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OYO targets expansion in China after raising $1bn fund

OYO targets expansion in China after raising $1bn fund

India-based startup OYO is targeting expansion in China and other international markets after raising $1bn in new funding.

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By Noah L. Wilson 26.09.2018

India-based startup OYO is targeting expansion in China and other international markets after raising $1bn in new funding. The budget hotel network said on Tuesday that a plethora of existing investors, including Japan’s Softbank Group, supplied capital in its latest funding round.

This means that OYO could now be worth around $5bn just five years after teenage entrepreneur Ritesh Agarwal, a Thiel Fellow, started the business. The company began life as a small website enabling listings and bookings for budget accommodations in India but has since expanded to include more than 8,500 hotels and 230 cities in Asia.

OYO now wants to establish a greater presence in China, Southeast Asia and the Middle East, where there are a significant number of unbranded hotels. “While we will double down on our investment in home markets, we will open new geographies in the future,” Agarwal said in a recent interview. “We have a very large opportunity worldwide.”

The latest funding comes from the biggest private tech investor in the world, Softbank Vision Fund, which agreed to put forward $800m for OYO’s ambitious expansion plans along with Greenoaks Capital, Lightspeed Venture Partners and Sequoia Capital. The investors have also committed a further $200m to take the total funding to $1bn. Prior to the latest funding, OYO had raised almost half a billion dollars from investors, with Softbank Vision Fund leading the way again in the previous round of financing in September 2017.

Most of the $1bn fund will go to China, where OYO already has a presence in more than 170 cities with 87,000 rooms. The company only launched its services in China late last year, but it has quickly established itself as a leader in cut-price hospitality. Meanwhile, around $400m will support expansion domestically and help OYO enter other new markets across the globe.

OYO has built its business around budget accommodations, but Agarwal said that he is eager to diversify its portfolio hotels to appeal to travelers with both low and middle incomes. OYO partners with hotel owners with the aim of standardizing rooms. This process involves upgrading room features to certain specifications and following up with staff training and standardized supplies. It then sells accommodations as OYO-branded rooms via its connected platforms.

“Budget travelers are consistently shortchanged by the lack of trust, quality and consistency,” Lightspeed India Managing Director Bejul Somaia noted. He believes that OYO can be a force for good in changing that dynamic and ensuring that travelers get a reliable level of service wherever they are in the world. Agarwal is also eager for his brand to deliver a high-quality experience that goes beyond standard hotel offerings.

The focus during OYO’s formative years was creating a wide network in India, and it has fulfilled this aim, as it now operates in more than 350 cities in the country. Expansion into China, Malaysia and Nepal followed, and the company now wants to continue its growth in this region and the wider world. It recently arrived in the UK, where it wants to secure 300 independent hotels before the end of the decade.

“We will continue to explore newer businesses while remaining focused on both organic and inorganic growth. In the last 12 months, we have increased our international footprint to five countries,” Agarwal said. “With this additional funding, we plan to rapidly scale our business in these countries while continuing to invest further in technology and talent. We will also deploy fresh capital to take our unique model that enables small hotel owners to create quality living spaces global.”

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