The question is, will this new attempt by OYO to enter the lucrative U.S. marketplace be successful?
Pre-Covid, OYO’s growth in the U.S. came at the expense of cutting corners, some big corners at that. Oyo's mandated cloud PMS eas basic at best, lacked the depth and breadth of functionality expected from a PMS today and “often crashed.” Oyo's Channel Manager and CRS were rudimentary; hoteliers complained Oyo's APIs with third-parties did not synch availability and pricing in a timely manner.
In addition, Oyo's obsession with boosting occupancy at any cost by lowering rates even in peak demand at the expense of ADRs was against basic principles of economics and time-tested industry best revenue management practices.
Oyo presented itself and behaved like a tech startup - not like a hospitality franchising company. This is how they were able to raise billions of dollars. We called Oyo the “WeWork of hospitality”
Oyo had no brand recognition, at least not in North America, which forced them to distribute its franchisees' inventory primarily through the major OTAs, Airbnb and the bed banks. Where was the value to the hotel owner? Why did you need Oyo for your property to be on Expedia or Booking - all you needed was a Channel Manager like SiteMinder, which came at a much lower cost.
How sustainable was Oyo Hotels’ presence in the U.S. with all of the above deficiencies, without a serious Book Direct strategy, without a repeat customer base of 55% -60% of room nights booked like all other U.S. hotel brands, without a recognized loyalty program? Oyo Hotels was clearly another WeWork in the making.
What is different now is that Oyo gained experience as a hospitality brand, which came at the expense of their bloated valuation, which is many times smaller now. Acquiring Motel 6, a well established hotel chain with great brand recognition, will undoubtedly help Oyo to increase its brand equity in the U.S., increase direct bookings and repeat business, and decrease dependency on the OTAs.
What does the future hold for OYO in the United States? Only time will tell, but OYO needs to create a meaningful loyalty program, overhaul its tech stack and revenue management practices to have a fighting chance.
