Online travel agencies MakeMyTrip, Goibibo and Yatra will no longer list budget hotel aggregators Oyo Rooms and Zo Rooms on their platform, so as to protect their market share in the hotel bookings space, which is a high margin category.
Both Oyo and Zo Rooms commented that this move will not have a major impact on their business. Oyo Rooms said that it gets less than 10% of its sales from OTA platforms (agents selling travel products and services like airlines, car rental, cruise lines, hotels, railways and vacation packages on behalf of suppliers), whereas Zo Rooms expects its mobile app to make up for the temporary dip in sales.
“We have worked very closely with OTAs right since our inception. With Oyo listings, OTAs had enabled a wider set of choices for customers who book hotels online. The move will limit this selection for their customers. Oyo has seen strong growth in customers booking Oyo’s via our channels such as the mobile app, website and reservations helpline. The experience on these mediums is faster, direct and more convenient. Only 10-15% of our customers today choose to book Oyo’s via OTAs,” said Kavikrut, Chief Growth Officer, Oyo Rooms.
In August 2015, Oyo Rooms had raised an amount of $100 million, led by the SoftBank Group, along with participation from its existing investors – Greenoaks Capital, Sequoia Capital and Lightspeed India. During the same month, just a week after Oyo Rooms, another hotel aggregator startup Zo Rooms raised an amount of $30 million from existing investors, Tiger Global Management and Orios Venture Partners. Following which another startup WudStay also announced its acquisition of Awesome Stays, an offline budget hotel aggregator for an undisclosed amount, to help expand its services in 6 new cities.
Online hotel industry is expected to grow to $1.8 billion by 2016 from the current $0.8 billion. Budget hotel aggregators such as Oyo Rooms, Zo Rooms, Zen Rooms, WudStay, and others are helping organise the highly unorganised online hotel booking space. Their model have forced the hotels to rethink of their growth models, and are helping in bringing about the shift and change in consumer’s mindset as they are trying to solve the problem of connectivity and access.
With their own version of alternative accommodation they are trying to disrupt the market by attracting interest of consumers and are also generating a lot of interest among the investors. Apart from offering budget accommodation they are also offering lucrative deals such as complimentary breakfast, Wi-Fi, television with cable, others.
Budget hotel space in a country like India holds immense potential (online booking space in India is worth $800 million) with a fast pace rise in the number of travellers both domestic as well as international. As per findings by Federation of Hotels & Restaurants Association of India there are just 103,000 ‘branded’ hotel rooms in India, of which just 35% are budget. As per its estimate India will need another 180,000 rooms by 2020 so as to meet the target for tourist arrivals.
As per an ICRA report, travellers are increasingly using internet so as to plan and book their travel. The rise in use of smart phones and internet penetration in India has lead to increased booking of hotels through online portals and applications in recent times.
With the rise in internet and smartphone usage and with the help of these budget hotel aggregators this space has become favourable to many Indians who run on a tight budget while planning a travel. Simultaneously also benefitting these low budget hotels which otherwise were not able to capture the limelight. It is also a favourite among international travellers now.
However, many hotel owners believed that the hotel company may look to tie up with existing budget accommodation aggregators’ to sell some of their unsold inventory, but under the condition of their own brand name. According to them, it is one more channel to sell their rooms but they do not agree to undersell their inventory. Mandeep Lamba, Managing Director- India hotels & hospitality group, JLL, hotels feels that it is a short term gain by allowing third party aggregators to sell their unsold inventory. Further adding he said, “However, this brings the risk of diluting their existing brand.”
Budget room aggregators ventured into this space so as to help streamline the highly fragmented online travel industry. But with the rise in the number of services launched in this sector, the question that comes to my mind is, will the budget room aggregators need a meta aggregator to further help the consumers compare their offers and make informed decisions?