Oyo Rooms, the fast-growing Indian hotel franchise, has raised more than $100m from US room-booking site Airbnb, giving fresh firepower for its international expansion drive.
Founded in 2013 by then 19-year-old university dropout Ritesh Agarwal, Oyo has become the world’s most rapidly expanding hotel chain, adding more than 700 properties each month.
On Monday, it confirmed an equity investment from Airbnb, without revealing financial details. A person with direct knowledge of the terms said Airbnb had invested between $100m and $200m, at a valuation “significantly higher” than the $5bn reached when Japan’s SoftBank led a $1bn investment in September.
The person added that Oyo and Airbnb were exploring deeper collaboration, including making Oyo properties available through the Airbnb platform, but that this would not entail dropping partnerships with other booking platforms, such as Expedia.
For San Francisco-based Airbnb, the investment is part of a push to broaden its business as it eyes an initial public offering later this year or in 2020.
“Emerging markets like India and China are some of Airbnb’s fastest-growing, with our growth increasingly powered by tourism to and from these markets,” said Greg Greeley, Airbnb president of homes.
The company, best known as a place to rent an apartment, house, or room in a private home, has been seeking new sources of revenue and customer growth by offering a wider array of travel services. In March, it bought hotel booking site HotelTonight, which will add more hotel rooms to Airbnb’s listings, and has hired an airline industry veteran to oversee transportation offerings.
Already by far India’s largest hotel chain by room numbers, Oyo now claims to be the sixth-biggest in the world, having expanded into several markets in Asia and the west.
It has grown with a primary focus on low-priced hotels with basic but reliable quality standards. Of more than 10,000 branded hotels in its network, most are existing hotels whose managers agree to renovate them to Oyo’s specifications. In return, the hoteliers are allowed to use the Oyo brand under a franchise agreement, and gain access to Oyo’s proprietary hotel management technology and swelling user base.
After the SoftBank investment, Oyo also received equity infusions of about $100m each from ride-hailing companies Grab and Didi Chuxing, based in Singapore and China respectively, both of which are also backed by SoftBank. Most of the new capital has been earmarked for expansion in China, by far Oyo’s largest foreign market. In recent months it announced moves into several new markets, including the UK, the US and Japan.
Airbnb was valued at $31bn in its last fundraising in 2017. The company does not disclose financials but has said it was profitable on an adjusted basis for the past two years. Last month, it said 500m guests had checked in at Airbnb listings since its founding in 2008.
