Care, cash, evolution: How OYO navigated Covid-19

SoftBank-backed hotels aggregator OYO, currently valued at over $9 billion, was hit hard by the pandemic last year. Since then, it has managed to focus on improvements in technology and user experience and get back on the road to recovery. Founder and group CEO Ritesh Agarwal, 27, at the forefront of reimagining OYO for a post-pandemic future, explains how he has been crafting this strategy. Edited excerpts.

THE PANDEMIC IMPACT

Tell us how the pandemic impacted your business, and the things you did to bring the graph back again into the positive.

I will break this answer up into two parts. First, the impact of Covid-19 and how we first responded and stabilised our ship, and second, how we are working towards resurgence and growing in the future. The pandemic impacted us for the first time in March and April 2020, when our gross margin in dollars fell over 66%. That was something that we’d built over a long period of time and that dropped substantially. Our perspective was that whenever there is an impact of such a crisis, there should be a simple way for everybody to understand how to deal with it. We thought the way to deal with the crisis was going to be care, cash, and evolution.

Let me start with cash. Within cash, our company worked on ensuring we speak to customers and owners so that we can protect and recover whatever revenue we can. So we learnt that there were four or five types of customer trends that were going on. Staycations were growing. We doubled down and ensured that our entire marketing, products, and supply were designed towards staycations. The second is, we saw there was a rise in work-from-anywhere. We prepared work-from-anywhere to be our focussed concept. We saw a big shift to online from offline, so we doubled down on digital-based reservations. We saw that value for money was critical. We saw healthcare and sanitation were critical, and we made sure we had [initiatives like] ‘Sanitised Before Your Eyes’, where people can see their rooms being sanitised before them. And recently, [we launched] VaccinAid, which are hotels where the entire staff has been vaccinated. And these hotels have seen much higher revenue. These are things we did to ensure the revenue was focussed.

OYO is now raising $600 million by way of a Term Loan B offering. What will you do with the money?

Our company already had a healthy balance sheet through the crisis. Our perspective was that we should try and bring institutional capital providers as partners in our business as we build it forward. As a part of that we also chose to get rated by Moody’s and Fitch. After our rating, we announced our intention to raise $600 million. The intention is to hold ourselves to higher levels of accountability and have slightly extra capital to have a fortress balance sheet around ourselves. There was some speculation about whether this was because of the impact of the second wave. I want to clarify that was not the reason. We went out to begin the rating process in January 2021, when India was at its best period.

On the [hotel] owners’ side, it was very critical that we went back to them and ensured we used Covid-19 as a time to tell our partners that we will work together with them to come out of this crisis. We helped them with new kinds of products and software—lots of features were launched which either improved revenue or brought simplicity and lower costs of operations for them. Every week, I did a town hall with our hotel owners around the world to try and continuously improve things. So this was the first [aspect].

The second was to use technology to operate the business better. We made sure that today 85% of the customer service and 80%-plus of the merchant service are served through chat and chatbots. Customers and hotel owners like it because earlier they had to wait in a queue to get a service. Now they get it much quicker. Of course, we have to keep improving on it. So these kinds of efforts were taken, combined with our efforts to get whatever business we could. For example, over the past six-seven months, we have served over half a million nights in quarantine/ frontliners accommodation. This is just in India. We also had similar services in every country we operate.

The third thing is making sure that there was care that we demonstrated. As the Covid-19 second wave hit, we saw that a lot of our employees were not able to take the time out to focus on things, not just at work but also not being able to spend time [on their own], with family, friends, etc. So we moved the company to a four-day week in order to make sure that people could make time for themselves. We also ensured that leaves were not ones that people needed to discuss; if you needed leave you just took it. We, unfortunately, lost four of our OYOpreneurs—fulltime and contracted employees. So we set up a bereavement policy for them. We’ve tried to do everything we can within our ability to try and make a difference in these times. But as a combination, this is what we did to deal with the crisis.

RIDING ON TECHNOLOGY

How did you then focus on recovery?

We doubled down in terms of our product and engineering investments. I started spending 70%-plus of my time on engineering. We increased our engineering and product investments between 2019 and 2021 by 60%. And we are investing as we speak. We launched several market innovations. All of these were part of this rapid transformation into the future. A lot of this is in service and in ensuring that consumer demand comes [in]. Even on the merchant side, 30%-40% of the new hotels that are joining our platform are coming through our reseller network, where our hotel owners themselves recommend to other hotel owners to come and join the OYO platform. So our ability to be able to innovate with products has allowed us to make sure that we not just recovered from the pandemic but have also been able to get a substantial amount of growth, as well as the bottom line matrix, in the right trends.

You had problems pre-pandemic too with some of your hotel owners who weren’t happy with OYO. While you say you’ve taken steps to improve the experience for them, how are you planning to recover from the hit the brand has taken as a result?

To begin with, I think our focus on making sure that our hotel owner experiences improve, and our customer experiences remain top-notch, is very critical. Within both these things, if I were to lay it out, there are a few reasons why our consumers and merchants have continued to appreciate us, and a few areas of improvement which we have used the last year almost as an opportunity to create an antidote— not just to the crisis but also with some of the improvements that were due anyway.

Let me start with the hotel owners. They like us typically for two to three critical reasons. The first is, we are able to give them improved business. The second is, our consumer app is the third most downloaded travel app in the world as per App Annie’s recent trends. Our ability to give them software like Co-OYO and OYO OS allows them to operate their hotels better. That’s why they like us.

In terms of areas of improvement, two things allowed us to improve our partner satisfaction rates. As a result, the number of complaints has rapidly reduced today and are limited mostly to a few situations from before the pandemic that we are still solving, and [in] that, [viewed in] comparison to serving 190,000 merchants, we have come a long way. Within that, the first thing that has enabled us is a simple business model—where we give our software and charge a revenue share for it—which has allowed our hotel owners to have simpler visibility of our overall business.

Also, we are able to make sure that hotel owners do not lose their consumer focus. The second thing we have done is to concentrate on our technology and make sure that the earnings have been made simpler to understand by means of the OYO Secure programme we have set up with our hotel partners. We have ensured that the pricing has been improved by way of the tariff manager product, and the service speed has rapidly improved. Today we are able to use the ‘help’ section in our Co-OYO and OYO OS apps to give either instant- or less-than-15 minutes first response times which allows our merchants to have a happier experience than earlier, when they had to wait for someone to come to the hotel and support them.

I am happy to share that our partner satisfaction rates have gone up by 30 points. It’s not to say we’ve done a great job. It’s more to say this was due, and now we are excited about not just being where we are and being satisfied with being good. We want to be the best for our hotel partners, and every day my colleagues and I wake up and say what can we do better, while of course keeping consumers’ interests and the right economics in mind.

(This interview originally appeared in Fortune India's July 2021 issue).