OYO, operated by Oravel Stays Pvt. Ltd, once bet $600 million on conquering the Chinese market, hoping to replicate its Indian success story. But reality has proven far more complex than anticipated, as the company confronts the same obstacles that defeated previous foreign entrants.
The Localization Trilemma: Traffic, Distribution and Regulation
According to four individuals involved in OYO's China operations, the company faces multiple systemic challenges. The primary hurdle lies in customer acquisition—OYO has failed to integrate with China's dominant travel platforms, while its standalone website struggles to gain traction. Currently, most Chinese bookings still come through offline channels, creating an urgent need to transition customers to digital platforms.
In an email statement, OYO Senior Vice President Yufei Hu noted: "We currently lease or franchise over 1,000 OYO hotels through multiple platforms including third-party distributors and WeChat, while serving numerous guests through prepaid channels. We're focused on upgrading infrastructure and ensuring quality accommodations while maintaining strong partner relationships."
The second challenge involves distribution networks. Unlike Western markets, China's internet ecosystem remains highly compartmentalized, with strict regulations and fierce local competition. Despite backing from SoftBank's Vision Fund, OYO remains excluded from Meituan—China's dominant hotel booking portal.
While OYO attempts to build its own platform, industry analysts consider this a daunting task in China's protected digital marketplace. Other global travel platforms like Expedia and Booking.com similarly face barriers to direct hotel bookings in China.
Valuation Boom Meets Reality Check
OYO's valuation skyrocketed from $850 million to $5 billion within a year, fueled by SoftBank-led investments totaling $800 million. This optimism largely stems from China's $134 billion travel market potential. Success here would make OYO a rare foreign startup to thrive in China, while failure would place it alongside departed giants like Amazon and Google—with significant implications for its global strategy.
Offline Strategy: Reinventing Budget Hospitality
Founder Ritesh Agarwal revealed in a September 25 interview that while OYO remains absent from Meituan, it's available on smaller platforms like Fliggy and Qunar. The company reportedly still relies heavily on offline bookings through registered hotels and call centers.
To adapt, OYO employs aggressive localization—maintaining 1,000+ Chinese employees and requiring property upgrades before branding. Currently focused on second- and third-tier cities, the company plans deeper penetration. Its model standardizes budget hotels through branding and operational efficiencies—a formula successful in India but facing complex execution in China.
Global Ambitions: Targeting the 2020 Olympics
Beyond India and China, OYO operates in Malaysia, Britain and Nepal. The Gurugram-based company, founded in May 2013, now eyes Japan ahead of the 2020 Olympics. Agarwal notes India's 4.3 million unbranded rooms pale against China's 35 million (with only 25% occupancy)—a gap his company aims to address.
OYO's global expansion reflects confidence in budget hospitality, but market-specific challenges persist. Beyond China's regulatory maze, Japan presents cultural adaptation hurdles. Whether OYO can replicate its Indian success worldwide remains uncertain.
Conclusion: High Stakes in the World's Largest Market
OYO's China venture represents both enormous opportunity and existential risk. While the market offers unparalleled scale in budget travel, its competitive intensity and regulatory complexity have defeated stronger players. OYO's performance here will not only determine its own trajectory but provide crucial lessons for foreign digital enterprises eyeing China.