OYO sells minority stake to Airbnb; raises $100-200 million for expansion

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April 1, 2019 5:24 PM

Around a month after OYO told Financial Express Online that Airbnb could be a "potential partner" to them, the two hospitality companies have now formalised that. Investing in OYO would give Airbnb significant access in the affordable hotel segment in India (where OYO claimed to be the seventh largest chain of hotels) and China.

Airbnb India country manager Amanpreet Bajaj had told Financial Express Online in March that India is very vast and there is room for multiple formats to co-exist.

Around a month after OYO’s Chief Growth Officer Kavikrut told Financial Express Online that Airbnb could be a “potential partner” to them, the two hospitality companies have now formalised that. Softbank-backed OYO is securing $100-200 million from Airbnb that would give latter significant access in the affordable hotel segment in India (where OYO claimed to be the seventh largest chain of hotels) and China.

Airbnb’s strong global footprints and access to local communities will open up new opportunities for OYO to strengthen and grow,” PTI quoted OYO Hotels & Homes Global Chief Strategy Officer Maninder Gulati as saying in an emailed statement.

“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 had told Financial Express Online. Dr Sharma was among the early backers of OYO.

However, this doesn’t give Airbnb much stake in OYO, which according to Dr Sharma is valued at $7 billion.

“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.

Airbnb India country manager Amanpreet Bajaj had told Financial Express Online in March that 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 OYO’s growth in the homestay segment.

Greg Greeley, President of homes at Airbnb said that India and China are some of its fastest-growing markets where OYO is growing. Hence, “We’re excited to partner with OYO as we work to make Airbnb for everyone,” Greeley told PTI.

OYO, on Thursday launched its apartment rental service — OYO Life in Japan. The company, which currently manages 515,000 rooms globally, envisions to become the largest hotel chain by surpassing 1.29 billion rooms managed by Marriott, by 2023.

“I believe it (overtaking Marriott) will come sooner,” Nikkei Asian Review quoted Agarwal during the launch.

OYO has seen a 4.3X year-over-year growth in business with realised value annualised run-rate of $1.8 billion, OYO spokesperson said.

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