Carolina Consulting OYO Strategy Analysis
This presentation delves into the strategic analysis of OYO's entry into the US market, focusing on key questions, executive summary, qualifiers for US budget hotel industry competition, and goals and objectives. It outlines the challenges, recommendations, and implementation strategies for OYO to succeed in the competitive US hospitality industry.
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Presentation Transcript
C C C Carolina Consulting OYO OYO Presented to: Jakayla Michel January 7, 2020 Presented by: Jason Cline, Will Richardson, Carly Seneca, Caroline Wright Situation Analysis Overview Recommendation Conclusion Implementation
C C Key Question Key Question Should you apply for a job with OYO in the US? What strategy should OYO take in the US in order to be successful, profitable, and sustainable by their 2023 target? Reality Check: US hotels (even budget hotels) already have many amenities that made OYO attractive. US franchise models are different than in India and China because of the emphasis on brand The US market is much less fragmented than in India and China. 3 years is ambitious 5 years is a more realistic target Situation Analysis Overview Recommendation Conclusion Implementation
C C Executive Summary Executive Summary Problem What strategy will be successful in the US market? Expand and establish brand presence and customer trust in the US. Goal Buy/Renovate Blocks of Rooms in Hotels Alternatives Aggregate Hotels Franchise Fully US market is not as fragmented as India & China US hotels already have many OYO amenities Franchises in the US have a heavy focus on branding Hurdles Situation Analysis Overview Recommendation Conclusion Implementation
C C Agenda Agenda Analysis Alternatives Recommended Strategy Implementation Q&A Situation Analysis Overview Recommendation Conclusion Implementation
C C Qualifiers to compete in US budget hotel industry Qualifiers to compete in US budget hotel industry Clean hotel environment Cost effective price structure Use friendly apps Brand Consistent hotel experience awareness of OYO Situation Analysis Overview Recommendation Conclusion Implementation
C C The Story The Story Situation Analysis Overview Recommendation Conclusion Implementation
C C Goals & Objectives Goals & Objectives Key Stakeholders Definition of Success Achieving top-of-mind awareness status with tech-savvy, budget-oriented US consumers while providing clean beds, efficient technology, and a safe environment to all. Customers 3rd Party Data Suppliers Key Performance Indicators Franchisees Awareness Occupancy Rate Data Analytics Profitability Employees Shareholders Situation Analysis Overview Recommendation Conclusion Implementation
C C Timeframe Timeframe Expansion in US (budget franchises) Drive stronger awareness of OYO in US Leverage data to continue to deliver Profitability Situation Analysis Overview Recommendation Conclusion Implementation
C C Key Highlights Key Highlights 6 years 1 room listing 1,000,000 rooms 5-19 Days to transform a newly acquired property 2.8x return Price decrease 10%, 3x occupancy Situation Analysis Overview Recommendation Conclusion Implementation
C C Decision Tree Decision Tree Aggregate hotels What strategy will enable OYO to be successful in the US market? Buy and renovate blocks of hotel rooms Franchise independent mom & pop hotels Franchise with Wyndham (biggest competitor) Franchise fully Franchise already- established budget hotel chains Situation Analysis Overview Recommendation Conclusion Implementation
C C Decision Tree Decision Tree Aggregate hotels What strategy will enable OYO to be successful in the US market? Buy and renovate blocks of hotel rooms Franchise independent mom & pop hotels Franchise with Wyndham (biggest competitor) Franchise fully Franchise already- established budget hotel chains Situation Analysis Overview Recommendation Conclusion Implementation
C C Operating Landscape Operating Landscape Competitors Company Customers Situation Analysis Overview Recommendation Conclusion Implementation
C C Operating Landscape: Competition Operating Landscape: Competition Competitors Company Customers Situation Analysis Overview Recommendation Conclusion Implementation
C C Competition Overview Competition Overview High Quality Industry Overview Traditional Hotel providing OYO Tru by Hilton Customers Wyndham Hilton Marriott Independent Franchises Extended Stay America Low Price Holiday Inn Express High Price Choice Hotels Days Inn Users Business Travelers Budget conscious travelers Luxury travelers Low Quality Situation Analysis Overview Recommendation Conclusion Implementation
