IJSRD - International Journal for Scientific Research & Development| Vol.

5, Issue 07, 2017 | ISSN (online): 2321-0613

India's Largest Branded Network of Hotels: Strategic Case Study

Analysis of OYO Rooms
Prasanna Balaji Venkataraman1 Anika Singh2
1,2
Department of Marketing Management
1,2
Great Lakes Institute of Management India
Abstract— The words 'Strategy' is the most important and expectations and behaviors of new consumers with
vital for any business organizations in today's world. additional costs (Szwarc, 2005)
Currently, companies have adopted the strategy which is  Anderson et al. (1989, p. 133) address four issues: (1) a
aggressive and customer centric. This has paved way for the strategic versus a tactical view of operations; (2) the
firms to become a successful leader where globalization has synergies between integrating business and operations
created various opportunities for the new entrants. Due to strategic issues; (3) how operations decisions
this, the company has to perform various market analysis demonstrate strategic opportunities; and (4) how
continuously to withstand the competition heat. This is also conceptual structures define operations strategy.
useful in creating the competitive advantage by concentrating  Barney (2002 p. 9) makes a useful connection when he
on the right target segment which is utmost important to stand says: "a firm experiences competitive advantages when
tall. its actions in an industry or market create economic value
Key words: Strategy, Globalization, Target Segment and when competing firms are engaging in similar
actions.
I. INTRODUCTION
OYO Rooms was established in 2012 with the goal to make IV. BUSINESS MODEL OF OYO ROOM
a mark in the Indian hospitality business just like the way Ola Aggregator Business model is the model followed by the
did in Car rental industry with the help of technology. The company. The strategy says it's a network schema where the
OYO business model can be compared with Ola as it does the firm gets the information about particular goods/service
same with hotels. They refer or to be precise they give providers, make the providers their partners, and sell their
customers to the hotels and keep a part of profits with them. services under its own brand. Since aggregator is a brand, it
OYO Rooms, an online aggregator for budget hotels has to provide services which have a good quality and price.
in India. OYO Rooms partners with hotels with the aim of This is done through signing up a contract with the partners.
standardization on various measures in each Room including
free Wi-Fi and breakfast, flat TVs, spotless white bed linen A. Companies using the Aggregator Model Are
of a certain thread count, fine branded toiletries, 6-inch  Taxis- Uber, Ola etc.
shower heads & beverage tray. The standards are audited  Hospitality- OYO Rooms
every few days so that the customers are assured a quality  Groceries - Goffers etc.
experience. OYO's budget stays range from 999 to 4,000  Food - Munchery, Food Panda, Swiggy
rupees.
The founder Ritesh Aggarwal a college dropout V. ATTRIBUTES OF AGGREGATOR MODEL
aged 17 when he started OYO is an inspiration for many
youngsters today. A. Customers
The ultimate users of any product/service are not the
II. OBJECTIVES customers of the aggregator.
 To understand the business model of OYO rooms and B. Industry
services provided by OYO All the service providers are of the same existing industry.
 To analyse the various existing strategies of OYO rooms Aggregators get the good/service distributors of a single
and providing solutions for existing problems industry and organize them under his own brand. Like Uber
 Suggest ideas on new segment to target and how to in taxis, Munchery in food delivery, OYO in hotels, etc.,
position it better
C. Partnership Model
III. LITERATURE REVIEW The good/services providers are not the criteria's of the
aggregator. They act as a dealers or partners to the business.
 The purpose of the studies in this period is to increase the
Partners/Dealers always have the freedom to yes or no to the
efficiency and profitability of the activities through
offer given by the aggregator.
classification based on loyalty via more loyal customers.
According to Szwarc, companies failed to understand D. Brand
that the new customers they obtained after 1980’s Aggregators invest most of their revenue in advertising or
particularly through price discounts are those customers building its own brand. This brand has clear features like –
existing in the market but in the recession in 1990’s they quality, price band, on demand or on time delivery, etc. All
tended to examine the performance of marketing and the products/services are given under a single brand name but
sales expenses. This tendency suggested that it was much by different service providers.
more costly to gain new customers than to preserve the
existing ones because it is quite difficult to detect the

