When he was 19, Agarwal spent three months traveling around India. In places such as Darjeeling, Delhi, Goa, Kerala, and Rajasthan, he lived a budget traveler’s nightmare: filthy hotels with dirty sheets, roaches, bedbugs, peeling wall paint, doors that didn’t close properly, foam blocks that passed as mattresses, and buckets to collect water for bathing. “I learned something fascinating in my journeys,” he says from OYO’s headquarters outside Delhi. His takeaway: There was a huge business opportunity in standardizing and improving service in hotels with 150 rooms or fewer that the major chains ignored. The first OYO opened in Gurgaon in 2013 with high-thread-count sheets, thick mattresses, flatscreen TVs, and hot water. Occupancy rates went from 18% to 90% in the first month, Agarwal says.
Today, he’s 26 years old, and his company is valued at $10 billion—thanks in part to a roughly $1.6 billion investment over the past two years from SoftBank Group Corp. Like most hotel chains, OYO doesn’t own its properties. Instead it provides capital and training to hotel owners who re-brand to OYO’s specs, along with proprietary data-mining technology that helps properties maximize revenue. OYO takes a portion of that revenue, Agarwal says, with gross margins averaging 20%. There are 44,000 OYO hotels with 1.2 million rooms on four continents. In the U.S., an average night’s stay runs $70 to $80.
