MARKETING MANAGEMENT – I

Assignment – 1

Het Mauwalla Jyothirmayee Kotni Sidharth P Jacob

(0416/58) (0459/58) (0401/58)

Himanshi Nimesh Rahul Challa Soumik Mandal

(0411/58) (0406/58) (0410/58)

Hiranyabh Baishya Rahul Chauhan Supratim Maitra

(0407/58) (0403/58) (0149/57)
Industry Overview
At its core, the Hospitality Industry concerns itself with providing products and services to people that assist in
recreation and support people's well-being. For the purpose of this study, we shall focus on the lodging (hotel) sector.

Hospitality
Industry

Food &
Lodging Events Tourism Transportation
Beverage

Most hotels and major hospitality companies have set industry standards to classify hotel types.
Personalized
Full-service Luxury On-site On-site amenities
Type Services (Concierge Examples
accommodations amenities restaurant (pool, gym, etc.)
Room service etc)

Grand Hyatt, InterContinental,

Luxury ✓ ✓ ✓ ✓ ✓ Sofitel, Four Seasons, JW Marriott,
The Ritz-Carlton, OYO Palette

Upscale Hilton, Renaissance, Marriott, Hyatt

✓ X ✓ ✓ ✓
Full-Service Regency, OYO Collection, Townhouse

Boutique ✓ X X ✓ ✓ Independent High-end hotels

Ibis Budget, Hampton Inn, Holiday

X (Basic
Economy X X ✓ ✓ Inn Express, Fairfield Inn, Four Points
Accommodation)
by Sheraton, OYO Rooms

Medium to X (Basic
X X X X Local unbranded indigenous hotels
Small Scale Accommodation)

*Personalized service includes a concierge, room service, clothes pressing staff, etc. *On-Site amenities mean swimming pools, gyms, massage rooms, etc

* Full-service & Basic accommodations differ in the way that basic accommodations offer little to no services

The global hotel segment is a $525bn industry, made up of 18 million rooms. The sector is heavily dominated by international hotel
brands that curate the luxury and Upscale Full-Service on a global scale. In India, there is good penetration of these global players,
however they only supply to around 30% of the consumers, with the majority being serviced by independent/unbranded hotels.
The global average contrastingly is 54% of total consumers being serviced by branded hotels.

Global Hotel Industry Indian Hotel Industry

18 Mn 2.72 Mn
$525 Bn $ 80 Bn*
Rooms Rooms

*Estimated
India previously had only global brands services: the luxury & Upscale Full-Service type of hotels. Recently, new-age companies like Oyo,
Fab Hotels, Treebo have tried to fill the gap on the cheaper side of hotel types. They integrate such hotels under their umbrella with
innovative strategies. Further, the successful foray of such brands in the industry has been heavily propelled by new technologies and
increased online booking penetration being used in the hospitality industry in general.

% OF CUSTOMERS SERVICED BY: % of Online Booking Penetration

International Hotel Brands
in Hotels
Unbranded/ Independent Hotels
40
100 70
54 46 20
50 30
0
0
Global India
2015 2016 2018 2020 2021

Below we compare some of these new-age brands that have taken the industry by storm.

Company Overview
Let us take a detailed look at OYO, which is the main focus of this study.

Key Stats for OYO

❖ Largest hotel network in India, spread in ~259 cities

❖ World’s second-largest and fastest-growing hospitality chain
❖ Currently valued at $10 billion dollars
❖ 43,000+ franchised and leased hotels, 50000+ vacation
homes68.40% Market share in India
OYO started as a hotel aggregator and used to lease some rooms and sell them
under its brand name. It then changed its business model from aggregator to
the franchise model (sign up mom-and-pop hotels, spruce them up to
minimum standards under a single brand and take control of booking and
prices using proprietary software to boost occupancy and revenue). In
exchange, OYO charges hotels fees and commissions.
SWOT Analysis

Marketing Mix
Segmentation
OYO uses a culmination of 3 bases of segmentation: Demographics (Income), Psychographics (Personality and
Lifestyle), and Benefits sought to segment the market into three segments.

Business executives
Backpackers
Luxury travelers • Mid-High Income
• Low-Medium Income
• High-Income • Lifestyle: Frequent tier 1/2
• Lifestyle: Frequent tier
• Luxury lifestyle Travelers
2/3 travelers
• Benefits Sought: No • Benefits Sought: All the amenities
• Benefits Sought: Basic
compromises on quality and required for a comfortable stay
amenities. These travelers incl. Wifi, AC. These customers
services, irrespective of price are extremely budget-
• The OYO Rooms for these travel frequently for business, are
conscious and can
travelers are Destination technology savvy, look for pocket-
compromise on quality.
friendly accommodation, yet
Holidays, 5-star hotels, A villa • The OYO Rooms for these cannot compromise on quality.
on the beach, etc. irrespective travelers are mostly tier 2/3 • The OYO Rooms for these
of the price. tier hotels. travelers are tier 1/2 hotels.