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 India's Largest Branded Network of Hotels: Strategic Case Study Analysis of OYO Rooms
(IJSRD/Vol. 5/Issue 07/2017/112)

E. Quality This is an people rather than product centralized approach to

The aggregator thrives to give a centralized quality to every communicate which helps deliver more appropriate messages
customer. They make sure that the partners provide you the to commercially appealing people.
standardized quality product/service. These aggregators have
terms that make sure quality is maintained.
F. Contract
A mutual agreement is agreed between the aggregator and the
product/service provider where all the conditions are
clarified. The conditions give a positive situation for both the
two parties where the partners focus on giving quality
product/service to the customers. The aggregator focus on
marketing and creating more leads for the partners and the Fig. 2: Schematic Representation of STP Strategy
partners are served better. 2) Segmentation of Oyo Rooms
As affordable travellers and customers exist, OYO future will
VI. SERVICES PROVIDED BY OYO ROOMS be evergreen. Market segments are divided on the basis of
Geographic, Demographics, Psychographics, Behavioural
OYO changes the way people stay away from home and benefits sought.
 Standardized: OYO Rooms assures to provide the same a) Demographics
kind of amenities and the same awesome experience OYO rooms are available across 170 Indian cities. Hence
across all its rooms finding an OYO room is easier for any average Customers
 Affordable: OYO offers rooms at prices that no other irrespective of the region, city and the climatic conditions. It
competitors in the budget segment offers today. has a tie up with around 2000 hotels which make people to
 Technology Driven: OYO uses technology to link all its find a decent hotel room anywhere.
functions and provide the customer a seamless awesome b) Demographics and Psychographics
experience Demographics include age, income, gender, generation,
marital status, family size, occupation, education, ethnicity
VII. SITUATIONAL ANALYSIS OF OYO ROOMS and religion whereas psychographics includes lifestyle,
personality, activities, Interest and opinions. There are no
A. Analysis 1: STP Strategy Analysis
such limitations with OYO rooms. Irrespective of the above
OYO's in terms of value chain analysis and thereby following mentioned demographic and psychographic features, OYO
up with segmenting, targeting and positioning: provides rooms to its customers with all the mentioned
1) Value Chain Analysis facilities earlier.
It is a strategic tool which is used to analyze firm activities c) Behavioral
which is internal. It's the aim of the firm to recognize which The primary behavioral role is usage rate. The usage rate of
part of activities are the most important valuable to the firm any normal customers depends on the customer loyalty. The
or company and which ones to be improved to give company lags behind in customer loyalty as the customers are
competitive advantage. not happy with few of the hotels and its standards under OYO.
The STP strategy is highly useful when creating Hence, OYO should frame some rules to the hotels to serve
good marketing articulations plans since it ensures the its customer better. If the company finds a way in increasing
marketers to prioritize proposals and then engage with the customer loyalty, then there are ample chances for the
different audiences. company to move forward in the positive way.
 While travelling customers or consumers prefer semi d) Benefits Sought
free and independent travel where they Pre book or use The main characteristics OYO should possess are
any holiday packages before reaching their destination. Convenience to find the room better. This aspect are found
This packages provides stay in accordance with the OYO and served good across OYO. Secondly, value for money is
rooms. important. The rates of the rooms are not more than Rs 4000
 Value and the Convenience are the major reason which makes any average customers content. Lastly, safety
consumers pre-book the OYO rooms. This is the positive measures and status of the rooms.
aspect with respect to business model of OYO. 3) Market Targeting
The company found its way in the segment of hospitality. The
company targets any average affordable customers as it
provides room at lesser price than the room which are not
under OYO. The main attractiveness are providing all the
required services well below the average cost i.e. Rs 4000
Secondly, availability and accessibility are the main required
characteristics. The services under OYO are available 24*7
and accessible throughout the year across different cities.
The other scenario belongs to:
 Backpackers i.e. very frequent yet still extremely budget
conscious people who don't mind compromising the
quality.
Fig. 1: Schematic Representation of Value Chain

