Oyo to focus on weekend business and cut losses

SoftBank-backed budget hotel brand OYO expects its loss to narrow further and record a healthy improvement in operating margin this fiscal year, founder Ritesh Agarwal said.
 
OYO narrowed its loss by a third in fiscal 2017, according to its filings with the Registrar of Companies (RoC). Agarwal said OYO is working on strengthening its focus on the weekend business for driving growth and improving financials. 
 
“We are seeing weekends becoming a powerful way of growth. Within our city expansion, we have a target of increasing our market share from 5% to 10% in 50 weekend destinations this year, which are an important category of focus for us, like Coorg and Chikmagalur,” Agarwal told ET. “We ended the month of December with 2.2 million room nights and did more transactions in January than in December.”
 
OYO, which received $250 million in a funding round led by SoftBank Vision Fund in last September, is targeting to grow its room inventory to 1,80,000 rooms in 2018 from 70,000 last year.
 
“We clocked in 75% occupancy rates on an annualised basis nationally, and in urban cities around 85% last year. We believe these rates will hold for this year as well despite the addition of new supply,” said Agarwal.
 
For the financial year ended March 2017, OYO trimmed its losses to about ₹330 crore from ₹496 crore the year before, according to its filings. Revenue grew fourfold to ₹102.2 crore. “RoC filings are not the full representation. 75% of our hotel rooms are under the franchised route and we have seen significant benefits of this model,” Agarwal said.
 
“In terms of losses, our business has significant scale level efficiencies. OYO has spent the same amount in marketing for the last three years on a monthly basis. But we still grew on revenue. Last quarter, we grew 2.6 times year-on-year, but with the same marketing spends,” said Agarwal.
 
“Our market share is just 1.3% of India’s hotel market. There is huge potential,” he added.
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