Dubai: The Indian hospitality brand OYO is well on its way to with its second gameplan for the UAE market - to rent out apartments for longer stays. This would see it rent out and manager close to 2,000 units in Abu Dhabi this year itself.
Recently, OYO - which was launched by Ritesh Agarwal as a booking platform for quality and yet affordable hotel accommodation in India - brought to market the Palette Tower in Abu Dhabi. Located in the Tourist Club area, the property provides 100 bespoke one-bedroom units.
“We already have more than 700 premium apartments across key destinations - Khalifa City, Al Zeina and Al Raha,” said Agarwal, with a networth reportedly at $2 billion plus.. “We plan to add another 1,000 premium apartments in Abu Dhabi in 2024 to meet the demand of long-term rental accommodation.
“OYO's past relationship with HUB71 for providing accommodation in Abu Dhabi has been highly fruitful, motivating us to stitch similar partnerships across the region.”
This focus on longer term rental accommodation marks a strategic shift for OYO, which extended its operations to the UAE in 2018 as part of a move into key global markets. The Covid years proved difficult for the brand, in line with what the global hospitality sector had to endure.
But when the post-Covid turnaround came about, OYO had the finances and the properties to make things work.
This is where the short- and longer term rented apartments come in handy. (OYO is already associated with 20 hotels in the UAE.) Longer stay rentals have been through sizeable increases over the last three-and-a-half years. So far, there are no signs of any real slowing down when it comes to higher rental demands. In such a marketplace, holding a 2,000 and over apartment portfolio is a nice place to be for OYO.
In Dubai, the company added more than 100 upscale holiday homes and ‘hoping to launch Oval Tower, a condominium in Business Bay’.
“These are fully-furnished apartments that meet the quality standards set by Dubai Tourism Commerce and Marketing,” said Agarwal. “In addition, we have also added Reflection Hotel, a 4-star property in Dubai.
“We are focusing on emerging business and leisure hotspots such as Sports City, Jebel Ali, Business Bay, Jumeriah Village Circle, Arjaan and Dubai Marina.“
Funds are there in plenty
Into its startup days, OYO had garnered plenty of attention when Japan’s SoftBank Group - owned by the famed Masayoshi San - became an early investor.
More recently, OYO had an equity fund raise of $50 million, which was oversubscribed by over two times. “Earlier, Microsoft invested $5 million as a strategic deal with OYO,” said Agarwal. “This equity raise was primarily aimed at boosting investor confidence and ensuring that we have additional financial flexibility to capitalise on emerging opportunities. “We have not required a fresh capital infusion because we have been EBITDA positive for the last 8 quarters. Our financial performance has ensured that our existing equity corpus is sufficient to meet our operational and strategic needs.”
The company had at one point been serious about an IPO and listing on the Bombay Stock Exchange. But that idea was subsequently dropped.
Gulf ambitions
For the UAE and its plans for other Gulf markets, OYO has kept open tapping investors from the region. ‘OYO's growth and strategic expansion in the Middle East have garnered significant attention and interest from regional investors,” said Agarwal. “The shares in the secondary market have been in great demand among regional investors.”
“We have a cash balance of about $120 million. Recently, we made a repayment of $195 million of outstanding Term Loan B, demonstrating our strong financial discipline and commitment to reducing our debt burden.
“The credit rating firm Fitch has also taken note of our improved performance and strong cash flows, upgrading our credit rating.” (OYO’s long-term foreign- and local currency issuer default rating was raised to 'B' from ‘B-‘.) “We are considering further prepayments of the loan. Additionally, we are exploring opportunities to refinance the remaining loan at a lower interest rate which will lead to annual interest savings of approximately $15 million to $20 million leading to higher net profit.”