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 India's Largest Branded Network of Hotels: Strategic Case Study Analysis of OYO Rooms
(IJSRD/Vol. 5/Issue 07/2017/112)

 For business executives who are frequent and looking for 3) Opportunities
technology and also looking for affordable  Business will be on run as the affordable budget
accommodations yet cannot compromise on quality. travellers are large in India.
4) Positioning Of Oyo Rooms  People use technology more these days which makes
The position of OYO is named as 'standardized budget hotels' OYO a evergreen.
which is shortly termed as aggregators. As said earlier it 4) Threats
targets business executives and frequent travellers. The  Competitors are arising day by day.
characteristics are:  Lacks customer loyalty.
a) Value for Money  OYO rooms has a problem with the new entrants. The
OYO has positioned itself in a market where money is valued. number of competitors is increasing day by day as the
OYO provides all its best services under a budget value which revenue generated across this market is really high.
creates value to the company which in turn gives more and
more customers on a regular basis. D. Analysis 4: Porter's Five Forces Analysis
b) Brand Positioning Porter's five forces analysis is a model that tried to analyze
It is been positioned itself as a brand which gets to care about the level of competition within an market and business
its customers. development. It creates upon industrial organization (IO)
c) Oyo Money Concept economics to create five forces that looks for the competitive
Many offers or discounts have been given to the customers intensity and therefore attractiveness of a particular
on the regular basis. OYO uses the concept of 'OYO money' segmented industry.
where discounts gained are sent to the wallet and the This analysis is associated with its principal
customers can use that OYO money next time when they innovator Michael E. Porter of Harvard University.
check in. This give OYO an edge to have its customer as a Each and every porter’s forces is explained below.
life time customer. 1) Industry Rivalry
OYO room has a great challenge in makes its growth steady.
B. Analysis 2: Marketing Mix (4 P'S of Marketing)
As the company lacks in competitive advantage it may take
1) Product no time for any other company to enter the market and make
Maximum price of the OYO Rooms is Rs.4000 with all the a mark.
basic necessities including free Wi-Fi and breakfast, flat TVs, 2) Threat of New Entrants
spotless white bed linen of a certain thread count, branded OYO Rooms has a problem with the new entrants. The
toiletries, 6-inch shower heads, beverage tray. number of competitors is increasing day by day as the
2) Price revenue generated across this market is really high.
As OYO mainly concentrates on budget and affordable 3) Bargaining Power of Suppliers
customers the price of Rooms are starting just over from As the competitors are increasing this in turn makes the
Rs.1000 to Rs. 4000. This gives OYO a more positive growth. suppliers to increase simultaneously. It depends on the hotels
3) Promotion behaviour to collaborate with OYO or not which makes the
The other advantage of OYO is the well planned usage of Supplier to be stronger on their side
social media which keeps the name of the company floating 4) Bargaining Power of Buyers
in the positive manner. This promotion activity makes any Buyers/Customers have lot of options available and they are
company to reach several heights. not dependent on OYO. Hence OYO should show itself
4) Place unique for the customers to prefer OYO as the first choice.
OYO Rooms are available in 226 Indian cities which makes 5) Threat of Substitutes
people to find the availability with OYO easily. The Hotel or hospitality Industry in most of the major cities
C. Analysis 3: SWOT Analysis is not threatened by alternate or substitute products except
that in times of recession international or overseas travel
1) Strength
might be replacing domestic and certain destinations replace
 Standardized: OYO Rooms promises to provide the more expensive ones on cost grounds. The substitute products
same amenities and the same awesome experience across retains the same function and reduce costs, and provides
all its rooms. higher quality performance with better product or service due
 Affordable: OYO offers Rooms at prices that no other to technological development. In the “lower” strategic groups
player in the budget segment offers today. for, hostels, tourist traffic, motels and staying with known
 Technology Driven: OYO uses technology to link all its people might replace cheaper hotels. This segment market is
functions and provide the customer a seamless awesome either low-income or cost-conscious, but in any case, it is
experience. quite price-sensitive.
 Good use of Advertisement: Large social media
followers with 18million followers in Facebook and VIII. STAGE 2: PROBLEM STATEMENTS & SUGGESTIONS
8000 followers in twitter.
2) Weakness A. Problems Statements
 The major drawback behind the firm is that it is restricted  As OYO Rooms are the budget hotels, they aren't able to
only to budget hotels/lodges. attract elite or niche market.
 In the process of expanding the business faster, the firm  OYO is currently focussing on its expansion, thereby it
is losing its fame across the market. If this case is starts losing its credibility as some hotels are following
corrected the business can be improved better. the standards set by OYO.