C C Competition Overview Competition Overview Industry Overview Traditional Hotel providing Strengths Strong branding Multiple tier choices to meet all types of travelers needs How We Win Leverage data analytics Drive brand awareness to increase app downloads and usage Consistent service with technology Customers Wyndham Hilton Marriott Independent Franchises Weaknesses Lack of centralized data Lack of differentiation in hotel room offerings Potential Landmines AirBnB moves into hotel space Loss of consumer trust Data integrity Users Business Travelers Budget conscious travelers Luxury travelers Situation Analysis Overview Recommendation Conclusion Implementation
C C Operating Landscape: Customer Operating Landscape: Customer Competitors Company Customers Situation Analysis Overview Recommendation Conclusion Implementation
C C Customer Description Customer Description Tech Savvy Millennial Travelers 18-35 years old Budget conscious shopper Mobile first data user Focused on experiences and adventures Budget Conscious Families 25-50 years old +2 children in HH Lower middle class background Service and experiences focused Situation Analysis Overview Recommendation Conclusion Implementation
C C Operating Landscape: Company Operating Landscape: Company Competitors Company Customers Situation Analysis Overview Recommendation Conclusion Implementation
C C Internal Perspective Internal Perspective Why We Lose Why We Win Company OYO provides modern hotel accommodations at a lower price but with a higher service and quality than direct competitors Limited brand awareness Limited market penetration Strong branded competitive market place Extensive data availability Well developed apps to support all key stakeholders Priced below key competitors to drive occupancy Products Budget friendly accommodations Extensive app development to support key stakeholders Pricing US Market: $60-110/night Situation Analysis Overview Recommendation Conclusion Implementation
C C Decision Tree Decision Tree Aggregate hotels What strategy will enable OYO to be successful in the US market? Buy and renovate blocks of hotel rooms Franchise independent mom & pop hotels Franchise with Wyndham (biggest competitor) Franchise fully Franchise already- established budget hotel chains Situation Analysis Overview Recommendation Conclusion Implementation
C C Alternative #1: Franchise Mom & Pops Alternative #1: Franchise Mom & Pops Seek out independent mom & pop owned budget hotels to franchise Will give small hotels more business and drive awareness Allows people to find quality stays that benefits individuals PROS Easy to find franchisees Will improve occupancy rates CONS Slower expansion Difficult to integrate technology & apps Situation Analysis Overview Recommendation Conclusion Implementation
C C Alternative #2: Franchise with competition Alternative #2: Franchise with competition Franchise with budget hotels owned by our large competition such as Wyndham Give a better experience to budget customers under already-established brands PROS Large customer base already established High data integration structure CONS Brand dilution Loss of company control (potetial) Situation Analysis Overview Recommendation Conclusion Implementation
C C Alternative #3: Franchise budget hotels Alternative #3: Franchise budget hotels Franchise with already- established budget hotel chains like EconoLodge, Motel 6, etc. along with other independent small hotels Provide a better experience for budget travelers while giving budget hotels a chance to complete PROS Offer upgrades, technology, convenience, safety, standardization, and branding CONS Potential for cannibalization Customer reluctance to leave established budget brands Situation Analysis Overview Recommendation Conclusion Implementation
C C Evaluation of Alternatives Evaluation of Alternatives Alternative #1: Mom & Pop Franchises Alternative #2: Competitor Franchises Alternative #3: Budget Hotel Franchises KPI Data analytics Customer awareness Occupancy rate Profitability Situation Analysis Overview Recommendation Conclusion Implementation
C C Decision Tree Decision Tree Aggregate hotels What strategy will enable OYO to be successful in the US market? Buy and renovate blocks of hotel rooms Franchise independent mom & pop hotels Franchise with Wyndham (biggest competitor) Franchise fully Franchise already- established budget hotel chains Situation Analysis Overview Recommendation Conclusion Implementation
