OYO Hotels & Homes is to raise USD1.5bn in its latest funding round, using the money to expand its position in the US and in the holiday rental market in Europe.
News of the round came as Selina was rumoured to be looking at raising further funding, after a USD100m earlier this year.
At OYO, RA Hospitality Holdings’ will be putting USD700m in as primary capital, with the balance USD800m coming from other existing investors.
Earlier this year, RA Hospitality Holding’s received approval from the Competition Commission of India to invest USD2bn in OYO. In order to facilitate this transaction, Lightspeed Venture Partners and Sequoia were selling part of their shareholding.
Prior to this, OYO had raised over USD1bn in its last financing round, announced in September 2018, led by SoftBank through SoftBank Vision Fund, with participation from existing investors Lightspeed Venture Partners, Sequoia and Greenoaks Capital and supported by new strategic partners including Airbnb.
This year, the company has reported a 3.8 times year-on-year growth in revenue in August 2019, with 1.2 million rooms under management across hotels and homes.
Ritesh Agarwal, founder & CEO, OYO Hotels & Homes, said: “The continued support of our investors like Softbank Vision Fund, Lightspeed, Sequoia Capital is a testament to the love, trust and relentless support of our asset owners and customers, hard work of all OYOpreneurs, and our commitment to making #LivingTheGoodLife a reality for over 3.2 billion middle-income people around the world. With the CCI approval now in place, the company will get a capital infusion of approximately USD1.5bn to support this mission, supported by me and other shareholders.
“Not only are we operating profitably at the building level but at the same time our Ebitda has also improved by 50% (on a year-on-year basis). The losses as a percentage of NRV have also been on a steady and significant declining curve. The growth across verticals in India and globally has been phenomenal and we truly believe that we will be able to build a truly global brand out of India, while ensuring that the business is run efficiently and with a clear path to profitability. Our immediate goal however is to make forward looking investments so we can achieve our mission, while delivering on our fiduciary responsibility to our investors by building a sustainable business.”
The company has been strengthening its position in holiday rentals in Europe, announcing in August that it was to invest EUR300m growing its European vacation rental business. The group bought Dutch holiday rental company @Leisure in May, renaming it it Oyo Vacation Homes.
Maninder Gulati, OYO chief strategy officer, said: “With Europe spearheading the vacation and urban home rental trend globally, @Leisure Group is uniquely positioned to capitalise on its experience and insights aided with OYO’s full-stack approach towards building the world’s largest global vacation rentals business. If one were to look at Europe alone, there is an ever-increasing demand for vacation homes with an increasing trend of booking an entire home.”
The funding came as hoteliers in India alleged that OYO was unfairly raising commission fees. Additional charges could take deductions to more than half of revenues, reported Reuters.
Last month, hotel operators in Bengaluru called for a criminal probe into the company. Two hoteliers in Karnataka filed separate police complaints accusing OYO of deceitfully increasing commissions, and accused Agarwal of fraud. OYO, which charges a base franchise fee of around 20%, insisted it has been transparent with its charging structure.
At Selina, local press suggested that the company could be on the verge of raising additional money after the funding round earlier this year, bringing the company’s total funding to USD225m to date. The company has 46 locations in 13 countries, with over 22,000 beds open or under conversion, combining private and shared accommodation with co-working facilities.
Selina co-founder & CEO, Rafael Museri, said: “We’ll continue to invest in our technology innovation team in Tel Aviv as we explore digitally-driven ways to disrupt the hospitality industry, enhance the complete booking and user experience for travellers, and continue rapid expansion into new markets across the globe.
“As we’ve seen across a number of industries from co-working to ridesharing, millennials and Gen Z are redefining how they want to live, work and explore the world. The ambitious and adventurous nature of these generations prove that there is a demand for our experiential hospitality model today and for years to come.”
HA Perspective [by Katherine Doggrell]: OYO is the only game in town in its domestic market. There had been some rumours earlier this year linking Accor to a bid on rival Treebo, but this hack understands that deal is no longer on the cards, despite Accor’s deal-per-week average sliding at the moment.
Such dominance is bound to make local hotels peeved and we await developments in India with interest. Now we watch to see whether the group can repeat its success in more developed areas. Indian Americans make up a significant number of hotel owners in the US, which may give the company something of an advantage in a country which is already au fait with advantageously-priced franchises.
In Europe, the group has its eye on holiday rentals, which offer a certain amount of low-hanging fruit in a territory where companies such as the aforementioned Accor are big players in the budget and economy sectors. The recent issues around WeWork mean that Softbank, which invests in both companies, is likely to be pressing for someone to make a profit sooner rather than later. Better keep that pipeline rolling.