OYO IPO Ho ho ho?

Yes, it’s Christmas around OYO’s house as its $1,1bn IPO attracts loving glances from investors despite it not having turned a profit. 

And yet last year enthusiasm was running low for the company which proclaimed itself one of the planet’s largest hotel groups. Yes, enthusiasm was running low for most hotel companies last year, but OYO’s goose was looking fully cooked.

OYO backer Softbank was cast as the anti-Midas, having thrown its lot in with WeWork and then the staggering OYO, which threw itself at the US only to hit a glass wall and slide unceremoniously down in with a squeak – despite, or possibly because of – picking up the former Hooters hotel in Las Vegas. 

The company said that it planned to identify existing independently-owned small and mid-sized hotels where it could add value through revenue management, operations and technology.

Some unwelcome stories in the US press about listings being bolstered by unavailable hotels, including unlicensed properties, with a sprinkling of rumours about unpaid fees, did not aid growth and the group talked about pulling back to its core.

It also inserted a few credible players into its board, to prepare for its IPO, including Dr W. Steve Albrecht, former president of the American Accounting Association and Association of Certified Fraud Examiner, on governance. Global branding was taken care of by the addition of Troy Alstead, former COO at Starbucks Corporation.

OYO had a similarly unfun time in the UK, where it had made a series of guarantees to owners which it was funding to try and establish a foothold. Many saw this as delaying the inevitable for some dying hotels and it did not lead to domination of the sector. Recently, it has launched a “network developer programme”, which sounds not unlike a Tupperware party for hoteliers, but does at least take the pressure off OYO’s own team.

In keeping with many tech unicorns in this sector, one wonders what OYO really is and how deep the hotel element is dyed. 

Masayoshi Son, founder, chairman & CEO at SoftBank, called Oyo “next-generation type of hotel management. OYO is not a travel agent. OYO manages hotel comprehensively with OYO’s management, with OYO’s IT, OYO’s booking technology and OYO’s quality control method. It’s like a franchise.

“OYO helps [owners] to get people and increase the occupancy of the rooms. So in return for that, the profit will be shared with OYO and hotel owners. And what they do is to create heat map with AI for demand production. And with AI, they decide pricing. So per day 43 million micro-optimisations take place by looking at the weather, looking at day or week, looking at what kind of campaign is ongoing. Because depending on that kind of situation, demand-and-supply balance is different. So dynamic pricing takes place – 43 million micro-optimisation per day. Without AI, you can’t do such micro-optimisation. I believe this is the most advanced hotel management.”

Yep, it sounds like a right laugh. The group’s filing document said that its app had been downloaded 100 million times, which is an awful lot of potential influence and data gathering, much like Airbnb.

As a hotel company it really is the lightest of brands, even offering a listing-only service for a fixed subscription. But is this what owners want? Cheap distribution and a promise of cleanliness? Possibly. In traditional hotel land the brand is built up and then franchised once enough guests can be found saying: “Take me to the XX, driver” when they land in a new city. Do people yearn to stay at an OYO? Not in the traditional view of brand loyalty. Do they like the price? Yes, and if OYO can get enough money from its IPO to restart its growth, owners may be more inclined to feel the same and stop thinking of it as a last resort and consider it first. A gift indeed. 

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