At just 26 years old, Ritesh Agarwal has built a global chain of hotels, homes and spaces. For the CEO/founder of Oyo Hotels & Homes, securing a portfolio of fully operated real estate began from modest means; it began during his high school years.
“I always wanted to do something new and interesting, something different from the norm,” he recalled.
The CEO started with selling SIM cards, exciting his entrepreneurial spirit and affection for technology. This may have planted the seed for Oyo, as Agarwal later began a platform listing diverse accommodations with small assets and vacation homes.
He said that during these early days, he became friends with many of the owners, spending time staying with them while still juggling school. It was during these trips, however, that he discovered the problems that Oyo would eventually set out to solve.
“That’s when I realized the whole demand/supply gap in the industry, and the idea of starting my own venture stemmed,” he said.
Agarwal added that while there wasn’t a scarcity of budget hospitality accommodations, the majority of mid-market and economy hotels—branded and unbranded—lacked quality and service.
“This meant that the solution wasn’t merely aggregating hotels on a website; it was to upgrade the experience and take responsibility for fixing it,” he said.
Oyo now scales across 80 cities and 800 countries, comprising 35,000-plus hotels with 1.2 million-plus rooms.
“One night I was having dinner with my family and my mother asked me why I work so hard; she kept using a word in Telugu ‘endukku,’ which means ‘why?’” Agarwal said. “While I didn’t have an answer at that time, later that week I traveled to a small town near Shenzhen in China, and there was a street that had many Oyo hotels.”
The CEO continued, “I saw a bus stop in front of one of the Oyo hotels and many families got down from the bus and walked toward the hotel to check in. There were kids, elderly couples and groups of youngsters. That day I think I got the answer to the question ‘endukku’: It was because of the joy I get from seeing so many middle-income people from around the world now having access to good, quality hospitality experiences at affordable prices.”
Officially launched in 2013 in India, the years since have been a learning experience for Agarwal, a period that helped shaped Oyo’s growth.
In 2015, Oyo struggled with customer service, Agarwal said, leaving him with the tough decision of stopping growth for four months, a choice that would allow the company to propel forward.
“It was one of the best things we did,” he said. “We focused on identifying key problem areas and finding solutions that are scalable.”
With operations launched this June and a plan to invest $300 million in the U.S., Oyo has expanded its footprint here, with more than 200 buildings in more than 60 cities, including Dallas, Houston, Atlanta, Seattle and Miami. According to Agarwal, Oyo has definite plans to soon expand its presence to New York, Los Angeles and San Francisco.
Oyo’s recent Las Vegas venture through its partnership with Highgate will bring its first flagship to the city—the 657-room Oyo Hotel & Casino—the once Hooters Casino Hotel.
“The focus for 2020 is going to be on ensuring we create great value for our asset owners and, more importantly, focus on delivering a good, quality customer experience,” he said.
To further its expansion in the U.S.—specifically on the vacation home side with Oyo Hotels & Homes—the company is seeking to raise $1.5 billion, with RA Hospitality Holdings on board. RA is set to contribute approximately $700 million to this first round of funding.
Agarwal said that funds will also be put toward expanding vacation rentals in Europe as well, which currently offers more than 125,000 homes globally.
“Our core focus is to impact the lives of more than 3.2 billion middle-income people worldwide,” the CEO said. “Our vision is to be the most loved hospitality brand in the world.”
Oyo has proved to be successful in acquiring partners with backing from global investors like Airbnb, Lightspeed Venture Partners, Sequoia and Greenoaks Capital, among others.
“Our business model and the value we bring to our asset owners and customers creates a strong competitive edge,” Agarwal said. “Our leadership team has some of the best and the brightest, and unlike most other companies at this stage in their journey, has not lost a leader to date.”
At the very start, Agarwal raised his first round of capital divesting double-digit ownership while raising $40,000.
“Ever since, I have been thinking whether there is a way to double down on my belief in a company that is such an important part of my life,” Agarwal said. “So, with that perspective, in the last few months I have been thinking about the transaction seriously [RA Hospitality transaction]. We’ve signed the binding documents. The first time I brought this up with investors, people didn’t think I was serious. I explained to them the rationale and that it will help me feel more comfortable about the conviction I am demonstrating in the company. Although investors wanted to stay on board for longer, both Lightspeed and Sequoia showed faith and willingness to support my decision.”
Opposition isn’t anything new for Oyo, which continues to face criticism, but Agarwal understands this to be a learning process for himself and his team.
“It’s important to note that the opposition in the form of illegal protests, etc., that gets written about is primarily by vested interest groups, mostly led by fly-by-night operators and people with competing assets,” he said. “As far as the Oyo owners are concerned, we’re listening to the feedback and are addressing any concerns or teething issues on a war footing. It’s also important to note that we have already acted on many of these suggestions and will continue to do so.”
Although only 26, Agarwal advises young entrepreneurs to keep an open mind and be willing to learn, unlearn and relearn again.
“Often, it’s not the most complex solution, but the most creative one that can help solve a problem,” he said. HB