Backing OYO would give Airbnb a significant access in the affordable hotel segment in India (where OYO claimed to be the seventh largest chain of hotels) and China.
Even as SoftBank-backed OYO’s Chief Growth Officer Kavikrut told Financial Express Online last month that Airbnb could be a “potential partner” to them, the latter is looking to back OYO to focus on the hotel business. This would give Airbnb a significant access in the affordable hotel segment in India (where OYO claimed to be the seventh largest chain of hotels) and China. The company had acquired the US-based hotel booking platform HotelTonight for reportedly around $400 million.
Airbnb is currently in discussions to invest in OYO and is likely to put $100-200 million, the US-based subscription-led digital media company The Information reported citing two people familiar with the matter.
“It is more of a strategic move by their common investors Sequoia. Such transactions keep happening between portfolio companies of an investor. Today OYO is an attractive investment propostion for a lot of companies globally,” Dr Apoorv Ranjan Sharma, Co-founder and President, Venture Catalysts told Financial Express Online. Dr Sharma was among the early backers of OYO.
However, investing up to $200 million in OYO, which according to Dr Sharma is valued at $7 billion, means only a minority stake for Airbnb.
“Airbnb won’t get much equity and hence they will be a minority shareholder of OYO. This will strengthen Airbnb’s India and China business as you have to partner with a large local brand to enter a market,” said Dr Sharma.
OYO vs Airbnb
OYO’s Kavikrut had told that Airbnb could actually be a potential partner, since OYO manages other two dimensions of the homestay market that Airbnb doesn’t — managing day-to-day operations & guest check in/checkout fulfillment, and home infrastructure.
“There are three main components to the OYO home business model… Airbnb is only the first of these three — a successful platform that lets hosts lists their homes and guests discover and book them,” he said.
“In this regard, they are a potential partner to us,” Kavikrut said, adding that OYO is building and will own all the three layers of the business, which is necessary to unlock homes in a market like India.
On the other hand, Airbnb India’s Country Manager Amanpreet Bajaj told Financial Express Online recently that hospitality market in India is very vast and there is room for multiple formats to co-exist even as for Airbnb to win, no one has to lose.
Bajaj was responding to the question over popular chain of hotels and homes OYO’s growth in the homestay segment, in which it forayed in 2016.
“What’s unique to Airbnb is the fact that we are a global company with more than 6 million listings. This gives (us) the benefits of the global network effect in a big way. We are opening up an entire experiential economy which is very powerful as hosts (on Airbnb) get opportunity to showcase their culture, passion and monetise it (underutilised homes) for their economic benefit. Also, travellers are looking for more real and authentic experiences and there is no better platform for Airbnb to offer that currently,” Bajaj said.