The growing number of units in the city has made the “price of certainty” more valuable than that of leasing, says Ritesh Agarwal, founder and CEO of OYO Hotels and Homes, which currently manages 1,300 rooms in Dubai, Sharjah, Ras Al Khaimah and Fujairah and is set to touch 12,000 rooms by 2020. With $1.8 billion (Dh6.61 billion) in sales last year, the OYO brand is the world’s sixth-largest chain of leased and franchised hotels, homes and living spaces. The company raised Dh3.68 billion funding through SoftBank Investment Advisers last year.
Earlier this year Agarwal expanded the OYO Hotels brand with 40 beautiful homes under OYO Homes, short-term vacation rentals that utilise the chain’s existing on-ground operations, hospitality technology, housekeeping skills, revenue management algorithms and distribution prowess to deliver a hassle-free solution to second-home owners.
“Beautiful designed spaces and smart pricing make us competitive in the market,” he says. “Consumers expect value. They want the prettiest of places at the lowest possible price.”
He says that in the Dubai market short-term holiday homes are popular with millennials and families traveling over weekends with children. “But we have to be smart with pricing. So in Palm Jumeirah we come in at Dh500 a night where everyone else would come in at Dh800 a night. At IMPZ we are present at Dh150 when others offer Dh250.”
Agarwal procures the units from both property owners and developers. “The price that works here is between Dh149 and Dh199 a night for a mid-market location and Dh259 and Dh299 for an upmarket place,” he explains.
Since its launch last year as a hotel chain, OYO has grown its market share through its Manchise business model that combines best-of-management contract and franchise agreement. “We create new age millennial pop hotels and we do both conversions and new constructs,” says Agarwal. “In the OYO Hotels category, we offer a franchise, a management contract or a lease. Under the franchise model, we can go to a big developer and ask him to give us one of his properties and we franchise it and use our brand name on it and offer him the Revpar. Under the management contract, we manage the property. Here the property not only has my brand and loyalty programme, the staff is also mine. Under the lease model, there is no revenue share. We ask the developer or the landlord to give me the property and we do a long-term, nine-year lease.”
Agarwal, who plans to generate more than 4,000 jobs in Dubai by the end of 2020, has also started OYO Skill Institute in Dubai, a training facility for housekeeping staff. The 25-year-old entrepreneur, who started the next-generation hotel chain in 2013, is the recipient of the Thiel Fellowship, a two-year programme wherein fellows receive $100,000 and mentorship from the likes of Mark Zuckerberg, Larry Page, Elon Musk and fellowship founder Peter Thiel, a venture capitalist. The fellowship is awarded to 20 people under the age of 20 to pursue innovative ideas in science and business, but it also means dropping out of college, as has been the case with Agarwal.
“I lived in San Francisco for a year and came back to India in 2014. OYO means On Your Own. We want to go after the small assets,” he says. “Be it Paddington in London, Downtown Dallas in the US or the ones from extreme south to the extreme north in Dubai, we want to bring beautiful living spaces at a smart price, while managing assets which are 200 rooms or smaller.”