Segment Rating Chart: Useful tool for assessing market segments

Here, we can see from the analysis that the hospitality market is not very attractive majorly because of
the micro-trends (Economy, Pandemic-Effect as we can see today, etc.) and the other factors seen in the
above analysis.

OYO has done a more than decent job capturing a large chunk (~80 %) of the market share by using
effective market segmentation. It has a high capability and resource allocation, and it had received ample
funding at the onset of the company. After that, it has not let the bar drop.
Targeting
OYO has specialized its products to cater to all the segments, but its core target market is the Business
Executive and the Backpackers.

OYO has used a differentiated marketing strategy, whereby it has used different marketing mixes to cater
to the needs and wants of the various segments.

Factors Affecting Target Marketing: Age, Gender, Interests, Geographic Location, Need, Occupation

OYO uses all these factors to determine which travelers would fit in which segment, provide them with
recommendations, and use a 360-degree marketing strategy. OYO used digital media to reach and attract
more customers. They implemented SEO and social media campaigns to attract more and more people.

All offerings of OYO target a particular customer segment.

The targeting is done via different marketing channels as part of the differentiated marketing strategy.
A summary of this targeting strategy of OYO for all of it’s products is jotted down in the below table.

Since the core target market of OYO aligns with the company's vision, i.e. to provide standardized,
affordable services to its customers, it uses various products and services to target different segments of
the market. For better targeting, it takes the help of user-generated data to better fit the product
according to customer expectations.
Positioning
The dimension of positioning used by OYO is - Problem Solution. At the onset of OYO, founder Ritesh
Agarwal has started the company with the core values that it would make all the basic amenities available
to its customers and make hospitality industry services value for money.

It has positioned itself in the hospitality industry as:

• Providing value for money
• Basic amenities are available, including Wifi-enabled, sanitary facilities, etc.
• Good Customer Service
• Easy-to-use app
• No compromise on quality

The tagline '#AurKyaChahiye' encapsulates the notion that OYO Rooms provides users with everything
they need for a comfortable stay.
The ‘Raho Mast’ positioning is part of the same…to let India know that no matter who you are, where you
are, whatever your budget when you spot that big red Oyo sign on a hotel, an app, or a website, you are
assured a quality experience

Perceptual Map

OYO has positioned itself as a medium of quality below the branded tier 1 hotels and above the unbranded
tier 2/3 hotels. On the pricing front, it has painted a picture in the minds of its customers that it offers
cheaper services compared to other players in a similar segment.
 PESTEL Analysis
Political Factors

Government vs. Tourism: Tourism contributes towards 9.2% of GDP and 8.1% of total employment in India. So, GoI is
introducing policies favorable for every sector which helps tourism, including the Hospitality Sector.

Government vs. Hospitality Sector: GoI encourages more registrations in OTA business and allows 100% FDI in the
hospitality sector, which enables to raise funds from foreign investors. It exempts rented rooms with declared tariff <
1000 and taxable hotel services < 10 lakhs from Service Tax.

Political Stability: A global company must flourish in other countries. Political stability ensures predictable market growth
while political chaos deters stakeholders’ trust in economic and organizational performance. Geo-political conflicts
between India and China, succeeded by GoI’s ban on Chinese apps, will negatively impact China’s attitude towards OYO,
the second-largest hotel chain in China.

Economic Factors

Inflation and Repo Rate: The inflation rate in India is projected to be 5.1% (>2%) in 2021-22. A higher inflation rate
decreases the value of assets. So, OYO must maintain its growth rate above this. To strengthen GDP, RBI had cut down
the Repo Rate from 5.15% (Feb 2020) to 4% (May 2020). This helps OYO collect more funds from banks. RBI hasn't
increased Repo Rate since then.
Unemployment Rate and Labour Productivity: During the pandemic, the unemployment rate rose to 7.11%. OYO, too,
had laid off thousands of employees globally. But OYO can take advantage of higher unemployment rates to increase labor
productivity by hiring a skilled workforce at low salaries. Labor Productivity (GDP per hour worked) measures output per
unit input (capital etc)
Economic Position: OYO has a funding of $3.3Bn as against its competitors with a maximum of ~140 Mn . This gives it an
advantage over its competitors as it can easily invest more to change the business model according to the ongoing
changes.
Purchasing Power: During the pandemic, GoI had a fiscal deficit of 16.8% of GDP 2020. The foremost solution is to increase
the spending of money. But, with job loss and money flowing towards the medical charges, people lost their purchasing
power in other areas. This affects OYO as its primary target customers are backpackers who are not willing to spend more.

