To apply or not to apply?

To Jakayla Michel
From Aalto HR Consulting

Aalto University School of Business

 Executive summary

Key challenge: To apply for OYO or not?

Company situation Your values and

Market trends
and prospects criteria

Apply for a Business Development Manager position at OYO

Executive summary
Agenda

Analysis

Alternatives

Recommendation

Conclusion
 Trends in hotel business globally
• Middle-class expansion
• Increasing taste for business and vacation travel
• Millennials spending more money on experiences like travel than on
goods and products

Main outcome: Trends are in the favour of OYO

Executive summary Analysis Alternatives Recommendation Conclusion

 Business model of OYO Hotels
• Transforming unbranded hotels through property renovations
• Up-fitting rooms and reselling
• Relying on software
• Using AI for dynamic pricing
• Currently the largest branded network of budget hotels
• Expanding aggressively: Asia, Middle-East and now the US

Main outcome: Bringing transparency and a standard

experience to budget travelers by utilizing AI
Executive summary Analysis Alternatives Recommendation Conclusion
 Franchise model
• Started as partnering on a block of rooms
• Currently franchising fully with local hotel owners
• Upfront payment and commission
• Offers extensive training and support
• Better in managing inventory
• Fast to sign agreements with new partners using software

Main outcome: Unique

Bringingfranchise
transparency
model and
allows
a standard
for fast growth
experience
and better inventory
to budgetmanagement
travelers by utilizing AI
Executive summary Analysis Alternatives Recommendation Conclusion
 Strengths of OYO
• Fast growth
• Efficiency by the use of its advanced technology
• Easy-to-use app interface
• Great word-to-mouth reputation
• Proved to rise occupancy remarkably
• Valued partner with hotels
• Scale allows for great partnerships within hotel industry

Main outcome: Valued technology and expertise

Executive summary Analysis Alternatives Recommendation Conclusion

 Challenges of OYO
• Criticism towards the founder
• Is not profitable
• Price differentiation within other rooms at the same hotel has created
conflicts

Main outcome: Business model hasn’t resulted in profits

Executive summary Analysis Alternatives Recommendation Conclusion

 The US hotel market and competitors
• Growing for the past 10 years
• Currently the fifth straight record year for hotel occupancy (66 %)
• Branded hotels control over 71% of the hotel market
• Different existing approach to franchising

Main outcome: US market and competition differ greatly from

established business

Executive summary Analysis Alternatives Recommendation Conclusion

Agenda

Analysis

Alternatives

Recommendation

Conclusion
 Alternatives

1 2

Apply for a Don’t apply

job for a job

Executive summary Analysis Alternatives Recommendation Conclusion

 Pros and Cons from you
Pros
+ Company success
+ Dynamic environment
+ High level of responsibility
+ Access to international
expertise
+ Investors recognition

Executive summary Analysis Alternatives Recommendation Conclusion

 Pros and Cons from you
Pros
+ Company success
+ Dynamic environment
+ High level of responsibility
+ Access to international
expertise
+ Investors recognition
Cons
- Criticism of founder
- No profits
- Unclear success of business
model in United States
- Unclear salaries for some
positions

Executive summary Analysis Alternatives Recommendation Conclusion

 Your values and criteria for a job

Make impact Dynamic Financial

that matters environment security

Life-long Friendly Stable work

learning atmosphere place

Executive summary Analysis Alternatives Recommendation Conclusion

 Alternatives selection

1 2

Apply for a Don’t apply

job for a job

Executive summary Analysis Alternatives Recommendation Conclusion

Agenda

Analysis

Alternatives

Recommendation

Conclusion
 Recommendation

WHAT?

Apply for the Business Development Manager position at OYO

WHY?

The position fits your ambitions and values and because OYO is a fast
growing sustainable company

Executive summary Analysis Alternatives Recommendation Conclusion

 Did OYO’s strategy make sense?

OYO’s strategy main aspects

• Aggressive expansion
• Franchise business model
• Customer segment: tech-savvy millennials valuing travel
experience and not interested in high-price accommodation

Executive summary Analysis Alternatives Recommendation Conclusion

 Did OYO’s strategy make sense?

WHY?
• The market is expanding unprecedently
• Business model is data-driven and attracts small hotel
owners and creates revenue
YES • The main segment, millennials, is growing

Executive summary Analysis Alternatives Recommendation Conclusion

 What challenges does the business face?
Challenge Overcome
Unconfirmed and not affecting the
1. Questionable reputation of founders
operations

Both a threat and the opportunity:

2. Rapid scaling
seeking to hire talents

VC and Angel investors trust the

3. Financing and profitability company;
Loss is decreasing substantially

Executive summary Analysis Alternatives Recommendation Conclusion

 Would the business model translate to US?

WHY?
• Unattractive to 71% of branded hotels
• Fort Worth, Texas case: decline in rate to 15$ from 60$
• 100% increase in revenue and 70% of occupancy
YES • Attractive to small business owners
• Focus on technology and operations
• Strong value proposition: Predict and improve ROI and
RevPAR

Executive summary Analysis Alternatives Recommendation Conclusion

 Is this business model sustainable?

WHY?
• Appealing to hotel owners (training, brand muscle,
customer lead generation, marketing)
• Customer target: tech-savvy millennial travelers
YES • Profitability will be achieved in 2020 in the US market
1875
1293
808
425

2018 2019
-46 2020 2021 2022 2023
-186
Profit from the US market

Executive summary Analysis Alternatives Recommendation Conclusion

 What are the company prospects for the future?

Financial analysis was

conducted to answer this
question

Executive summary Analysis Alternatives Recommendation Conclusion

 Financial Analysis
Financial Assumptions
• OYO is able to maintain average growth rate of the past: 250% opening 5
franchises hotels per day in US
• The US hotel market has seen unprecedented growth in past 5 years which
can be capitalized on
• The US Market size in the unbranded hotels is 4,6 Million rooms
• OYO has a 0,5% market share with 50 hotels in the US
• Average hotel room price of 50$ per night
• Overhead costs are averaged

Executive summary Analysis Alternatives Recommendation Conclusion

 Financial Analysis
The US market size

There is potentially a 4,5 Million room Market in the US for OYO

Executive summary Analysis Alternatives Recommendation Conclusion

 Financial Analysis
Revenue in the US, M$
28.12304
• The additional revenue
from the US market will
19.3952 with the current
estimates be over
12.122 M$25 at the end of the
year 2023
6.38
• The Market share has
2.9
1.16 grown to over 12% at
2018 2019 2020 2021 2022 2023 this point
Revenue in the US

Executive summary Analysis Alternatives Recommendation Conclusion

 Financial Analysis
Revenue in the US

Executive summary Analysis Alternatives Recommendation Conclusion

 Financial Analysis
Costs of the Business model: Franchising
• The costs are mainly
driven by number of
hotels in the US
market
• Including overhead
costs and
restructuring costs of
franchisees

Executive summary Analysis Alternatives Recommendation Conclusion

 Risks and mitigation
Risk Probability Impact Mitigation

Not getting into the company Low High

Find another company to work for
or start own business
Company fails completely Low High
Company fails in the US market Low Medium Ask for relocation

Find another company to work for

Values crash Low Medium or start own business

False promises about salary Medium Low Renegotiate and lever expertise

Executive summary Analysis Alternatives Recommendation Conclusion

Agenda

Analysis

Alternatives

Recommendation

Conclusion
 Conclusion

Key challenge: To apply for OYO or not?

Company situation Your values and

Market trends
and prospects criteria

Apply for a Business Development Manager position at OYO

Executive summary Analysis Alternatives Recommendation Conclusion