MARKETING MANAGEMENT – I

Assignment – 1

Mauwalla Het Ketan Jyothirmayee

SidharthKotni
P Jacob
Himanshi Nimesh Rahul Challa
Soumik Mandal
Hiranyabh Baishya Rahul Chauhan
Supratim Maitra
At its core, the Hospitality Industry concerns itself with providing products and services to people that assist in
recreation and support people's well-being. For the purpose of this study, we shall focus on the lodging (hotel) sector.

Hospitality
Hospitality
Industry
Industry

Food
Food&&
Lodging
Lodging Events
Events Tourism
Tourism Transportation
Transportation
Beverage
Beverage

Industry Overview
Most hotels and major hospitality companies have set industry standards to classify hotel types.
Personalized
Full-service Luxury On-site On-site amenities
Type Services (Concierge Examples
accommodations amenities restaurant (pool, gym, etc.)
Room service etc)

Grand Hyatt, InterContinental,

Luxury ✓ ✓ ✓ ✓ ✓ Sofitel, Four Seasons, JW Marriott,
The Ritz-Carlton.

Upscale Hilton, Renaissance, Marriott, Hyatt

✓ X ✓ ✓ ✓
Full-Service Regency

Boutique ✓ X X ✓ ✓ Independent High-end hotels

Ibis Budget, Hampton Inn, Holiday

X (Basic
Economy X X ✓ ✓ Inn Express, Fairfield Inn, Four Points
Accommodation)
by Sheraton.

Medium to X (Basic
X X X X Local unbranded indigenous hotels
Small Scale Accommodation)

*Personalized service includes a concierge, room service, clothes pressing staff, etc. *On-Site amenities mean swimming pools, gyms, massage rooms, etc

* Full-service & Basic accommodations differ in the way that basic accommodations offer little to no services

The global hotel segment is a $525bn industry, made up of 18 million rooms. The sector is heavily dominated by international hotel
brands that curate the luxury and Upscale Full-Service on a global scale. In India, there is good penetration of these global players,
however they only supply to around 30% of the consumers, with the majority being serviced by independent/unbranded hotels.
The global average contrastingly is 54% of total consumers being serviced by branded hotels.

Global Hotel Industry Indian Hotel Industry

2.72 Mn
Rooms

Key Stats for the Hotel Segment of India:

§ Position in travel & tourism competitiveness Index (WEF): 65th in 2013 to 34th position in 2019
§ Third Largest Investment in World in Travel & Tourism (5.9% of country’s Investment)
§ Cumulative FDI inflow: $15.61 Bn between Apr 2000- Dec 2020
India previously had only global brands service the luxury & Upscale Full-Service type of hotels. Recently, new-age companies like Oyo,
Fab Hotels, Treebo have tried to fill the gap on the cheaper side of hotel types. They integrate such hotels under their umbrella with
innovative strategies. Further, the successful foray of such brands in the industry has been heavily propelled by new technologies and
increased online booking penetration being used in the hospitality industry in general.

% o f C u st o m e r s Se r vice d b y: % of Online Booking Penetration in Hotels

International Hotel Brands
80 70
70 Unbranded/ Independent Hotels 30
60 54
50 46
20
40 30
30 10
20
10
0
0
Global India 2015 2016 2018 2020 2021

Below we compare some of these new-age brands that have taken the industry by storm.

Company Overview
Let us take a detailed look at OYO, which is the main focus of this study.

Key Stats for OYO

v Largest hotel network in India, spread in ~259 cities

v World’s second-largest and fastest-growing hospitality chain
v Currently valued at $10 billion dollars
v 43,000+ franchised and leased hotels, 50000+ vacation

OYO started as a hotel aggregator and used to lease some rooms and sell them
under its brand name. It then changed its business model from aggregator to
the franchise model (sign up mom-and-pop hotels, spruce them up to minimum
standards under a single brand and take control of booking and prices using
proprietary software to boost occupancy and revenue). In exchange, OYO
charges hotels fees and commissions.
 SWOT Analysis

4 P’s of Marketing
 Segmentation
OYO uses a culmination of 3 bases of segmentation: demographics (Income), Psychographics (Personality, and
lifestyle), and benefits sought to segment the market into 3 segments.

Backpackers
Luxury travelers
Low-Medium Income, Benefits
High-Income, Luxury lifestyle,
Sought: Basic amenities.
Benefits Sought: No compromises on
quality and services. The OYO Rooms
Lifestyle: Frequent tier
for these travelers are Destination
travelers
Holidays, 5-star hotels, A villa on the
beach, etc. The customers in this These travelers are extremely
segment are quite focused on budget-conscious and can
getting a good service and don’t compromise on quality. The OYO
want to compromise on this aspect Rooms for these travelers are
irrespective of the price. mostly tier 2/3 tier hotels.
Business executives
Mid-High Income, Benefits Sought: All
the amenities required for a
comfortable stay including wifi
availability and air-conditioning.
Lifestyle: Frequent tier 1/2 Travelers.
2/3 
The customers in this segment travel
frequently as part of the
business/corporate work, are
technology savvy, look for pocket-
friendly accommodation, yet cannot
compromise on quality. The OYO
Rooms for these travelers are tier 1/2
hotels.

