Infusing OYO with the Right Ingredients for Sustainable Growth
Infusing OYO with the right balance of local flavor and chain reliability to support its US expansion, job opportunities, and customer expectations. Recommendations include emphasizing unique local experiences, moderating US expansion, and enhancing customer loyalty. Analysis focuses on meeting customer expectations, maintaining quality standards, and differentiating OYO from other chains.
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Presentation Transcript
Infusing OYO with the right ingredients Genevieve Roch, Akshay Joshi, Rachel Simmons & Paul Bugnon JMSBConsulting
Agenda 1.Recommendation 2.Analysis 3.Alternatives 4.Implementation 5.Financials
Is OYOs strategy sustainable enough to support it s US expansion and associated job opportunities? Rapid expansion Customer expectations Robust technology High capex HR capacity
Recommendation Combine local flavor with chain reliability Analysis Alternatives Implementation Financials Emphasize unique local experiences Moderate US expansion (1/day to 2/day) Provide local activity guides, unique decoration and menus What to do section on app with local advertisements Ensure reliability and customer loyalty OYO certification and branding for all new hotel partners Customer loyalty program for extras at OYO hotels Business customer guaranteed rates Add structure to internal organization Clear and defined roles at management level Strategic customer experience role at director level (Michel) Training for Field Sales Reps and Territory Ops Leaders in new strategy Ensure a unique experience while maintaining a standard of quality
Recommendation Trend for travelling sets customer expectations Analysis Alternatives Implementation Financials Safety Uniqueness Expected amenities Experiences Quality standards Travelers Affordability
Recommendation OYO offers the standards expected by customers Standards Analysis Alternatives Implementation Financials OYO Budget Chains Luxury Chains AirBnB Solo locations Price OYO must differentiate itself from chains
Recommendation OYO capitalizes on the demand for unique experiences Uniqueness Analysis Alternatives Implementation Financials OYO Solo locations AirBnB Budget Chains Luxury Chains Price Uniqueness permits adaptability and reduces overhead costs
Recommendation OYO can capture the unbranded US market Uniqueness Analysis Alternatives Implementation Financials OYO 50% unbranded; approx. 18,000 locations Solo locations AirBnB Budget Chains Luxury Chains Price
Recommendation US expansion supported by sustainable plan Analysis Alternatives Implementation Financials Realistic expansion targets Clear standards adapted to US Certification Robust tech implementation plan for locations Build HR capacity Ensuring the right talent is essential for this expansion
Recommendation Global business model Analysis Alternatives Implementation Financials Multiple: 5x Revenue: $2.04B Valuation: $10B 70% occupancy 20% commission $40 average rent/day 100% growth rate Valuation & expectation are reasonable with their current metric
Recommendation Global business model Analysis Alternatives Implementation Financials Room required: 1.2M Current loss: $0.2B Current overhead: $2.2B 10% loss 17 000 employees 1 000 engineers Overall OYO is near break even
Recommendation US business model Analysis Alternatives Implementation Financials Current Onboarding rate: 0.25 hotel/day Target for US: 250 hotels 30 180 rooms US investment: $300M Required rate: 1 hotel/day Current: 50 hotels Total potential target: 18 00 hotels Target for the US market are reasonable, but need the speed up
Recommendation US business model CapEx per hotel Analysis Alternatives Implementation Financials Average CapEx per hotel: $240k US investment: $300M Total CapEx in US: $60M 70% occupancy 20% commission $40 average rent/day Payback per hotel: 10.2 Months Capital allocation for US is on track
Recommendation Criteria for OYO s Success in the US Analysis Alternatives Implementation Financials Technology Technology Robust data analytics and dynamic pricing ensure OYO s competitive advantage 24/7 customer support AI software to determine the right deal for partnering hotels Market OYO OYO s business model is lucrative to a sizeable market of unbranded hotels in the US US has high population of millennials who spend more money on travel and experiences Strategy Market Strategy OYO lacks capacity in terms of HR and capitol for rapid expansion Needs to differentiate based on elements other than pricing OYO needs to leverage its proprietary technology to establish a differentiated business model in the US
Recommendation Choosing the best strategy for OYO Analysis Alternatives Implementation Financials Pull out of US and focus on India and China Rapid US expansion using current business model Profitable expansion in US by adapting to the local market Capacity Potential Market Size Long-term Growth Ensure a unique experience while maintaining a standard of quality
