The business reporter learned from Airbnb that the company has confirmed its investment in the Indian hotel group OYO. Although the details of the transaction have not been disclosed, the capital linkage between the two companies mentioned above is already sufficient to draw industry attention. In the eyes of industry insiders, OYO, known for its rapid expansion and constant controversies, has risen to become the group with the largest number of hotels in China. If the listings on Airbnb rapidly expand from homestays to chain hotels, it will surely encounter more competitors. In the future in China, Airbnb will not only have to deal with Chinese apprentices like Xiaozhu Short-Term Rental and Tujia, but also face fierce competition from OTA giants such as Ctrip and Meituan.
Invest heavily in OYO
The long-awaited 'partnership' between Airbnb and OYO seems rather low-key. As of the time of the Beijing Business Today reporter's submission, neither party has disclosed more details of the transaction. However, according to an American technology media outlet citing informed sources, the transaction price is between 150 million and 200 million US dollars, and Airbnb will consider how to provide OYO's accommodation services to users on its platform. Greg Greeley, president of Airbnb's housing business, said, 'Emerging markets such as India are the fastest-growing markets for Airbnb. Airbnb's global growth is largely attributed to the development of tourism in such emerging markets.' In many emerging markets, OYO is helping local accommodation industry entrepreneurs offer travelers more travel options.
It is worth mentioning that this is not the first time Airbnb has ventured into hotel industry investment. On March 18th of this year, Airbnb announced the acquisition of the hotel booking platform HotelTonight, hoping to enhance its penetration into the hotel business through this move. Some insiders believe that Airbnb's continuous investment in the hotel reservation sector might be related to the tightening of its policies on short-term rental properties for homestays on a global scale.
Since the beginning of this year, Airbnb's business in markets such as New York, Paris and the Netherlands has constantly encountered obstacles. For instance, on March 12th of this year, the city of Amsterdam in the Netherlands banned the private rental of rooms on the Airbnb platform and required homeowners to rent out their rooms through such platforms for no more than 30 days a year. It is even considering prohibiting the operation of homestays on certain streets.
It is also worth noting that Airbnb once stated, 'We will be ready to go public by July 1, 2019,' and there are currently less than three months left until this plan is reached. After successively investing in two hotel service providers, Airbnb has accelerated its expansion from homestays to the hotel sector. In the industry's view, this is also an important step for Airbnb to pave the way for its listing.
'Make enemies on all sides
Airbnb's investment targets are by no means 'good people'. According to the information, OYO Hotels was founded in 2013 and is the largest hotel chain brand in India. In China, OYO has emerged as a 'dark horse' in the economy hotel sector, completing in just one and a half years the journey that took traditional economy hotels like Home Inn and 7 Days Inn ten years. It is understood that since OYO entered China in November 2017, as of February 28, 2019, OYO has been operating over 7,400 hotels in 298 cities across the country, with more than 340,000 guest rooms. However, the total number of the three major chain brands, Home Inn, Hanting and 7 Days Inn, that have been in operation for ten years has only just exceeded 7,000.
Unlike traditional hotels such as Home Inn and 7 Days Inn that charge franchise fees, OYO Hotels does not charge franchise fees. Instead, it charges a commission of 6% to 8% of the hotel's turnover based on the hotel project. As franchisees can join after simple renovations, it has also been given the title of 'OEM hotel' by the industry.
With OYO's rapid expansion, it has also encountered resistance from Internet platforms such as Ctrip and Meituan. In September 2018, OYO Hotels was once 'frozen' by Meituan and Ctrip. It was reported that at that time, some media searched for OYO hotels in regions such as Suzhou, Hangzhou and Shenzhen on Ctrip, but no hotel information related to OYO appeared in the search results. In addition, OYO is lagging behind in ranking on the search page of Meituan-Dianping. Even some hotel owners have reported that OYO hotels have been taken down.
Zhao Huanyan, Chief knowledge Officer and senior economist of Huamei Consulting Group, said that Airbnb is a company mainly engaged in short-term rental homestays. Although it has been vigorously expanding its business in China in recent years, it has also encountered resistance from local homestay enterprises such as Tujia and Xiaozhu Short-Term Rental. Unlike the actions in the general capital market, Airbnb is not a venture capital firm. Therefore, it is highly likely that the two sides will join hands in business. Next, Airbnb, as a platform, is likely to offer support to OYO. However, in this case, it is very likely to be resisted by the opponent.
It is understood that currently, several major OTA platforms in China, such as Ctrip, Fliggy, and Meituan-Dianping, all have a large business in the hotel accommodation sector. According to Ctrip's 2018 financial report, accommodation reservations accounted for nearly 40% of its total revenue. In addition, Meituan-Dianping's hotel room night booking volume reached 283.9 million in 2018, increasing by 38.5% year-on-year. A considerable portion of this share was from small and medium-sized hotels. It is evident that Airbnb's expansion in the hotel sector has affected the 'pie' of OTAs.
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