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 India's Largest Branded Network of Hotels: Strategic Case Study Analysis of OYO Rooms
(IJSRD/Vol. 5/Issue 07/2017/112)

New Entrants are coming up with the same model,  In the current situation, OYO is having the problem with
there is no point of difference left as of now the usage rate as it is keep on decreasing and losing
 Customers became more demanding which OYO aren't customer loyalty
able to fulfil (Case study with respect to couples booking  We would like to work upon that in order to take the
has been illustrated in the following report as an corrective action against this bullwhip effect
example).  In addition to it, we would like to target niche market via
 As demand increases, number of hotels are sufficient having tie with elite hotels (OYO has a tie up Holiday In
enough to service the customers especially in Southern and provide services at the much lesser price than if we
part of India (Lonvala case discussion can be found in go and book the room on our own
the solution for reference).
B. New Positioning Strategy
B. Recommendations and Suggestions Which we propose is standardized hotels in budget which is
 Now the company is matured enough that they can target different from Standardized Budget hotels
elite customers and can go ahead and sign up contracts 1) Point of difference in two positioning for the same
with elite hotels to target niche market. company is as below
 Frequent audits and due diligence should take place in Standardized Standardized
Characteristics
order to determine whether the hotels are following the Budget Hotels Hotels In Budget
protocols or not in order to attain CLTV. Budget as well as
Positioning Budgets hotels
1) As suggested earlier, OYO should target Niche elite hotels can be
Difference are targeted
market and should have tie up with the consultants targeted
in order to gain customer traffic across different of Customer traffic Customer traffic
scale and this will be the new added competitive is good and all the would be more as
advantage and threat to new entrants. customers who people who are
2) OYO gives the facility to book rooms for unmarried Customer
are targeting the targeting budgets
couples however some hotels did not allow some Traffic
budgets hotels or elite hotel, both
customers in the past and now OYO started may utilize the can be captured in
publishing in the Guest Policies that customers services budgets
should double check with the hotel and the company Table 1: Point of difference in two positioning for the same
is no more responsible if the hotels doesn't allow the company is as below
customers. 2) OYO needs to approach these hotels like Hilton, Marriot
etc. and can have a word with them, present their proposal
and at least try to get the things done.

ACKNOWLEDGEMENT
We are highly indebted to our parents and all our Faculties at
Great Lakes Institute of Management.

REFERENCES
[1] Szwarc, Literature Review and Discussion on Customer
Loyalty and Consciousness, Eyup, 2012
[2] Rani, Pooja, and Neha Shrivastav. "Marketing in India."
International Journal of Research 1.7 (2014): 131- 134

Fig. 3: Hotel Specific Policies

 In July 2016, only 2 hotels were tied up with OYO in
Lonvala but currently the number of hotels tied up has
been increased to 10+ but still the company is not able to
control the customer traffic. Thereby giving their
business to Goibibo who used to dominate there as OYO
has not been expanded upto that mark in order to take the
market advantage.

IX. STAGE 3: SUGGESTIONS AND RECOMMENDATIONS

A. New Segment
Which we would like to target is Behavioural segment and
the reasons stated are as below:

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