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Oyo's business model is looking a lot like WeWork's

asia.nikkei.com

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Re: Oyo's business model is looking a lot like WeWork's

#31

Post by 9nGQluzmnq3M »

aptwebapps wrote: post #29
9nGQluzmnq3M wrote: post #11

> For its core India business for the financial year 2018, Oyo reported revenues of just $61 million and a loss of $53 million. How on earth does this translate into a $10 billion valuation? For comparison, Hyatt's market cap is $7.9B, and they made $296M profit on $1,215M in revenue in Q3 : https://s2.q4cdn.com/278413729/files/doc_financials/2019/q3/...

The valuation does not come from their operating numbers, core or otherwise. It comes from their last round of funding.

I'm aware of that, but the valuation implies that at least the investors think there's a plausible path for the business to be larger than Hyatt.

Re: Oyo's business model is looking a lot like WeWork's

#32

Post by braythwayt »

9nGQluzmnq3M wrote: post #31
aptwebapps wrote: post #29

Earlier quoted context omitted.

The valuation does not come from their operating numbers, core or otherwise. It comes from their last round of funding.

I'm aware of that, but the valuation implies that at least the investors think there's a plausible path for the business to be larger than Hyatt.

When the valuation is based on investment by investors already in the deal... It does not imply that they think there’s a plausible path for the business to be worth the money.

As events have shown with WeWork, it implies that they are maintaining the façade for a little while longer while hoping o get to the point where they can unload the business onto the public markets.

Asking SoftBank what they think their investments are worth is like asking me what I think my house is worth. You Have to go by what arms-length investors are willing to pay.

I really think we need a new rule where nobody quotes a valuation if the last round involved existing investors and/or founders pumping up the valuation with additional investment.

Re: Oyo's business model is looking a lot like WeWork's

#33

Post by coredog64 »

leoedin wrote: post #23

Oyo are aggressively expanding. When I was in Nepal earlier this year they had OYO branded hotels everywhere. Since then they seem to have started taking over the super-budget hotels in London. I assume it's mostly the same hotels, but they've been paid to slap an OYO sign on the front. It's hard to see what actual additional value they bring though. They're not really a stamp of quality, and they're not generally op…

Hotel chains have to share revenue with OTAs like booking.com. OTAs typically have agreements that they get the lowest public rates. Therefore, if you’re a hotel with enough online presence to drive demand, you can keep more of the money by having customers book direct via a loyalty program. One way to do that is a broad network that allows customers to always book directly with you.

Re: Oyo's business model is looking a lot like WeWork's

#34

Post by lotsofpulp »

ryanlol wrote: post #12
mav3rick wrote: post #3

Earlier quoted context omitted.

What's wrong with that ?

Nothing, some prudes just don’t want to stay in hotels where other people have sex. Odds are that the hourly-rate rooms would be on a different floor than the daily-rate floors for logistical reasons, which makes it even harder for me to see any problem with this. There’s significant a cultural difference here too, in the areas where Oyo primarily operates young couples need these rooms just as much as prostitutes.

> Nothing, some prudes just don’t want to stay in hotels where other people have sex.

What you write may be true for Asia, but if you’re from the US, it makes sense to be wary of hotels offering hourly prices since it attracts a clientele that reduces the quality of life at the hotel. It’s not about being a prude, it’s the fact that hotels frequented by pimps, hookers, and drug dealers offer a less desireable experience.

Re: Oyo's business model is looking a lot like WeWork's

#35

Post by lotsofpulp »

oefrha wrote: post #14

Franchising, and buying up small hotels to form a hotel chain are both very old business models. So it seems to me that neither their original (basically franchising) nor current business model is innovative. What exactly does Oyo bring to the table? Seems even worse than WeWork.

The valuable part of the franchising business model is ensuring a consistent experience for the buyer. That would involve spending money to hire a considerable workforce to continuously visit and evaluate every hotel.

That would involve spending money and make it clear that the marginal costs of franchising hotels is not zero, and so it’s not worth the crazy multiples of revenue valuations that software companies are.

All of these companies are an exercise in figuring out how to create plausible deniability to justify investing in it so that it can be dumped onto a greater fool.

Re: Oyo's business model is looking a lot like WeWork's

#37

Post by fareesh »

As a consumer, the OYO brand means nothing to me because anecdotally it's clear that they only claim to enforce standards but in reality it's an illusion.

In the absence of that assurance, what am I getting from OYO?

If I want a hotel room I will browse listings on the various aggregators that have them and go with the best find for my budget. Unlike Hyatt or Four Seasons or Taj, where you can treat the brand as an indicator of some standard, it doesn't exist in a meaningful way for OYO, even for a far lower standard. It's all over the place.

If anything I'd be suspicious of OYO immediately.

I'm unsure if my experience is the norm or the exception. If there's a huge segment of people who associate the OYO brand with trust, then their model would appear to be working quite well.

Re: Oyo's business model is looking a lot like WeWork's

#38

Post by achow »

fareesh wrote: post #37

As a consumer, the OYO brand means nothing to me because anecdotally it's clear that they only claim to enforce standards but in reality it's an illusion. In the absence of that assurance, what am I getting from OYO? If I want a hotel room I will browse listings on the various aggregators that have them and go with the best find for my budget. Unlike Hyatt or Four Seasons or Taj, where you can treat the brand as an i…

As an idea there is nothing wrong, infact it is brilliant!

Not very unlike fast food franchise business, or Coca Cola bottling franchise - corporate puts in standards, best practices, supplies 'secret sauce' (some times literally), invests massively in branding and advertising which would be way out of thinking league of small time owners of the outlets.

If this was done purely from problem solving perspective (and not as 'growth hack'), then it would have worked beautifully.

Re: Oyo's business model is looking a lot like WeWork's

#39

Post by puranjay »

hos234 wrote: post #27
Traster wrote: post #6

>SoftBank Group, directly and through its Vision Fund, is heavily invested in both. This is the worst case scenario. Every company that Softbank tries to unload becomes a liability because of the association. On the topic of the actual business, I think there's a really basic question people need to ask themselves when they look at these business models: In 10 years time does the industry you're in look different? Be…

OYO is India based unlike WeWork and given what Reliance Jio pulled off and the cash they raised to do it, I feel the context is different. Travel along an Indian highway and try to find your standard roadside motel as you would in US ala Best Western. There are no low-mid tier chains. What OYO is promising is scale. What Best Western took 50 years to do these guys want to do in 5 or 2 idk. It's a worthwhile bet give…

I agree with your fundamentals. But I don't believe Oyo's execution is right. Nor do I agree with this statement:

> It's a worthwhile bet given the Indian consumers purchasing power/quality expectations are on the rise.

India's income and consumption growth have been slower than expected. A recent report even found that rural consumption in India fell compared to 2011-12, and urban consumption increased by a paltry 4%.

In the last two decades, everyone has been building businesses in India with the assumption that India will continue growing at "China pace". Real estate prices are the best example.

But as everyone is also beginning to find out, the money simply isn't there. At least not for now.

Oyo might be a decade too early. This business needs to be built, but not now

Re: Oyo's business model is looking a lot like WeWork's

#40

Post by puranjay »

9nGQluzmnq3M wrote: post #11

> For its core India business for the financial year 2018, Oyo reported revenues of just $61 million and a loss of $53 million. How on earth does this translate into a $10 billion valuation? For comparison, Hyatt's market cap is $7.9B, and they made $296M profit on $1,215M in revenue in Q3 : https://s2.q4cdn.com/278413729/files/doc_financials/2019/q3/...

Hyatt should just call itself a tech company and increase its valuation 10x
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