OYO made a strategic alliance with great China Lodging by raising $10M investment

On Wednesday, budgetary hotel aggregator Oyo Rooms announced that it is raising an additional USD 10 million from Nasdaq-listed Chinese hotel operator China Lodging Group.

As per an agreement between the two companies, which they will unite the technical strengths and operations expertise of Oyo Rooms with China Lodging Group’s operator in China.

The investment will happen as follow-on to Oyo’s recently announced Series D financing of USD 250 million led by SoftBank Vision Fund. But now it has dropped down that money up with a $10 million strategic investment from multi-billion dollar hotel management firm China Lodging.

The MoU signifies the shared aspirations of China Lodging Group and OYO to explore growth opportunities in the global hospitality industry and to create synergies by working together. – said Jenny Zhang, CEO, China Lodging Group.
He added- The partnership will draw on the strengths of China Lodging Group’s visionary and experienced management team, market leadership through a multi-brand strategy, extensive hotel operations expertise and strong loyalty program and OYO’s advanced technologies in the hospitality industry that enables the transformation of hotel operations.

NASDAQ-listed China Lodging, which was previously known as Huazhu Hotels is valued at $6.8 billion. The two companies work together and learn from each other moving forward, as refused to operating some form of joint entity. This ia apart from financial commitment.

China Lodging Group has an experienced leadership team and hotel operations expertise especially in managing large properties. OYO is a new-age technology company disrupting the hospitality industry with category-leading capabilities of using technology to onboard and transforms existing supply, standardize operations and distribute these through online and offline channels. – said Ritesh Agarwal, founder and CEO, Oyo.

We are very excited about this partnership — both in terms of potential opportunities and existing synergies through our complementary strengths and capabilities,” OYO CEO and founder Ritesh Agarwal said in a statement. – said Ritesh agarwal in a statement. “Addressing consumers in India and China – two of the world’s fastest-growing markets – through our combined strengths opens up a very large and significant growth opportunity.”

China Lodging coverage is over 3,500 hotels across 369 cities in China, 700 of which were opened last year itself. Rights of global brands like Mercure, Ibis and Novotel are owned by China Lodging. It also operates an OYO-like budget offering, Hanting, aimed at reaching more cost conscious or younger customers.

OYO concentrates on affordable stays using a budget hotel network that provides standardized services like clean towels, free WiFi and hot water which aren’t always guaranteed by the masses of affordable hotels raised across India. It’s model included full franchise model and partial inventory.

China lodging hotels are operated via a lease which is around one-quarter and ownership model with the rest franchised or managed franchises.

Among the fastest growing travel markets in the world, China and India have a significant role, with an emerging domestic travel opportunity. According to Deutsche Bank, nearly two-thirds of India’s rooms supply in 2020-21 will comprise of budget hotels. Criteo expects online travel market in Asia Pacific to be worth USD 446 billion in value by 2020, witnessing a 72 percent growth between 2016-2020.

OYO is widely expected to ramp up its international expansion, which has seen it open up in Malaysia last year and Nepal earlier this month. China would be a surprising best option for the company at this point given the growth of the market and level of competition. Highest probability is further striking into Southeast Asia and other neighboring Asian markets, but for the time being the startup isn’t confirming any information about their business plan.

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