How this Indian hotel chain plans to conquer the China market

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A Chinese national flag flies in front of a building under construction in the central business district of Beijing, China.

Giulia Marchi | Bloomberg | Getty Images

For many foreign firms, China’s market is a notoriously tough nut to crack.

Tech giants such as Amazon, eBay and Uber — which have a significant market presence in the United States — all called it quits on China after finding themselves unable to survive the cutthroat competition with local firms there.

But Indian budget hotel chain, On Your Own Rooms, managed to be the exception to the rule.

The Softbank-backed hotel start-up was founded in India in 2013, and has since grown to become one of South Asia’s largest hotel and accommodation chains.

Since OYO Rooms ventured into the Chinese market in November 2017, it has expanded at a breakneck pace. OYO Jiudian — its Chinese subsidiary — currently has nearly 10,000 hotels and 450,000 rooms across 320 cities under its name.

Why design a global company that will never be successful, versus a local entrepreneur? … That mindset enabled us to think two levels ahead of anybody else.

Ritesh Agarwal

chief executive officer of OYO Rooms

“In a brief period, we have emerged as the country’s second-largest hotel group and company,” Sam Shih, the chief operating officer of OYO Jiudian, told CNBC.

China is the company’s biggest market today, OYO’s Chief Executive Officer Ritesh Agarwal said at a travel conference in Singapore in late May.

“We’re opening roughly 10 to 12 buildings a day in China,” Agarwal announced at the inaugural Skift Forum Asia.

He outlined two key traits of his business that allowed the company to reach the success it has in China’s market: strategic partnerships and a local entrepreneurial mindset.

Strong partnership

Agarwal said at the conference that the company has signed a “very strong, strategic partnership” with Ctrip, China’s largest online travel aggregator (OTA).

“OYO Hotels used to distribute on Ctrip, but we had a very local traveler partnership — it was never really at a brand level,” Agarwal said.

OYO’s “great working relationships” with prominent travel aggregators like Ctrip opens up new opportunities for the hotel chain and strengthens its reach to local communities, Shih told CNBC.

The OYO Dongxing Wenquan Hotel in Zhengzhou, China.

OYO China

That partnership will help its Chinese subsidiary reach its goal of giving China’s middle-income population — estimated by the government to be about 400 million, or less than a third of the population — a “great living space” for less than 150 Chinese yuan ($21.71) per night, Shih added.

“We’re excited by the possibilities of these mutually beneficial relationships,” he said.

Entrepreneurial mindset

OYO Jiudian’s success also stems from how it’s positioned itself in the world’s second-largest economy, Agarwal said.

When OYO entered the Chinese market, the company viewed itself as local Chinese entrepreneurs “who were copying OYO Global,” he explained.

“Why design a global company that will never be successful, versus a local entrepreneur? … That mindset enabled us to think two levels ahead of anybody else,” Agarwal said.

With that in mind, the hotel chain “nativized” its offerings from the “point of view of a traveler in the country and what was lacking from his/her experience earlier when OYO was not around,” COO Shih said.

“For instance, most foreign companies look at recruiting bilingual management teams in a different country,” he explained. “We didn’t make that a criterion because a Chinese company operating in the country wouldn’t have that constraint — and if we had that constraint, we would narrow our talent pool.”

This helped the company to build a strong team of over 7,000 “OYOpreneurs” in China, with less than 20 of them English-speaking, he added.

“In short, OYO copied what OYO itself has been executing since its inception in India to gain this momentum in China,” Shih said.

Big bets on China

When asked about the firm’s plans for the Chinese market, Shih said the company is “betting big on China” as it is their “home market.”

Today, OYO Jiudian makes up less than 2% of the country’s lucrative accommodation market — which stands at approximately 35 million rooms, Shih said.

He said OYO has allocated $600 million from the $1 billion it obtained from its last round of funding in order to “strengthen our capabilities for the market and drive our next wave of growth in the country.”

“We have an incredible opportunity ahead of us and we are just getting started,” Shih added.

Source: CNBC

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