WEAKNESS OF OYO

 A strategy of co-branding: Oyo does not own any of the rooms that it lets out. But
it is more like a hotel aggregation platform where the buyer and seller are allowed
to transact with each other through a common window provided by Oyo. Thus they
just cobrand with various budget hotels but do not own the rooms.
 Poor service quality: Though Oyo has tried to standardize amenities for each room
based on the prices they charge, they have not been able to do the same with
services. This has made the service quality and reliability highly questionable.
 Tight margins: Hotels that are on a tie-up with Oyo can also loop in other agents
for which Oyo cannot do anything much to circumvent. In this context, the model
thrives solely on how well the margins they provide for their hotels are which can
be risky in the long run.

THREATS

 Competition: With lowered barriers to entry, every new entrepreneur is looking at

aggregating services. There are a lot of online portals like ibibo, trivago,
makemytrip etc which offer a varied gamut of services similar to Oyo.
 Growing concerns about safety: Today there is negative imagery of unsafe stays
and the number of cases of harassment is on an increase. Though Oyo does not
guarantee safety at any point in time for its hotels they have a moral commitment
to ensure that no such untoward incidents happen.

 High Cash burn rate

Hotel Aggregator business model involves a very high cash burn rate.
Advance booking of the hotel rooms for the whole year needs a lot of cash
burn.Also, since the company is in their expansion mode they are offering heavy
discounts in order to acquire the customers.
 Standardization
One of the major issues was of standardization which was faced by OYO.Since
the company was dealing with non-branded hotels, the level of professionalism
was low.
It soon became a challenge for OYO to delight their customers at every point of
contact.
 Competition
OYO is the market leader and it is true that leaders define the path. Oyo has
opened paths for many other competitors.
 MalpracticesThe partners who are the hotel owners used to book their own hotel
rooms when they used to see lower prices on the Oyo’s platform and this
became malpractice benefiting the hotel owners.To stop this, and to expand the
business, Oyo Rooms has started leasing of hotels and places where it has full
control over the day-to-day operations of these hotels.

COMMISSION

The revenue model has also transformed as the business model changed from
aggregator to franchise. Earlier the brand used to lease hotels at a
predetermined price and offered them to the users at a take-up rate. This has
been changed to a commission-based revenue model.

Oyo rooms charges a commission of 22% from its hotel partners. However, this
commission does vary according to the services provided by the brand.

US hotel industry outlook

But, while all major industry metrics are projected to remain in the green, they do suggest a slight loss of
momentum.

Additionally, the company reported that weakening occupancy growth is weighing on hotels.
Despite modest supply growth in the U.S., Moody’s noted demand growth has slowed to 2.1
percent during the first eight months of 2019, compared to 2.9-percent growth in the previous
year. As a result, occupancy and average-daily-rate growth have slowed over the same period.
That has resulted in RevPAR growth of 1.2 percent in comparison to the metric’s 3.5-percent
increase experienced in the prior year.

https://www.hotelmanagement.net/own/moody-s-u-s-hotel-industry-outlook-downgraded

https://reviews.cheapism.com/cheap-hotel/#knights-inn-review

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