INDIAN'S GROWTH....CANNOT BE STOPPED!

TR 20.07.17

7 Minute read

With the recent announcement that E-commerce giant Amazon has launched a flight-booking service in India (Praveen, 2019) adopting a new business model of no cancellation fees - India has recently come on to the map as a strategic growth opportunity for many of the MNE – Hyatt, Accor and Radisson have big expansion plans in India, and the likes of IHG currently having 39 hotels in India under four IHG brands, with another 39 in the pipeline – due to open in the in 2020 – 2023. However, pipeline’s take time to come to market. Meanwhile the fast moving platforms like Oyo and AirBnB are in a position to react with speed when entering into a region. Airbnb recently invested $100m into Oyo, which was founded in 2013 by university dropout 19 year old Ritesh Agarwal. Oyo is Softbank backed and also financed by ride hailing companies Grab (from Singapore) and Didi chuxing,(from China). Oyo has become the worlds most rapidly expanding hotels chain, adding more than 700 properties each month. Presently, Oyo has over 13,000 franchised rooms and leased as well as over Guesthouse 450,000 rooms, adding over 64,000 rooms every month, globally. Some of Oyo listing of hotels is dependent on the hotel managers agreeing to renovate their hotels to Oyo’s specifications. In return, the hoteliers are then allowed to use the Oyo brand under a franchise agreement, thus giving them access to Oyo’s proprietary hotel management technology and growing user base. Oyo is valued at $5bn. However, AirBnB has not stop there with investment alone. As, the company is reported to be looking forward to tapping into the millennials maket in India by doubling its marketing investments in the county.

But the challenges come from two sources: Local and Overseas rivals

Local Rivals..

The Indian Hotels Company Limited may be most known for the luxury Taj brand. But it has been diversifying into new brands, reimagining current brands and growth. They have upscaled the Vivanta brnad and also the midscale Ginger brands, As well as introducing a soft brand—SeleQtions, with 12 locations—and they have also entered the home-stay management segment with the launch of Ama Plantation Trails, a collection of bungalows owned by IHCL parent Tata Group’s Tata Coffee Limited company. As of 31 March, the company operates 179 hotels—including 30 under development—on four continents.

Overseas Rivals…

Not to be outdone Accor swooped to invest $50m into the major rival to Oyo Treebo Hotels in an attempt to get a major stake of the indian budget hotel market.

Discussion points:

1: According to Oyo, there are more than 6 million hotel and guesthouses rooms in the Indian Subcontinent. With Accor buying into Treebo, and The Indian Hotels Company Limited entering the home-stay management segment will we see how other chains doing likewise and not sitting by leaving it all to Accor and The Indian Hotel Company to participate alone in the sector?

2: And do you think that any budget acquisition by any global hotel company would be a pure investment play rather than about adding value to the chain’s existing brands or even creating a new product brand?

References:

Hamdi, R. (2019). What if Accor Acquires Oyo.

https://skift.com/2019/06/07/what-if-accor-acquires-oyo/ (accessed. 17/06/2019).

Praveen, p (2019) Airbnb looking to double marketing investments in India: Reports

The company is looking towards tapping into millennials in India.

https://www.hoteliermiddleeast.com/103723-airbnb-looking-to-double-marketing-investments-in-india-reports (accessed. 17/06/2019).

Praveen, P. (2019) E-commerce giant Amazon launches flight-booking service in India

https://www.hoteliermiddleeast.com/102910-e-commerce-giant-amazon-launches-flight-booking-in-india. (accessed. 17/06/2019).

Praveen, P. (2019). Accor to invest close to $50million in Oyo’s rival Treebo Hotels

This investment could get the hotel group a significant stake in India's budget hotels — Treebo

https://www.hoteliermiddleeast.com/business/102815-sidharth-gupta-rahul-chaudhary-and-kadam-jeet-jain. (accessed. 17/06/2019).

Praveen, P. (2019). InterContinental Hotels Group is set to open 39 new hotels in India The new properties will add 6,200 hotel rooms in India. https://www.hoteliermiddleeast.com/business/hotel-pipeline/102229-intercontinental-hotels-group-to-open-39-new-hotels-in-india. (accessed. 17/06/2019).

PTI| ( 2019). OYO aims at 1 million rooms to become world's "largest" hotel chain

https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/oyo-aims-at-1-million-rooms-to-become-worlds-largest-hotel-chain/articleshow/67528856.cms. (accessed. 17/06/2019).

Ricca, S. (2019). Indian Hotels’ Chhatwal on the value of diversification

http://www.hotelnewsnow.com/Articles/295759/Indian-Hotels-Chhatwal-on-the-value-of-diversification. (accessed. 17/06/2019).

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