Alternative Finances

OYO: Why Credit Could Be Key To US Expansion

hotel front desk

India-based hotel and booking startup OYO has been on a tear lately, landing $1.5 billion in new funding, expanding to new markets and getting into new areas — most recently, coworking spaces. Now, the fast-growing operation is tapping into one of the growing trends in payments and commerce by offering online financing for its many partners.

That news of the funding comes amid bigger, related changes in the larger travel and hospitality industry, changes sparked by digital and mobile technology, along with shifting consumer patterns. To get a better handle on what’s going on — and why OYO is embracing hotel financing — PYMNTS recent talked with Abhinav Sinha, chief operating officer and operating partner at OYO USA.

In case one doesn’t know (hey, the hotel industry is undergoing some significant development), OYO is an India-based operator of economy and mid-economy hotels that launched in 2013, is now active in some 80 countries and is trying to increase its U.S. market share as this new decade looms. One way to play harder in the U.S. is a new program that has OYO partnering with Biz2Credit, a small business online lending platform. The general idea is to provide working capital and commercial real estate loans to OYO-affiliated U.S. properties.

Bigger Trends

The motivation for doing so reflects bigger trends not only in the hotel world, but the wider worlds of payments and commerce, where all kinds of businesses are racing to provider deeper and more meaningful experiences to customers and clients — and to better tie them to specific ecosystem, whether in travel or other industries. “It’s a great time for us think more holistically about the service we bring to our hotel partners,” Sinha told PYMNTS. The company has at least 150 hotel partners, he said, with 30 more joining each month. This financing program could help spark further growth while also building a better ecosystem for OYO, at least in his view.

Those loans via Biz2Credit and OYO are intended to go toward such area as renovation, redesign, infrastructure upgrades and investment in technology for improved revenue management and operations. “We are not just talking about typical marketing [and other such tasks],” Sinha said when discussion the new program, which was made public in early October. “Those improvements can increase the yield on [hotel assets].” The analysis of online data points and other information present financing options that, according to Sinha, are faster and more efficient than other ways of securing such capital. The partnership includes a mutual referral agreement — that means Biz2Credit will refer its hotel clients to OYO.

Online financing is gaining traction throughout the economy, and that includes the travel sector — itself a complex and varied area of commerce of payments. In one recent and perhaps influential example, that can include point-of-sale financing for costly vacations, a payment option that can encourage or enable more people to travel. UATP CEO Ralph Kaiser noted in a previous conversation with PYMNTS and Uplift CEO Brian Barth that it becomes particularly important to offer a variety of payment methods at checkout, including alternative methods like installment financing.

The financing option from OYO doesn’t cover vacations, of course — it’s a B2B offering, after all — but it is designed to allow hotels to better serve and attract customers who don’t necessarily want to stay in a stale, boring place with old infrastructure and technology. The new offering also demonstrates how digital technology as is bring more flexibility — or at least the potential of more flexibility — to the travel and hospitality space as a whole.

It’s a space in which OYO is aggressively trying gain more market share and loyalty. And it recently gained a huge amount of fuel to further that effort. Earlier in October, it announced a $1.5 billion funding round led by Founder Ritesh Agarwal, SoftBank’s Vision Fund, Lightspeed Venture Partners and Sequoia India. OYO offers 1.2 million rooms in 80 countries, including China, and more recently, in the U.S. The unicorn ranks second among India’s startups, behind One97 Communications, the parent of digital payments pioneer Paytm.

Other Focus Areas

Hotels and financing, though, aren’t the only area of focus for OYO, as Sinha discussed with payments. The company has recently expand into coworking spaces, according to a reports. Not only that, but vacation rentals are a prime area for OYO, reflecting other bigger trends in the online commerce world. For instance, back in May, OYO acquired Leisure, a rental company based in Amsterdam, and rebranded it as OYO Vacation Homes. OYO has around 23,000 hotels and around 125,000 vacation homes.

Indeed, Sinha told PYMNTS that even with the increasing crowded online vacation rental market, there is ample room for growth with rentals, thanks in large part to more individual homeowners want to earn more money from their properties — and finding easier ways to do that via online platforms. Rentals, in fact, will play a major role as OYO grows and tries to become more things to more consumers, which Sinha means offering more products at broader price points to appeal to what he called broader demographics.

That’s a bold goal, but travel and hospitality are quickly changing. How and where OYO succeeds will no doubt offer many hard lessons for the many other global players in this space.

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