OYO (Oravel Stays Limited) is a leading hospitality company that helps hotel owners and homeowners connect with travelers looking for affordable and comfortable stays. They transform small, unbranded properties into well-managed, digitally accessible hotels, making it easier for guests to find quality stays through its app, website, and other booking platforms. Operating in multiple countries, OYO offers options for every budget, from budget-friendly rooms to premium experiences. Its innovative model helps property owners boost their earnings while ensuring a seamless booking experience for customers. The buzz around its upcoming IPO and the recent turnaround in their numbers has put focus on the price of [View Current Price of OYO Unlisted Shares] in the private market.
At its core, OYO operates on what is known as a “two-sided platform.” In simple terms, this means the company builds a digital bridge that connects two different groups: property owners and travelers. On the supply side, the company is busy signing up more properties, helping them upgrade their facilities, and ensuring that these hotels meet the brand standards that customers expect.
Before OYO came into the picture, many small hotels and guest houses operated on their own without any special branding or modern technology. This often meant that travelers would find it difficult to locate reliable or consistent options, and property owners struggled to fill their rooms. OYO steps in by helping these properties upgrade their services and appearance. It uses digital tools to assist with managing bookings, checking room availability, and providing customer support. In addition, they rebrand these properties under their own name so that travelers know what to expect when they book a room. Essentially, they take an average or unknown property and give it a makeover with better management and a trusted brand name. This transformation helps property owners earn more money and provides travelers with a sense of reliability, making the whole process smoother and more predictable.
For property owners, often referred to as “patrons” in the system, joining the platform offers several key benefits. First, it provides an opportunity to change a small or less-known hotel into one that is part of a trusted brand. This means that instead of being one among many, a hotel can stand out and attract more guests simply by being associated with the OYO name. Second, the company gives these owners access to a set of digital tools that make it easier to handle day-to-day operations such as booking management, pricing, and customer service. Instead of dealing with mountains of paperwork or outdated methods, these tools help owners run their business more efficiently. It offers property owners a recipe for success by turning a local, independent hotel into a modern business that can compete with larger hotel chains—all through improved technology and better branding.
For travelers, who are called “customers” in their terminology, the benefits are equally important. Travelers want to book a hotel where they can be sure of the quality and service, and the consistent branding helps build that trust. When you see the OYO name, you know that certain standards will be met, regardless of where the property is located. The platform offers a wide range of accommodation options, from budget-friendly rooms to more premium hotels, ensuring that there is something to suit everyone’s needs and budgets. Moreover, the process of booking is made very simple through the app or website, meaning even someone who is not tech-savvy can easily find and reserve a room. In simple words, OYO takes away the guesswork of finding a decent place to stay and makes it as easy as possible for travelers to plan their trips with confidence.
Ultimately, the business model is designed to create a cycle of growth and improvement. The more properties that join the network, the better the brand becomes, which attracts even more travelers, and in turn encourages more property owners to sign up. This creates a self-reinforcing loop where each side of the platform helps the other grow. The continuous collection and analysis of data through the digital platform allow them to make smarter business decisions, improve operational efficiency, and tailor its services to meet the evolving needs of the market.
Sale of Accommodation ServicesWhen OYO acts as the principal provider of a stay, it means that it is directly responsible for delivering the complete service to the guest. In these cases, it doesn’t just connect a customer with a hotel—it actually takes charge of the stay. For example, OYO might manage the entire hotel experience under its own brand. The revenue from these stays is recognized directly on their books, as they are selling a service (a complete room or property stay) rather than simply facilitating a connection. This approach allows them to control the guest experience and ensure that the quality standards promised by the brand are met.
Commissions from BookingsThey also make money by acting as a booking agent. In this role, they provide a platform via its website or mobile app—where travelers can search for and book accommodations. When a booking is made, OYO charges a commission fee, which is typically a percentage of the total booking value. This fee is paid by the hotel owner (or sometimes factored into the overall price for the guest) for the service of connecting the guest with the property. In simple terms, it’s similar to how an online travel agency earns money: they facilitate the transaction and take a small cut as a fee for their role.
