Ritesh Agarwal Interview | It is still Day 0 for us but an entrepreneur is wired for risks, says OYO founder

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Published: September 23, 2019 8:45:58 PM

From my perspective, as an entrepreneur, one is wired to take risks. You, of course, need to be smart and take calculated risks, and then do all you can to make it worth the risk, says Ritesh Agarwal.

oyo, ritesh agarwal, oyo china, oyo us, softbank oyo, oyo valuation, oyo hotel chainWe are profitable at a building-level, says OYO Founder & CEO (Group), Ritesh Agarwal.

At a young age, OYO Hotels & Homes Founder and CEO (Group) Ritesh Agarwal has got his hands full in building a model that perhaps doesn’t have any precedent globally. But being the only one-of-its-kind globally, OYO might have everything to lose given the scale at which it is. But does that bother Agarwal? “That’s an interesting question. Being the only one-of-its-kind globally is a good thing for us in many ways. Our competition is with what we were yesterday,” said Agarwal who is a huge believer in Kaizen — the philosophy of continuous learning and improvement.

At 25, probably the youngest entrepreneur heading a company that has a private market valuation of $5 billion “it is still Day 0,” according to Agarwal as he speaks to Sandeep Soni in a freewheeling and wide-ranging interaction more as the entrepreneur Ritesh Agarwal and less as the leader of the company that is soon to catapult into the biggest hotel chain globally. Below are the edited excerpts – part 1.

Businesses say we can turn profitable whenever we want but scale comes first. I am sure this is the case with OYO as well. How does OYO’s profitability path look like?

Profitability is something that is very much on our radar. We are profitable at a building-level. We have been investing in technology, talent and hotel infrastructure upgradation. On a Y-o-Y basis, we have seen that not just our buildings are operating profitably at the building level but our EBITDA has also improved by 50 per cent (on a Y-o-Y basis).

We are thinking long term and are operating with a clear path of operating efficiency. The losses as a percentage of Net Realised Value have been on a steady and significant declining curve. This year, the company has seen a 4.4x Y-o-Y growth in revenue in June 2019 (versus June 2018), with 1 million rooms under management across hotels and homes; with over 200,000 rooms in India.

Do you think, because of the growth so far and vision ahead, your business model is invincible now, much like what companies like Nokia or Kodak or Yahoo perhaps also thought?

From my perspective, as an entrepreneur, one is wired to take risks. You, of course, need to be smart and take calculated risks, and then do all you can to make it worth the risk. At OYO, we certainly don’t rest on our laurels. For us, it is still Day 0 and we have a long way to go. There is always room for improvement in experience and it can be achieved if one listens to the customers carefully.

We place our bets on technology and innovation. While we are the first hotel chain to develop in-house technology platform and operating systems, including a suite of over 20 apps for managing all aspects of operations, we are always on the look-out for identifying and adapting to the next big thing. Case in point – IoT switches or evaluating greater use of AI as well as VR or AR for audits and hotel transformation.

As an individual, what thought process you go through during testing times such as hotel partners agitation, associations questioning the company’s intent, police case etc.?

That’s a very interesting question. When you scale up your business there will invariably be small groups of vested interests unwilling to see the new ground reality. If you see the history of entrepreneurship in India and elsewhere globally, there are many examples of entrepreneurs navigating their way through these challenges. We will not bow down to the unreasonable demands of vested interest groups, a majority of which are owners running competing properties, instigating and intimidating independent hotel owners associated with OYO, and creating false public uproar or arguing against transparent pricing and quality standards introduced by OYO that can fundamentally improve customer experience.

So how do you look at addressing these problems?

At OYO, we often refer to this as an occupational hazard, that one has to work with keeping in mind the larger picture – 18,000+ hotel owners in India alone choosing OYO and growing with OYO. This year alone, we have had over 642 hotel owners, with hotel sales over Rs 1 crore each, a stark increase from their earnings before becoming a part of OYO. So my personal thought process is to treat the issues based on their merit. The OYO Partner Engagement Network (OPEN) is a great example of us spending our energies on identifying ways and initiatives that can add value to an OYO hotel owner’s experience. I don’t let needless speculation deter me or my team from pursuing our mission.

Culturally, the business has to be flexible according to every new market it enters. How do you ensure that at OYO?

Our teams across the international geographies have observed local nuances with respect to the hotel industry in each of the countries we are present in. These observations help us in highly localizing and personalizing the experience for our guests. For instance, in the Philippines, most hotel rooms also keep a copy of the Bible in the drawer/on the table in the rooms for guests. In Indonesia, most hotel rooms have the Qibla sign also known as Arah Kiblat in the local language Bahasa. As Malaysia hosts a lot of Indian tourists, the hotels provide information on the nearest Indian/South Indian restaurants.

Do you think you have got everything right at OYO so far? Did you ever compromise on growth for anything?

Nobody or no company in this world can say they have got everything right and it has been a perfect journey. In 2015, there was a time when we had a lot of complaints regarding our customer service. We took the hard decision of stopping growth for four months, no matter what our shareholders said. And I feel it was one of the best things we did. We focused on identifying key problem areas and finding solutions that are scalable.

Today, as we scale across 800 cities and 80 countries worldwide, we adopt a problem-solving approach, identify the opportunity in the middle of every potential difficulty and cultivate cross-functional synergies to surmount obstacles.

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