India’s 25-year-old hotel billionaire eyes a US expansion
CNN Business : In just six years, Ritesh Agarwal has gone from a college dropout to one of India’s youngest billionaires.
At 19, he founded budget hotel chain OYO in the city of Gurgaon, just outside India’s capital. Now, at 25, the entrepreneur has grown the brand globally and is looking to expand his empire in the US.
While India is OYO’s biggest market, with 18,000 locations, its presence in China is quickly catching up, with nearly 13,000 OYO hotels across 338 Chinese cities. And the company’s distinctive red and white logo can also be found on hotels in the United Kingdom, Indonesia, the Philippines and the United Arab Emirates.
The United States, however, is where Argawal sees the next big opportunity.
“The US is one of the largest hospitality markets, both in terms of [domestic] and international tourism, and therefore presents a huge opportunity for us,” said Agarwal.
Ritesh Agarwal launched the business that became OYO in 2013, when he was 19. It has become Indias biggest hotel chain.
Ritesh Agarwal launched the business that became OYO in 2013, when he was 19. It has become India’s biggest hotel chain.
The company already has 200 US locations, but Agarwal wants more. In August, OYO bought the 657-room Hooters Casino Hotel in Nevada, which he has already rebranded as the OYO Hotel & Casino Las Vegas.
OYO was initially born in 2012 as an online service called Oravel Travel that aggregated budget hotel room listings.
“It was like an Airbnb concept,” said Bejul Somaia, a partner at venture capital firm Lightspeed Venture Partners.
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Somaia first met Agarwal after he was accepted for a Thiel Fellowship in 2013. The two-year program created by PayPal founder Peter Thiel awards $100,000 in grants to entrepreneurs who either skipped or dropped out of college so they may pursue an innovative business idea.
“You don’t often see Indian entrepreneurs selected for it, so we took notice of Ritesh,” said Somaia.
But Somaia wasn’t all that impressed by Agarwal’s business idea.
“I told him it wasn’t the right model for India. The sharing economy model is a challenge in India because of inconsistency in quality and safety,” said Somaia. He suggested a better approach was to find a way to standardize and upgrade the supply of rooms and give it a uniform branding.
That’s when Agarwal told him about OYO Rooms, an offshoot business he’d quietly launched in 2013 that was doing just that.
In addition to its tens of thousands of budget hotels across India, OYO also operates higher end accomodations called OYO Townhouse.
In addition to its tens of thousands of budget hotels across India, OYO also operates higher end accomodations called OYO Townhouse.
OYO, originally an acronym that stood for “On Your Own,” was a website that offered an inventory of branded budget hotel rooms across India with standardized amenities, such as free WiFi, flatscreen TVs, quality linens and branded toiletries.
The idea clicked and Lightspeed Ventures became an early investor, investing $600,000 in seed capital.
By 2016, OYO expanded the business model. Rather than just updating and reselling available hotel rooms, OYO would rebrand the hotels entirely as OYO properties and sign on affiliates through franchise and lease agreements.
OYO's hotels in India are primarily operated like franchises.
OYO’s hotels in India are primarily operated like franchises.
The company now has more than 35,000 hotels in 800 cities, and employs 20,000 people, half of them in India. Agarwal declined to disclose the company’s revenue, but said that it is not yet profitable.
OYO, whose other investors include SoftBank, Sequoia Capital India, Airbnb and Greenoaks Capital, is estimated to be valued at $10 billion.
In October, the company raised another $1.5 billion, including a $700 million investment from Agarwal, who now owns a 30% stake in the company. Agarwal also bought $1.3 billion worth of existing shares from investors Lightspeed Venture Partners and Sequoia Capital. OYO said the investment would help drive its expansion efforts.
‘I had no idea what the world outside looked like’
Growing up in the Eastern Indian state of Odisha, Agarwal led a simple life.
“Probably 70% of the population [in the town] was living below poverty,” he said. “I never complained, but I also had no idea growing up what the world outside looked like.”
Agarwal knew early on he had an entrepreneurial hunger. At 13, he took a summer job selling SIM cards for mobile phones to other stores in the area.