Indian Startup, OYO Rooms, To Expand In US

OYO's brand is recognizable in more than a dozen countries. It is almost ubiquitous in its home turf in India with 18,000 locations, and the number of rooms it has in China is also catching up. Still, the $10-billion hospitality startup isn't sated as it targets a broader U.S. reach.

In June, the six-year-old company invested $300 million to slap its logo across more hotels in America. But even before their planned expansion, they have already sprouted in several cities in Dallas, Houston, Atlanta, and Miami. Back in August, the company also purchased Hooters Casino Hotel in Nevada for $135 million, according to a source cited by CNN.

"The U.S. is one of the largest hospitality markets, both in terms of [domestic] and international tourism, and therefore presents a huge opportunity for us," said founder Ritesh Agarwal.

OYO is backed by Softbank's Vision Fund that injected $1.5 billion last month along with investors Lightspeed Venture Partners and Sequoia Capital, which boosted the Gurugram-based hotel chain to the decacorn status. Agarwal also invested $700 million.

The company's business model works by rebranding and redesigning existing hotels with the OYO brand and operates them together with the owners. OYO's compensation is usually a cut from the hotel's total revenue minus cost.

Not yet profitable
Despite the rate of OYO-branded rooms mushrooming across several countries, the company is still not profitable. Aditya Ghosh, the company's chief executive, expects that OYO net loss for 2019 will be down to 10% of overall sales.

Rising complaints from hotel owners
The success of OYO can be attributed to Agarwal, who dropped out of college and fearlessly pursued his great idea. It's only been six years, and the company has rapidly disrupted the hotel industry. But the success of OYO is also met with controversies and lawsuits.

In September, a complaint was filed against Agarwal and two of his representatives about a profit agreement that the OYO camp failed to honor. Another one is a report by Entrepreneur India wherein a certain Bets Fernandez sued Agarwal and six other OYO employees because OYO didn't pay the Roxel Inn owner rent since May.