India based Oyo Hotels & Homes, which has been announced major investments in the U.S. and Indonesia announced that it plans to invest $50 million to expand in Vietnam. According to Dushyant Dwibedy, General Manager for Oyo in Vietnam, the company has opened 90 hotels with 1,500 rooms during the second quarter of this year and now has properties in Hanoi, Ho Chi Minh City, Da Nang, Nha Trang, Phu Quoc and Vung Tau. The company expects to expand its network to 10 cities in Vietnam by the end of 2020, with 20,000+ rooms available to travelers.
|The Riverside Hotel in HCMC is now branded as an Oyo network property|
Oyo has been making news in the hotel industry after it announced three weeks ago that it would invest $300 million USD in opening or acquiring hotels in the U.S. Earlier, the company had also announced a $100 million USD investment in hotels in Indonesia and says that it now has 720 hotels with 20,000 rooms across 80 Indonesian cities in its network, with another 308 hotels scheduled to be in operation by September.
Oyo believes that if a $100 million USD investment in Indonesia can allow it to scale rapidly there, then there is no reason it cannot repeat the feat in Vietnam with its proposed $50 million USD in investment funds.
|An Oyo branded hotel in Indonesia|
Dwibedy, Oyo’s Vietnam GM attributed the company’s quick expansion to 90 hotels in Vietnam in a matter of three months to several factors.
• First, Vietnam is unique for having many “mini” hotels, that is, buildings with 20 to 40 rooms, often even smaller than 20 rooms. These properties have a greater need to spread their fixed costs and owners “are more open to experiment with technology”
• Second, based upon experience Indonesia, Malaysia, and the Philippines, the company has identified key factors for hotel conversions
• Third, Oyo moves with speed. The company says that it can identify and onboard properties within 10 days, renovate them in record time, create demand and use technology to raise operational efficiencies.
In the view of many hoteliers, Oyo’s model is flawed because of both the operation and financial challenges the company faces with its large expansion into multiple markets.
But Oyo seems confident in its model and it statements to the press noted their Oyo Center Danang as a case study. According to Dwibedy, the Danang property saw a 150% increase in room rentals after Oyo redesign and branding, and Oyo’s pricing and revenue management, tools resulted in a 50% increase in revenue in three months for the hotel owner.
Oyo says that is business model and technology will help hotel owners to double their revenues, but whether this also translates into overall profitability remains to be seen. With an average room rate of only $17 dollar per room, margins are small so if Oyo is correct, it will be a blessing to many independent, small hotel owners.
One hotel expert we contacted for this articles said that Oyo can help small hoteliers, but that managers and owners of medium and higher range hotels are more worried about AirBnB and other short-term home-sharing networks, which are now estimated to account for 40,000 rooms of inventory.
As Vietnam’s international visitors continue to increase, travel industry experts are now starting to question a “growth at all costs” mentality and instead are beginning to question whether Vietnam should focus on business, family and long-stay travelers rather than back-packers and Chinese-tourists on package tours who are considered at the lower end of the tourism visitor market.
Simply put, Vietnam should focus on visitor segments that put more money into the economy with their visits, and who are also likely to become return visitors to the country in years to come. However, in order to capture these market segments, the country need to develop world-class conference and exhibition facilities and to become a “family friendly” country that has a variety of attractions that will appeal to families with children. One thing for sure, Vietnam’s travel industry is changing quickly and Oyo Hotels is entering Vietnam at a very interesting time.