Social Factors

Attitude towards Leisure: Ethnographic research should be done on the people’s attitude towards leisure time in a region
because it is important information on which OYO relies upon.

Demographics of a society: Changes in demographic patterns like aging-population, migration trends, and socio-economic
variables are highly important for global business organizations like Oyo Rooms. Proper segmentation should be done,
and governments’ attitudes towards migration must be considered to influence a firm’s ability to bring the best managers
from abroad.

Education and Cultural/Social norms: A higher level of education results in better jobs, higher income, and spending on
aspirational products. Consumer behavior is influenced by the social and cultural norms that avail in society. Even
traditional gender-based stereotypes (if any) must be considered, and OYO’s marketing should be done accordingly.
Technological Factors

Smartphones and Internet: Being a booming company of the 21st century, accessing the huge pool of opportunities of
the 21st century, accessing the chance of advanced technology via the internet and smartphones is necessary. But, in
some places, internet accessibility isn’t easy. In such cases, an alternative must be found, such as tapping foreign tourists,
etc.

E-commerce infrastructure and Digital drive: E-commerce is critical for OYO’s business model. It must evaluate the
infrastructure of e-commerce and related technologies before entering a new market. Digitalization of various processes
is an excellent way to overcome corruption in the economy.

Social Media Marketing: The development of information and communication technologies has led to the adoption of
innovative marketing strategies, including customer collaboration. Social media is one such technology, and Oyo had
already tried #OYOLove campaign. It can use these technological trends to start creating campaigns for developing online
brand communities.

Environmental Factors

Usage of eco-friendly commodities: Industries, nowadays, use higher amounts of disposable items, most of which are
non-biodegradable. These can cause serious environmental concerns, which can affect OYO too. Internationally, many
hotel chains are shifting towards more biodegradable items to counter the climate crisis.

Animal welfare: Many activities by companies are causing extinctions of major species such as corals etc. Therefore, hotels
are now being put under a lot of pressure by both governments and environmental activists, to ensure a minimal carbon
footprint. Demand for hotel stays is also affected by the weather conditions in certain times of a year.

Encouraging green practices: Hotels consume a lot of water, electricity, and gas, thus, resulting in shortage of resources.
To overcome the pressure by governments and NGOs, hotels must take energy usage seriously and use smart technologies
to reduce it. OYO can play an active role in encouraging green practices in its partner hotels. It can support other activities
on social media.

Legal Factors

Legal terms with Governments: OYO, being a global company, needs to pay special attention to the legal terms of the
countries it operates in. It was operating about 350 hotels in the USA, but the California government did not allow it to
run franchises. It had been penalized $0.2M for the same. It had also partnered with 30 hotels, which were not following
government regulations, and they had ceased functioning.

Legal terms with stakeholders: In 2016, Zostel, a backpackers’ hotel chain in India, had approached the court against OYO,
claiming that OYO had defaulted on an agreement that it has to issue 7% of its stock to Zostel in return for the transfer of
business.

Other Laws and Regulations: Oyo must concentrate on various laws and work policies specific to some countries. It must
follow workforce policies and anti-discrimination laws while hiring, training, and firing the employees. It must have a
background check on all the stakeholders it works with and offer deals or make promises accordingly. It must take care of
the workforce's health and well-being and try to follow data-privacy norms.
Financial & COVID- Impact Overview
Consolidated revenue for FY19 stood at USD 951 million, which is 4.5X YoY growth over FY18. Nearly 63.5% (USD
604 Mn), 36.5% (USD 348 Mn) of the revenue is from India and outside India. Gross Margin in India inc. from 10.6%
in FY18 to 14.7% in FY19, more than 90% of demand was repeat & organic, indicating the strength of the business
model & good customer experience.

However, the total gross margin fell from 10.7% to 7.1% in FY19 due to expansion in newer markets such as China.
FY19 Net Loss – India reduced from 24% to 14%; However global increased from 25% to 35% due to expansion in
newer markets such as China.

Q4 CY'19

0 10 20 30 40 50 60 70 80 90 100
Repeat Organic Paid

• Stringent Lockdowns implied • 73,000+ repatriated

highest cancellations Indians provided quarantine
• Gross Margin (rev after deducting • OYO Care tied up with 24+ state
exp at individual hotels) fell as ministries, 50+ govt. and private
much as 60% hospitals
• As of Jan 21, the gross margin • Housed 250,000+ hospital staff &
rebounded to 15% below pre- asymptomatic patients from Apr 20
pandemic levels • 200+ sailors were safely
• However, it is still losing money, quarantined across India
around $15 Mn a month

What’s OYO
COVID 19 Impact
doing