India's fast-growing company continues to draw attention. It is now developing on the luxury segment in Saudi Arabia. In order to pursue its international expansion and diversification, the startup has raised new funds.
New funds for massive diversification
The Indian startup has just raised $1.5 billion as part of a Series F funding round. RA Hospitality Holdings’ will inject $700 million, after having received approval to invest $2 billion in OYO earlier this year. The rest of the new funds ($800 million) will come from multiple investors. At the same time, Lightspeed Venture Partners and Sequoia sold part of their shares to OYO’s founder and CEO.
Ritesh Agarwal also announced that the company has been able to improve its EBITDA by 50% on a year-on-year basis, meaning that they are “operating profitably at the building level” as he said. These funds will be used to keep diversifying the company’s portfolio and to support the management and the operation of OYO's five-star and luxury properties.
Despite the company's success, the business model and its desire for growth have not made the company profitable yet. Therefore, it needs new funds in order to pursue its international development strategy.
Ritesh Agarwal stated as follows:
Given how we continue to make forward-looking investments in the form of Capex support to our asset owners, developing our technology, onboarding pricing, revenue management, talent acquisition, training and developments at the group level, we are not profitable yet.
Development in the luxury segment in Saudi Arabia
OYO Hotels & Homes will invest $1 billion in the Saudi luxury hotel market. The group will therefore add luxury properties, but also mid-range, premium and high-end properties to its portfolio in this market. The latter already includes 130 properties, or 6,500 keys spread over 14 Saudi cities. At this announcement, Ritesh Agarwal, founder and CEO of OYO Hotels and Homes, said:
The luxury segment in the Kingdom of Saudi Arabia holds a lot of promise for us given the rapid growth of the hospitality industry over the last few years. (…) Our operations in the region are supported by over 350 Saudi nationals and we are keen to generate employment opportunities for young hospitality enthusiasts in the region. The Kingdom’s hospitality industry offers a huge, untapped opportunity and we’ll continue to invest in it and expanding OYO’s presence in the region.
An untapped opportunity to come with the new visa to facilitate tourist stays in Saudi Arabia. A measure that aims to achieve the target of 100 million tourists per year by 2030, compared to 17.7 million in 2018.
In addition to strengthening its presence in this market, this development will create 5,000 jobs in Saudi Arabia by 2020. Also, OYO will also set up 2 training institutes in Riyadh and Jeddah, in order to train “hospitality enthusiasts” with OYO hospitality standards in the Kingdom.
With a strong international ambition, the startup aims to surpass the world's number one hotel company, Marriott, by 2023. The Indian currently claims 458,000 rooms in 8 countries, an amount multiplied by 8.7 compared to 2018, placing it in 8th place in the world ranking (Hospitality ON data as of 1 January 2019).