What is it for OYO post COIVD ?
It’s quite evident that the travel and hospitality sectors have been the worst hit due to the outbreak of the pandemic. However bleak it might seem now, travel will return. But it will be a long recovery, which will be dependent on the extent of the virus spread, containment and prevention interventions. There will be an evolution of customer expectations, McKinsey surveys revealed that the biggest of these would be focused on cleaning, hygiene in the rooms and rapid testing for guests. OYO has initiated working on these as can be seen in OYO Japan, where they have developed technology for contactless check-in and check outs and packaged food delivery to the rooms. To match customer expectations the company must invest in technology for reducing human interfaces, the funds for which could be partly sourced from their existing wedding business which is relatively unaffected by lockdown and is generating cash.
To overcome the current uncertainties, the operational decisions that the board had taken way ahead during December 2019 have become a boon, where 98% of the hotels are now asset light and don’t have fixed guarantees. Having entered a Force Majeure and cut-off monthly payment to partners, making payments as per customer bookings only, on top of which there have been layoffs, pay cuts and extended furloughs is working to keep the costs in check.
The company’s headstrong expansion has had mixed results- with the investment splurges in China and USA being sour, whereas Northern European countries showing a faster recovery and even Chinese markets are now slowly reopening and it is crucial for the company to achieve a stronghold there, being the second largest hotel chain there. The market is prospective and will help running the revenue streams, the competition can be overcome by the advantage of the price point and by focusing on value added services.
As for the capital funding and question of profitability, there is a claim of a billion dollar balance sheet by the Founder, eliminating need for immediate funding or near future bailout. The business looks prospective for sustainability considering the current performance, significant operating economies and restructuring the business model to suit the market conditions, focusing on the reliable low cost experience for apt customer segments. It has been delivering promising results even in a dwindling market, by delivering occupancy rates above market averages in markets like US, and triple digit million dollar annualized revenues in Japan. The prime focus of OYO which is in the economy and budget segment of customer is the perfect combination to the COVID cocktail, studies suggest that the economy hotels will have the fastest pre-pandemic level returns which is also favorable for OYO.
Response to the article- “In a post-covid world, Oyo runs out of room”
Article reference Link- https://www.livemint.com/news/india/in-a-post-covid-world-oyo-runs-out-of-room-11586968158820.html