Segment Rating Chart: Useful tool for assessing market segments

Here, we can see from the analysis that, hospitality market as a whole is not that attractive a market
majorly because of the micro-trends (Economy, Pandemic-Effect as we can see today, etc) and the other
factors as can be seen in the above analysis.

OYO has done a more than decent job to capture a large chuck (~80 %) of the market share by using
effective market segmentation. It has a high capability and resource allocation and it had received large
funding at the on-set of the company, thereafter, it has not let the bar drop.
Targeting
OYO has specialized its products to cater to all the segments but its core target market is the business
executive and the Backpackers.

OYO has used a differentiated marketing strategy, whereby it has used different marketing mixes to
cater to the needs and wants of the different segments.

OYO primarily focuses on backpackers and business travelers, therefore, it does differentiated
marketing because this segment has different needs and constraints.

Factors Affecting Target Marketing: Age, Gender, Interests, Geographic Location, Need, Occupation

OYO uses all these factors to determine which travelers would fit in what segment and provide them
with recommendations accordingly. It uses a 360-degree marketing strategy. OYO used digital media to
reach and attract more customers. They implemented SEO and social media campaigns to attract more
and more people. 

All offerings of OYO target a particular customer segment.

Offerings of OYO:
 OYO Rooms - Backpackers
 OYO Townhouse - Vacation Travellers
 OYO SilverKey - Business Executives
 OYO holiday and Homes - Holiday Travelers
 OYO Palette - Resorts and Villas
 OYO Collection O - Guests traveling for business and leisure
 OYO LIFE - Flexible accommodations seekers

Since the core target market of OYO aligns with the vision of the company i.e to provide standardized,
affordable services to its customers it uses various products and services to target different segments of
the market. For better targeting, it takes the help of user-generated data to better fit the product
according to customer expectations.
Positioning

The dimension of positioning used by OYO is - Problem Solution. At the onset of OYO, founder Ritesh
Agarwal has started the company with the core values that it would make all the basic amenities
available to its customers and make hospitality industry services value for money.

It has positioned itself in the hospitality industry as:

 Providing value for money
 Basic amenities are available including wifi-enabled, sanitary facilities, etc.
 Good Customer Service
 Easy-to-use app
 No compromise on quality

The tagline '#AurKa Chahiye' encapsulates the notion that OYO Rooms provides users with everything
they need for a comfortable stay.
The ‘Raho Mast’ positioning is part of the same…to let India know that no matter who you are, where
you are, whatever your budget when you spot that big red Oyo sign on a hotel, an app or a website, you
are assured a quality experience

Perceptual Map

OYO has positioned itself as a medium of quality below the branded tier 1 hotels and above the
unbranded tier 2/3 hotels. On the pricing front, it has painted a picture in the minds of its customers
that it offers cheaper services compared to other players in a similar segment. 
 PESTEL Analysis
Political Factors

Government vs Tourism: Tourism contributes towards 9.2% GDP and 8.1% of total employment in India. So, GoI is
introducing policies favorable for every sector which helps tourism, including the Hospitality Sector.

Government vs Hospitality Sector: GoI encourages more registrations in OTA business and allows 100% FDI in
hospitality sector, which encourages to raise funds from foreign investors. It exempts rented rooms with declared tariff
< 1000 and taxable hotel services < 10 lakhs from Service Tax.

Political Stability: It is necessary for a global company to flourish in other countries. Political stability ensures
predictable market growth while political chaos deters stakeholders’ trust in economic and organizational performance.
Geo-political conflicts between India and China, succeeded by GoI’s ban on Chineses apps will show a negative impact
on China’s attitude towards OYO, the second largest hotel chain in China.

Economic Factors

Inflation and Repo Rate: Inflation rate in India is projected to be 5.1% (>2%) in 2021-22. Higher inflation rate decreases
the value of assets. So, OYO must maintain its growth rate above this. To strengthen GDP, RBI had cut down the Repo
Rate from 5.15% (Feb 2020) to 4% (May 2020). This helps OYO collect more funds from banks. RBI hasn't increased Repo
Rate since then.
Unemployment Rate and Labour Productivity: During the pandemic, the unemployment rate rose to 7.11%. OYO, too,
had laid off thousands of employees globally. But, OYO can take advantage of higher unemployment rates to increase
labour productivity by hiring a skilled workforce at low salaries. Labour Productivity (GDP per hour worked) measures
output per unit input (capital etc).
Economic Position: OYO has fundings of $1B with it. This gives it an advantage over its competitors as it can easily invest
more to change the business model according to the ongoing changes.
Purchasing Power: During the pandemic, GoI had a fiscal deficit of 16.8% of GDP 2020. The major solution is to increase
the spending of money. But, with their job lost and money flowing towards the medical charges, people lost their
purchasing power in other areas. This affects OYO as its main target customers are backpackers who are not willing to
spend more.