Recommendation Risks Analysis Alternatives Implementation Financials Likelihood Impact RISK MITIGATION CONTINGENCY Hire talent acquisition company Use contractors or external consultants Not able to hire required talent MED HIGH Local Bring on influencers or local celebrities to promote activities Restrict listings from chains and large companies experiences are not authentic LOW MED
Recommendation Timeline at a glance Analysis Alternatives Implementation Financials 2020 2021 2022 Target: 1/day expansion Target: 2/day expansion Local experiences Local activity guides and menu items What to do App development Approach local businesses for advertising opportunities on WtD app WtD app links to loyalty program Ensure new hotels are using OYO back-end technology Reliability and loyalty Customer loyalty program for perks Business/frequent traveler guaranteed rate packages Add Director of Customer Experience Add VP position in Customer Experience Internal structure C-Suite and management role structure Training program for new US hires
Recommendation Expansion plan Analysis Alternatives Implementation Financials US: 1/day US: 2/day EU & Latin America Upgrades Integrate back-end operations Listings and UI standard for all Procurement and Operations support TOL support for local elements List of minimum requirements (amenities) Local requirement templates (guides, menu items) Technology Management
Recommendation Branding: Infuse OYO with local flavor Analysis Alternatives Implementation Financials OYO Yakima Valley OYO Nashville What-to-do App What-to-do App Activities Street art walking tour Bourbon tasting Activities Wine tastings Stargazing hiking tours Hotel Decoration Rock n roll / Country hall of fame Southern charm Hotel & App Menu Items Chicken and Waffles Restaurant promotions Decoration Country charm Chic and sleek Hotel & App Menu Items Local cheese platters Restaurant promotions Wifi, comfortable beds, fresh linens, clean rooms, safe for solo travelers and women
Recommendation Customer loyalty Analysis Alternatives Implementation Financials Customer Type Business & Frequent Travelers Backpackers & Milennials Benefits to Customer Guaranteed rate + 15% discount Loyalty program with extras at OYO locations Benefits to OYO Advance bookings and increased occupancy Positive reviews and customer loyalty Customer profiles and data to improve services
Recommendation Organizational Hierarchy Analysis Alternatives Implementation Financials CEO CTO COO US India China
Recommendation Organizational Hierarchy Analysis Alternatives Implementation Financials VP Operations & Management HR Directors Director of Customer Experience Work together to ensure local elements, app and loyalty program combine for a unique customer experience VP Customer Experience Territory Operations Leaders US Business Development Managers Contribute to outreach with local business and app population VP Sales Field Sales Representatives
Recommendation Employee Training Program Analysis Alternatives Implementation Financials Sales and customer service Teamwork 3 month onboarding Employee teambuilding through testing local activities Local OYO knowledge and resources standards & strategy
Recommendation Plan financing Analysis Alternatives Implementation Financials US investment remainder: $150M 2021 FCF : $50M 2022 FCF : $100M Use of funds: $300M Current investment and future free cash flow ensure financing
Recommendation Budget breakdown (US Mil) Analysis Alternatives Implementation Financials
Recommendation Financial projection (US Mil) Analysis Alternatives Implementation Financials 300 140 116.085 120 250 100 200 80 52.97 Revenue 60 Profit 150 Total CapEx: $216M 40 266.085 100 20 -13.68 137.97 0 50 Target market share: 5% -20 61.32 0 -40 2020 2021 2022 Revenue Profit US operation can be very profitable, with the target 5% of independent hotel
Recommendation KPIs for US market Analysis Alternatives Implementation Financials 80% Occupancy rate 50$ Average revenue per room Higher than OYO average $75M US operation overhead Target for 2020 KPIs to track to ensure plan success
Recommendation Combine local flavor with chain reliability Analysis Alternatives Implementation Financials Emphasize unique local experiences Moderate US expansion (1/day to 2/day) Provide local activity guides, unique decoration and menus What to do section on app with local advertisements Ensure reliability and customer loyalty OYO certification and branding for all new hotel partners Customer loyalty program for extras at OYO hotels Business customer guaranteed rates Add structure to internal organization Clear and defined roles at management level Strategic customer experience role at director level (Michel) Training for Field Sales Reps and Territory Ops Leaders in new strategy Ensure a unique experience while maintaining a standard of quality