C C Recommended Strategy Recommended Strategy Our recommended strategy is for OYO to expand into the United States through franchising of budget hotels and other independent accommodations You only live once Explore with OYO Situation Analysis Overview Recommendation Conclusion Implementation
C C Why might this not work Why might this not work Key Concerns 1. No brand awareness of OYO in US 2. No franchisee buy-in or interest 3. Data hacks & employee resistance to data-driven tech 4. Profitability concerns inability to sustain competitive low prices Key Implementation Plan points 1. Extensive marketing campaigns 2. Structure which will benefit franchisees 3. Establish customer trust & training for employees 4. Long-term profitability structure Situation Analysis Overview Recommendation Conclusion Implementation
C C Implementation Overview Implementation Overview Hotel renovation and upgrades Marketing awareness campaigns Franchise expansion throughout US Pricing Situation Analysis Overview Recommendation Conclusion Implementation
C C Implementation Overview Implementation Overview Hotel renovation and upgrades Marketing awareness campaigns Franchise expansion throughout US Pricing Situation Analysis Overview Recommendation Conclusion Implementation
C C Implementation: Product (1/3) Implementation: Product (1/3) Product Part 1: Hotel renovations: Renovate dingy hotels by assessing what renovations are needed by proprietary ORBIS app Floors, TVs, facilities, cleanliness standards, etc. Add electrical structure and increased wireless speeds for tech integration Customer service training for staff to improve the customer experience Situation Analysis Overview Recommendation Conclusion Implementation
C C Implementation: Product (2/3) Implementation: Product (2/3) Product Part 2: Tech integration for franchisees and staff Training for how the app will help rather than hinder hotel employees Both management and staff Example: reduce room checks from 100% to 30% based on historical data Rate employees on customer service rather than # of rooms cleaned to be a differentiator in budget hotel accomodation Improved communication between management, staff, and guests Many guests prefer texting to in-person communication Franchisees will be able to see/manage booking rates and spend less time managing promotions and advertisements Situation Analysis Overview Recommendation Conclusion Implementation
C C Implementation: Product (3/3) Implementation: Product (3/3) Product Part 3: Tech integration for customers Leverage AI chatbots for 24/7 reliable customer service support Customers expect high quality customer service even when travelling on a budget App will show when room is ready, ability to request an early check- in, late check-out, and room service App will show available rooms and customers could choose Customers will be more likely to leave reviews on a specialized app and can rate various pieces of the experience Situation Analysis Overview Recommendation Conclusion Implementation
C C Implementation Overview Implementation Overview Hotel renovation and upgrades Marketing awareness campaigns Franchise expansion throughout US Pricing Situation Analysis Overview Recommendation Conclusion Implementation
C C Implementation: Placement Implementation: Placement We already have 50+ hotels in 35 cities Expand primarily in: Near airports Along highways At the outskirts of frequently-visited cities At less-populated tourist destinations Situation Analysis Overview Recommendation Conclusion Implementation
C C Implementation Overview Implementation Overview Hotel renovation and upgrades Marketing awareness campaigns Franchise expansion throughout US Pricing Situation Analysis Overview Recommendation Conclusion Implementation
C C Implementation: Promotion Implementation: Promotion Digital Mobile First Digital Website Traditional Marketing Word of Mouth Situation Analysis Overview Recommendation Conclusion Implementation
C C Implementation: Promotion Implementation: Promotion Geotag and Geofence on Snapchat OYO Website Build Out Commercials Customer Reviews on Yelp and Trip Advisor Signage in public transportation locations Post/Ads on Facebook and Instagram Loyalty program for reviews and customer referrals Banner Ads on travel blogs, travel sites, and airlines (ex: Planes, trains, automobiles) Sponsor OYO App on Apple Store and Google play Situation Analysis Overview Recommendation Conclusion Implementation
