India hotel chain: Federation of Hotel & Restaurant Associations claims invalid

OYO Opinion

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India’s hotel chain OYO believes claims made by the Federation of Hotel & Restaurant Associations of India (FHRAI) are invalid. The hotel chain is rejecting recommendations made by FHRAI saying the organization has been misleading.

While OYO will continue to engage with FHRAI and with its asset owners on a one-to-one basis, to resolve issues if any, the company strongly condemns the misplaced demands of certain organizations, claiming they are not in the best interest of consumers or asset owners. An OYO spokesperson who chose to remain anonymous stated:

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“Today, OYO Hotels and Homes, a full-scale hotel chain like many others, operates over thousands of franchised and leased hotels in India and hosts millions of guests from around the world. More and more people choose OYO every year than any other hotel chain in the country, and that is because of our collective focus on delivering high-quality customer experiences. We are privileged to partner with asset owners and independent hoteliers across the country and globally, to ensure a much higher occupancy leading to better financial returns on all of their hard-earned investments. On an average, 75% of hotel owners associated with OYO have seen an increase of 20-30% in occupancy in the first three months of operation as an OYO branded property.

“We are aware of the recommendations made by FHRAI, and believe that the same are misguided and misplaced, and based on incorrect allegations made by small groups of people (not necessarily by franchisees and lessors associated with OYO Hotels) with vested interests. Neither are these demands aligned with the sentiment of the larger group of asset owners franchised or leased their property with OYO Hotels. Them coming together and creating a collective public uproar to get their unreasonable and vested demands fulfilled, is not in the best interest of the consumers or asset owners.

“As an example, certain bodies have incorrectly claimed that OYO charges high commission, we would like to confirm that our franchise fees are not only in line with the industry, but it also enables us to create and maintain a world-class distribution platform for our asset owners and invest heavily in the improvement of the asset related infrastructure. Also note, we have never charged over 25% franchise fees, do not intend to in the future as well, unless we invest a massive amount of capex in the property, in which case again, we operate within the realms of standard industry practices.

“We manage two star and three-star hotels that usually run on market-led REVPARs, similar to other branded hotel chains while maintaining what is ideal for customers and generates fair yields for our assets owners. Identical to other mid-market hotel chains, we operate our leased and franchised assets while following strict compliance with the contractual terms.

“Also note, OYO like all other branded hotel chains follows strict compliance procedures and is fully compliant as a franchisor or lessee operating in India. Lastly, we can deliver predictable and affordable tariffs to our customers because we can reduce our cost of operations significantly when compared to traditional hotel companies, through the use of technology, superior talent and scale.  If OYO Hotels were to fulfill the unreasonable demands to  hike price, OYO Hotels will be the first beneficiary, but with our experience, we understand that this will disturb market dynamics and cause a disservice to both the customers and asset owners. Complying to these demands will not only make the category expensive for customers, with almost 40% price into hike increase, and but will also lead to a drop in occupancy and thereby impact overall business adversely in the long run.

“Similar to airlines, and ride-sharing companies, OYO has introduced dynamic pricing in the hospitality industry to create a level playing ground even for an independent or small hotelier. The pushback on adoption of these forward-looking business practices will, in the long run, be detrimental to the hospitality landscape, hoteliers and most importantly the customers, and result in the unavailability of quality accommodations at affordable prices.

“We at OYO strongly condemn this and will remain committed to maintaining market led RevPars that are beneficial for asset owners and affordable to consumers.

“Having said that, we are actively engaging with the asset owners, franchisees and lessors associated with OYO Hotels, on a one to one basis to understand and address their concerns and work towards further strengthening our relationship with them.”