What will it take for revival of OYO and the hotel franchise business post-COVID
Today, in the difficult times of COVID, the hospitality industry is facing the biggest challenge. Only the companies that have evolved with a robust business model can survive and sustain post-COVID. OYO is one such company. It started in 2013 and currently, it is present in 800 cities in 80 countries. There are two major reasons for its large network. One reason being attracting similar minded people to work together and second, it has a great focus on building processes.
OYO visions itself becoming the world’s best and not the largest hospitality company. It aims at being aspirational by giving importance to quality service, customers and partners.
Franchisor & Franchisee Relationship
The relationship between the two parties has to be clear and transparent for a long run commitment. There are three major ideas around which OYO works with franchising:
1. Value proposition - It has to be simple for customers to understand. It should also increase revenue for partners at the same time.
2. Passionate team - The team should be as passionate as the company to sell.
3. Ecosystem - The franchisor is selling the whole ecosystem and not just the brand name.
OYO has maintained a system of 3C limit score for each hotel where it has information on cleaning, training staff, check in experience and the like. The hotels that cross the 3C limit are sure to shut down.
OYO is open to conversion franchising and ownership operated partners rather than strategic management relationships. OYO feels the local operator is much aware, adds value to the customer and has the right assets. The company continues to support them technologically and helps them in all ways. There is a heavy investment in training provided to the partners.
Dealing with Post-COVID Challenges
OYO has witnessed a positive response from customers since the lockdown till now. It is spread over 20 cities and union territories in India. SMEs and young millionaires form the two major customer segments. The company has currently reached 30% of pre-COVID level though there is a 50% increase seen in the past few months after the lockdown.
Customer level trends
- There is significant demand coming from macro cities. The smaller cities will take time to come up from the situation.
- In a city, stay and travel has increased. Travellers of small or medium scale enterprises or business owners have started coming in. Inter-state travel has also seen an increase.
- Self-quarantine and isolation needs. OYO has been collaborating with the government and hospitals to fulfil these needs.
- Pilgrimage locations are witnessing a peak.
- Apartment renters- With no maids, there are people from apartments looking for a safe stay.
- The volatility of environment - The total environment is volatile and unpredictable. The lockdown in some states at different times makes it difficult for partners to make any predictions.
- Fewer Revenues – Though there are positive signs in revenue growth, it is still not as it was.
- Shortage of staff - Another major challenge what the partners face is the shortage of staff.
OYO is taking action in dealing with challenges and also helping the partners. Few measures it has been taking are:
- OYO Sambandh Initiative – It’s the value proposition and constant communication with its partners to give clear information.
- Cash Flow – Other value-added services have been introduced like the customer membership programme to increase cash flow. Partners are also given a discount in various areas. To take care of the capital needs of the partners, a weekly reconciliation is undertaken.
- OYO Secure Scheme - This is a kind of wallet. The company gives them a discount of up to 30% on recharges to the wallet. This gives people better visibility of their revenues and transactions.
- Sanitization Training - OYO has set some basic sanitization standard that has to be followed by every partner. Also, certain partners opt for being tagged. Tagged partners have to go through a certain process.
- Staff Requirement – OYO is working with certain agencies for the need of staff to the partners.
Future of Hospitality Industry – OYO
OYO is seeing a good future for its business post-COVID. Attraction from partners will be much higher now. Demand is flowing from larger channels, for example, OYO is working with government, embassies and hospitals.
In a broad perspective, the organised franchising in the hospitality industry will be higher.
Edited By: Vaishnavi Gupta