C C Implementation Overview Implementation Overview Hotel renovation and upgrades Marketing awareness campaigns Franchise expansion throughout US Pricing Situation Analysis Overview Recommendation Conclusion Implementation
C C Implementation: Pricing Implementation: Pricing Leverage dynamic pricing algorithm Leverage customer satisfaction data to change prices accordingly Sell aggregated data to help boost revenues Possible customers include: travel agencies, cities/towns, businesses Situation Analysis Overview Recommendation Conclusion Implementation
C C Financial Assumptions Financial Assumptions 3 weeks from signing revenues 100 rooms per hotel 80% occupancy Situation Analysis Overview Recommendation Conclusion Implementation
C C Income Statement Income Statement 2019 2020 2021 2022 2023 2024 2025 Revenues $ 26,666.67 $ 36,400.00 $ 75,333.33 $ 153,200.00 $ 308,933.33 $ 620,400.00 $ 931,866.67 Expenses SGA 60,000.00 120,000.00 150,000.00 187,500.00 234,375.00 292,968.75 366,210.94 Tech $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00 Net Income $ $ $ $ $ $ $ (43,333.33) (93,600.00) (84,666.67) (44,300.00) 64,558.33 317,431.25 555,655.73 Situation Analysis Overview Recommendation Conclusion Implementation
C C NPV NPV 2025 $ (120,099,422.21) 2030 $ (118,627,228.96) 2040 $ 479,751.74 Situation Analysis Overview Recommendation Conclusion Implementation
C C Budget Budget 2019 2020 2021 2022 2023 2024 2025 Total Capital Expenditures $ 730,000.00 3,650,000.00 14,600,000.00 29,200,000.00 58,400,000.00 116,800,000.00 116,800,000.00 340,180,000.00 Situation Analysis Overview Recommendation Conclusion Implementation
C C Timeline Timeline Year 1 Year 2 Year 3 Year 4 Marketing X X X X Franchise Expansion X X X X New Cities X X X Training X X X X Tech/Hotel Renovations X X Situation Analysis Overview Recommendation Conclusion Implementation
C C Risks & Mitigations Risks & Mitigations Risk Likelihood and Severity Mitigation Lack of profitability Target high tourism cities for expansion Expand too quickly Checks and balances to start rollout regionally Slow development for consumer awareness Comprehensive mobile first branded campaign Data integrity Continue working with trusted third party suppliers Situation Analysis Overview Recommendation Conclusion Implementation
C C Metrics Metrics KPIs Data analytics Metrics 1 million daily visits within US to OYO app and website within 2 years 15 million app downloads within 2 years RevPAR +$50 per franchisee within a year Positive NPV return Customer Awareness Occupancy rate Profitability Situation Analysis Overview Recommendation Conclusion Implementation
C C Executive Summary: Revisited Executive Summary: Revisited Problem What strategy will be successful in the US market? Expand and establish brand presence and customer trust in the US. Goal Buy/Renovate Blocks of Rooms in Hotels Alternatives Aggregate Hotels Franchise Fully US market is not as fragmented as India & China US hotels already have many OYO amenities Franchises in the US have a heavy focus on branding Hurdles Situation Analysis Overview Recommendation Conclusion Implementation
C C Slide Index Slide Index Title Alternative #1 Timeline Key Question Alternative #2 Risks & Mitigations Executive Summary Alternative #3 KPI s & Metrics Agenda Evaluation of Alternatives Sensitivity Analysis Qualifiers Decision Tree SWOT The Story Recommended Strategy Mock Ad Goals & Objectives Why it Won t Work Impact of Technology Timeframe Implementation Overview Data Hierarchy Operating Landscape Implementation: Product Product Lifecycle Operating Landscape: Competition Implementation: Placement Contingency Plan Competition Overview Implementation: Promotion Operating Landscape: Customer Implementation: Pricing Customer Description Financial Assumptions Operating Landscape: Company Budget Internal Perspective Income Statement Situation Analysis Overview Recommendation Conclusion Implementation
C C SWOT SWOT Strong data/technology Limited brand awareness Well developed partnerships with 3rd party providers Limited market penetration Positive past performance SWOT Build consumer awareness through marketing Data integrity Competitive undercutting Drive market penetration through expansion Situation Analysis Overview Recommendation Conclusion Implementation
C C Data Hierarchy Data Hierarchy Prescriptive Analytics Predictive Analytics Data Analytics Data Aggregation Data Collection Situation Analysis Overview Recommendation Conclusion Implementation