Subscription IncomeAnother revenue stream comes from subscription income. OYO offers membership programs (for example, the OYO Wizard program) where customers pay a regular fee to access special benefits like exclusive discounts, deals, or additional services. This subscription fee is a predictable source of income because it is usually paid on a regular cycle—monthly or yearly. For a beginner, think of it like paying a membership fee to a club that offers ongoing discounts or perks; the steady stream of subscription payments adds up over time and supports the overall business.
Other Operating RevenueBeyond the main revenue sources, the company also earns money from several additional, or “ancillary,” services. These can include charges for property damage, which are fees that guests might incur if they accidentally damage the property during their stay. They also generate revenue through travel insurance, where a small fee might be added to a booking to cover the cost of insuring the guest or property, and cleaning fees, which help cover the cost of preparing a room for the next guest. These extra charges may seem small on their own, but they add up to become an important part of their overall revenue. They help cover operational costs and add flexibility to the revenue model by ensuring that they can recover costs associated with maintaining high standards across its properties.
Together, these revenue streams create a diversified model that helps OYO not only earn money from the core service of providing a place to stay but also from the additional services and membership benefits it offers. This diversification is important because it helps the company stabilize its income and reduce dependence on a single source, making it more resilient to changes in the market or fluctuations in customer demand.
Leveraging Fragmented Supply through Asset Transformation: The core growth strategy involves actively transforming the largely unorganized and underutilized supply of independent hotels and homes. By bringing these properties onto its platform, the company not only increases its inventory but also provides a unique value proposition to owners by offering them a pathway to increased revenue generation through standardization and technology integration. This approach is not just about aggregating properties but about actively reshaping them to meet a consistent brand standard. This transformation process helps them tap into a significant market of previously untapped hospitality assets.
Building Trust Through Brand Standardization and Recognition: Their growth is strongly influenced by its focus on creating a recognizable and trusted brand. By bringing independent hotels and homes under the OYO umbrella, the company has been able to introduce a degree of standardization in an otherwise fragmented market. This strategic focus on quality is enhanced through initiatives like the Super OYO program, which recognizes properties that consistently provide positive customer experiences.
Strategic Global Diversification with Regional Focus: While India remains a central market, OYO has propelled its growth through strategic global diversification, with operations expanding across Europe, the US, Southeast Asia, and the Middle East. Their approach isn't just about geographical spread; it’s about making focused investments in regions that present unique opportunities, such as the vacation home sector in Europe through OVH and a rapidly expanding portfolio in the US. The growth in Southeast Asia also highlights a targeted approach to expansion in core markets in that region.
Adapting to Evolving Travel Trends: The ability to identify and adapt to emerging travel trends has been a significant driver of its growth. The company has specifically focused on the rising trend of spiritual tourism in India by adding properties in major religious locations, reflecting a proactive approach to market needs. This ability to recognize and adapt to changes in traveler behavior positions them favorably in the dynamic tourism sector. The company is also expanding its company-serviced hotel portfolio in Southeast Asia and the Middle East.
Financial Restructuring and Prudent Fiscal Management: A crucial element of their growth is its focus on financial health through active debt management and cost optimization. The company's debt buyback initiative, aimed at reducing its financial burden, coupled with efforts to refinance at lower interest rates, demonstrates a commitment to improving its fiscal position. This financial strategy, coupled with a leaner cost structure, has been critical to the company achieving eight consecutive quarters of positive EBITDA and its first full fiscal year of profit.
Inventory Growth: OYO has significantly increased its hotel inventory, growing from 12,938 hotels in FY 2023 to 18,103 in FY 2024. This increase in inventory indicates a strategic effort to expand the company's reach and availability of accommodations. It's important to note that the company anticipates that the new additions will require time to achieve full revenue potential.
Revenue: Despite the growth in inventory, revenue from operations remained relatively stable, at Rs. 5,389 crores in FY24 compared to Rs. 5,463 crores in FY23. This indicates that while the company is growing its capacity, there is a time lag between inventory expansion and increased revenue. This may be due to newly added properties needing time to reach their full revenue potential. The company's revenue streams are also supported by its platform, which facilitates bookings through OYO's app, web, and m-web platforms, as well as through online travel agents and corporate tie-ups. The company also earns revenue through royalty income, which is recognized based on performance obligations. Royalty income from group companies in India is recognized as a percentage of revenue and from group companies outside India as a percentage of net contribution.
