Companies

OYO confident about business practices in India, says Aditya Ghosh

K Giriprakash Bengaluru | Updated on November 08, 2019 Published on November 08, 2019

Aditya Ghosh, CEO, Oyo India and South Asia

OYO has been a trailblazer in its domain, but over the last year, reports about its engagement with stakeholders, especially hotel-partners, have been on the rise. In an interview with BusinessLine, Aditya Ghosh, CEO-India & South Asia, OYO Hotels & Homes, shares the issues facing the start-up and how they are being tackled. Excerpts:

OYO seems to have expanded too fast for its own good. Complaints are mounting from partners, customers and vendors. What exactly is the reality?

As we go about trying to change the way the hospitality business has been run so far and make standardised hotel rooms available to millions of customers at a fraction of the cost they had to pay earlier, it is the unfortunate reality that like many other industries before us — such as telecom, FMCG, transportation and airlines — we too will face the ire of a small minority whose vested interests are going to be impacted everyday because they are no longer being able to charge exorbitant prices.

This is a battle we are willing to take on. Having said that, what gives us great encouragement is that in India alone, over 18,000 asset owners have joined hands with OYO. We launched the OYO Partner Engagement Network (OPEN) in April 2019. The objective was to start an industry-first series of year-long initiatives to help our asset owners reach their business goals. We announced six core promises as part of the launch of OPEN which included transparent payment protocols.

How do you plan to tackle such issues as they can drag down the company’s brand value?

As franchisors, we continue to engage with our franchisee hotel owners on a one-to-one basis to resolve issues and if we don’t reach a mutually-acceptable solution, we part ways amicably. While we work towards addressing such issues, our primary focus is to ensure that the consumer has access to affordable, reliable and good quality accommodations.

Overall, OYO’s annual retention is as high as 99.5 per cent across the chain in India and South-Asia. On an average, over 75 per cent of hotel owners associated with OYO have seen an increase of almost 3x+ in occupancy, 2.5x jump in RevPar and a significant jump in profit. When there is any gap in the quality of service offered by the hotel staff, including check-in experience, safety and security, among others, it results in low customer satisfaction and could lead to lack of trust in the brand. Not only does that impact OYO’s reputation but, if left unchecked, could lead to serious concerns. We have, therefore, introduced strict compliance and performance metrics that help us ensure that hotel owners/manager always deliver reliable experiences, like the 3C evaluation programme, applicable for all the 18,000-plus hotels.

The Federation of Hotel and Restaurant Association of India (FHRAI) had accused OYO of predatory pricing but on investigation the CCI dismissed five out of six allegations. Which are these allegations and what is OYO planning to do now?

The CCI has recognised the fact that OYO is a hotel chain and we are happy that it has dismissed certain prima facie allegations of abuse of dominance regarding price parity, predatory pricing, exorbitant commissions, etc. The CCI has acknowledged that OYO Hotels and Homes is a hotel chain and not an online travel agency (OTA), while noting that the company is not in a dominant position. With respect to the dismissed allegations, the order from the CCI states that the hospitality company is neither engaged in any predatory pricing nor charging exorbitant commissions from hotels, which are part of its chain.

The CCI has acknowledged that OYO and Make My Trip - GoIbibo (MMT-Go) operate in different segments and that OYO as a budget hotel chain is in a vertical relationship with MMT, which is essentially a distribution platform for hotels. The CCI has directed to investigate the complaint filed by FHRAI against MMT, Go-Ibibo and OYO as it pertains to alleged violation of the provisions of Section 3(4) of the Act only. The concern expressed is around whether OYO’s contractual relationship with MMT, as part of an arrangement, may have an adverse effect on competition. OYO stands ready to extend full support to the investigation and, as a law-abiding corporate citizen, has full faith in the administrative and the judicial process.

FHRAI has alleged that both MMT and OYO have dominant positions in the market. Is this correct?

Yes. As regards the dominance of OYO, the Commission refers to its observations and findings in Case No. 03 of 2019 (RKG Hospitality Pvt. Ltd. V. Oravel Stays Pvt. Ltd. (OYO)), given vide order dated July 31, 2019, wherein the CCI order confirmed that OYO is not a dominant player. The order by CCI recommended that OYO is a significant player in the market for franchise service for budget hotels in India.

Is it right that OYO has an exclusive partnership with MMT? What is OYO’s contractual relationship with MMT?

We do not have an exclusive relationship with MMT.

Published on November 08, 2019
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