IPO-bound OYO revamps operations

New Delhi: As the pandemic ravaged several industries, especially the tourism and travel sector, a few enterprises used the situation to rebuild from scratch, at the cost of making certain painful short-term decisions. IPO-bound Oravel Stays Ltd, or OYO, is one such example that revamped its operations and business strategies to not only stay afloat, but also emerge stronger.

OYO's exponential growth nearly came to a halt due to the pandemic. However, it used the downtime to rebuild itself, or 'fix nets like fishermen do, while waiting for storm to pass' as described by its founder and Group CEO, Ritesh Agarwal.

The company changed its cash-burning business model, fixed its unit economies, doubled down on technology while focusing on becoming lean and agile.

As OYO gets prepared to hit the bourses, a deeper analysis of its Draft Red Herring Prospectus (DRHP) reveals interesting business metrics.

Among all the moves, OYO decided to shift focus to its core markets including India, South East Asia and Europe Vacation Homes and rationalised non-core geographies, leading to improving EBITDA (earnings before interest, taxes, depreciation, and amortisation) by an impressive 79 per cent from FY20 to FY21. It revamped patron (hotel and home operators) policies and engagement, leading to 77 per cent rise in patron satisfaction levels (on-quarter) in the fourth quarter (Q4) of 2021, by query resolution through technology, quicker and simpler account reconciliation and twice a week payouts.

The seven-year-old startup added more that 25,000 hotels in 2019 (as per its DRHP) and the gross booking value per hotel is likely to improve from Rs 25 lakh in FY2021 to the pre-Covid level of Rs 50 lakh per hotel per annum. The pandemic also helped the company streamline strategic and shared services functions -- such as revenue management, supply, human resources, legal and finance -- to create efficiencies and reduce costs, moving away from providing minimum guarantees to its hotel partners.