalised as the cost of doing business in India". The same applies to OYO rooms also. Logistics, back-end operations, customer segmentation and relationship play vital roles in business success.

Google is a silent enemy like an earthquake or Tsunami. Google Apps like Localguides, its huge infrastructure and innovations in machine learning can change the game altogether. It could happen, we have Google verified hotels with live streaming hotel views.

Unpredictability in Tourism Industry 

Indian tourism and hotel industry is expected to grow to 11 billion dollars by this year, still, it is full of chaos. Everybody understands seasonal demands, but changing climate, unstable political scenarios, social and economic conditions make it unpredictable. Last few years natural calamities have a considerable impact on Uttrakhand tourism.

Can Data Science solve business problems? 

OYO-rooms claims to monitor so many parameters about hotel rooms, it appears the data collected by them would be overwhelming. I found no patented idea or any innovation claims by OYO. CBSights (Oravel Stays Patent) refers to one patent link but it belongs to OYO Corporation not OYO rooms. People are developing machine algorithms to advise the most suitable hotel stay for the specific customer. Not sure if OYO-rooms has reached that level or not. Though they have a job opening of a Data Scientist. I love to see if they have any blog post on technical aspects. Oyo blog on 2016 Travel trends is interesting but it has marketing perspective.

Let us see which side the wind blows!