Social Factors

Attitude towards Leisure: Ethnographic research should be done on the people’s attitude towards leisure time in a
region, because it is an important information on which OYO relies upon.

Demographics of a society: Changes in demographic patterns like aging-population, migration trends and socio-
economic variables are highly important for global business organizations like Oyo Rooms. Proper segmentation should
be done and governments’ attitude towards migration must be considered as it can influence a firm’s ability to bring
best managers from abroad.

Education and Cultural/Social norms: Higher level of education results in better jobs, higher income and spending on
aspirational products. Consumer behaviour is influenced by the social and cultural norms that avail in the society. Even
traditional gender-based stereotypes (if any) must be considered and OYO’s marketing should be done accordingly.
Technological Factors

Smart phones and Internet: Being a booming company of the 21st century, accessing the huge pool of opportunity of
the 21st century, accessing the opportunity of advanced technology via the internet and smartphones is necessary. But,
in some places, internet accessibility isn’t easy. In such cases, an alternative must be found, such as tapping foreign
tourists etc.

E-commerce infrastructure and Digital drive: As E-commerce is critical for OYO’s business model, it must evaluate the
infrastructure of e-commerce and related technologies before entering a new market. Digitalization of various processes
is a good way to overcome corruption in the economy.

Social Media Marketing: The development of information and communication technologies, has led towards adoption
of innovative marketing strategies, including customer’s collaboration. Social media is one of such technology and Oyo
had already tried #OYOLove campaign. It can use these technological trends to start creative campaigns for developing
online brand communities.

Environmental Factors

Usage of eco-friendly commodities: Industries, nowadays, are using higher amounts of disposable items, most of which
are non biodegradable. These can cause serious environmental concerns which can affect OYO too. Internationally,
many hotel chains are shifting towards more biodegradable items to counter the climate crisis.

Animal welfare: Many activities by companies are causing extinctions of major species such as corals etc. Therefore,
hotels are now being put under a lot of pressure by both governments and environmental activists, to ensure a minimal
carbon footprint. Demand for hotel stays is also affected by the weather conditions in certain times of a year.

Encouraging green practices: Hotels consume a lot of water, electricity, and gas, thus, resulting in shortage of resources.
To overcome the pressure by governments and NGOs, hotels must take energy usage seriously and use smart
technologies to reduce it. OYO can play an active role in encouraging green practices in its partner hotels. It can support
other activities on social media.

Legal Factors

Legal terms with Governments: OYO, being a global company, needs to pay special attention towards legal terms of the
countries it operates in. In the USA, it was operating about 350 hotels, but it wasn’t approved by the California
government to operate franchises. It had been penalised $0.2M for the same. It had also partnered with 30 hotels, who
were not following government regulations, and they had ceased functioning.

Legal terms with stakeholders: In 2016, Zostel, a backpackers’ hotel chain in India, had approached court against OYO,
claiming that OYO had defaulted on an agreement that it has to issue 7% of its stock to Zostel in return for the transfer
of business.

Other Laws and Regulations: Oyo must concentrate on various kinds of laws and work policies which are specific to
some countries. It must follow workforce policies and anti-discrimination laws while hiring, training and firing the
employees. It must have a background check on all the stakeholders it works with, and offer deals or make promises,
accordingly. It must take care of the health and well-being of the work-force and also try to follow data-privacy norms.
Financial & COVID- Impact Overview
Consolidated revenue for FY19 stood at USD 951 million, which is 4.5X YoY growth over FY18. Nearly 63.5% (USD
604 Mn), 36.5% (USD 348 Mn) of the revenue is from India and outside India. Gross Margin in India inc. from
10.6% in FY18 to 14.7% in FY19, more than 90% of demand was repeat & organic, indicating strength of the
business model & good customer experience.

However, total gross margin fell from 10.7% to 7.1% in FY19 due to expansion in newer markets such as China.
FY19 Net Loss – India reduced from 24% to 14%; However global increased from 25% to 35% due to expansion in
newer markets such as China.

Q4 CY'19

Repeat Organic Paid

0 10 20 30 40 50 60 70 80 90 100

• Stringent Lockdowns implied • 73,000+ repatriated

highest cancellations
• Gross Margin (rev after deducting
exp at individual hotels) fell as
much as 60%
• As of Jan 21, the gross margin
rebounded to 15% below pre-
pandemic levels
• However, it is still losing money,
around $15 Mn a month
Indians provided quarantine
• OYO Care tied up with 24+ state
ministries, 50+ govt. and private
hospitals
• Housed 250,000+ hospital staff &
asymptomatic patients from Apr 20
• 200+ sailors were safely
quarantined across India

COVID 19 Impact What’s OYO doing