Profitability: OYO achieved a milestone in FY24, turning PAT (Profit After Tax) positive for the entire fiscal year, with a profit of Rs. 229 crores, which is the company’s first profit since its incorporation. This turnaround reflects a strong focus on profitability. The adjusted EBITDA improved by approximately 216% to Rs. 873 crores in FY24, compared to Rs. 277 crores in FY23. The adjusted EBITDA excludes transformation expenses, depreciation of right-of-use assets, and interest on lease liabilities.
Leverage: OYO has been actively managing its debt by repaying ₹1,620 Cr (USD 195 million), which is 30% of its outstanding Term Loan B, which is a type of long-term loan that companies take from big investors, like hedge funds, rather than banks.
They are now working on refinancing its remaining debt at a lower interest rate, reducing it from 14% to 10%. This move is expected to save the company ₹125-140 Cr per year and extend the repayment deadline to 2029.
Their financial strategy focuses on maintaining a strong balance between debt and equity to stay financially stable and flexible for future borrowing. The company aims to keep its debt-to-equity ratio at an optimal level to comply with financial rules. As a result, its net debt-equity ratio improved from 2.56x in FY23 to 2.19x in FY24, meaning OYO now relies less on borrowed money compared to its own funds.
Cost Management: The company has focused on making its cost structure leaner, with reductions in general and administrative spending and optimization of marketing spend. This approach to cost control has contributed to improved profitability. The company also noted it was able to reduce interest outlay through the debt buyback. The reduction in the company’s cost structure has also been assisted by a reduction in general and administrative spending and optimizing marketing spending.
In FY24, OYO generated Rs. 5,389 Cr in revenue and recorded a net profit of Rs. 229 Cr. In comparison, Treebo achieved Rs. 116 Cr in revenue but reported a net loss of Rs. 28 Cr, and FabHotels recorded Rs. 552 Cr in revenue with a net loss of Rs. 114 Cr. This data shows that it operates on a larger scale and has reached profitability, whereas Treebo and FabHotels are yet to turn a profit.
Looking at expense management, OYO managed to reduce its expenses by 15.8% during FY24, which supports its profitability. On the other hand, Treebo saw its expenses increase by 27.6%, and FabHotels experienced an expense growth of 38.5%.
OYO’s higher P/E ratio of around 150 can be attributed to market expectations of its technology-enabled, asset-light business model and its ability to operate profitably with controlled expenses. The company’s scale and global presence also set it apart from more traditional or emerging hotel businesses like Treebo and FabHotels. Therefore, Oravel Stays Unlisted Shares appear to be trading at a premium.
Refinancing and Debt Maturity Risk:OYO has been actively repaying and refinancing its debt, yet a significant portion remains maturing soon—for instance, approximately $448 million in debt is set to mature in June 2026, according to ratings by Fitch. In a tightening capital market or high-interest-rate environment, securing favorable refinancing terms could be challenging, which may strain the company’s liquidity and future cash flows.
Global Expansion & Quality Control Risk:As the company aggressively expands into new markets beyond its core regions (India and Southeast Asia), there is an increased risk of diluting service quality and brand consistency. Integrating diverse regulatory standards and maintaining high operational standards across different geographies can lead to operational lapses. Past disputes and controversies underscore the challenges of aligning disparate property management practices under one brand.
Dependence on Travel Demand and Economic Cyclicality:The revenue is closely linked to global travel and tourism trends. Economic downturns, renewed pandemic threats, or geopolitical tensions can sharply reduce travel demand, thereby affecting occupancy rates and overall revenue. This cyclicality means that even with operational improvements, the company remains vulnerable to external shocks.
Competitive Pressures:The hospitality sector is fiercely competitive, with established hotel chains, alternative platforms like Airbnb, and other tech-driven hospitality models vying for market share. Their success depends on its ability to maintain a competitive edge in pricing, technology, and customer service. Any erosion in these areas could diminish its market position and compress margins.
In conclusion, OYO’s impressive turnaround—marked by its transformation of unbranded hospitality assets into a digitally enabled, branded network—has led to significantly higher revenue and profitability compared to peers like Treebo and FabHotels, whose operations are still challenged by losses and rising expenses. This premium performance underpins its high P/E ratio and valuation, but the company’s future course will hinge on its ability to remain sustainably operational amid challenges such as high leverage, rapid global expansion, and fluctuating travel demand.
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