OYO bets big on premiumisation, targets 25% annual growth with India at the forefront

After years of aggressive expansion, OYO has shifted gears — from being a loss-making startup to a profit-generating, premium-focused global hospitality player. Founder and CEO Ritesh Agarwal says the company is now doubling down on profitable growth, driven by a three-pronged strategy of premiumisation, deeper international expansion, and an “India-for-the-world” product play.

“For the last three years, our focus was reinvention — moving from a high-growth startup to a sustainable hospitality enterprise. That transition has paid off. Last year, we reported over ₹600 crore in net profit, marking two consecutive years of profitability,” Agarwal told Fortune India.

OYO’s broader goal for the next three years is clear: continue compounding what has worked. “We’re now able to fund growth with internal accruals rather than relying on external capital,” Agarwal points out.

India, meanwhile, is expected to outpace global growth for OYO over the next three to four years. “The domestic travel demand far supersedes any other market in the world,” Agarwal explains, citing a mix of booming domestic tourism and the rise in outbound Indian travellers.

The company, which grew 25% globally in top-line revenue last year, expects to maintain this growth trajectory. “India should grow faster than the global average,” he adds, underscoring that profit growth will likely exceed revenue growth due to OYO’s fixed-cost-heavy model.

Interestingly, India currently contributes around 30% of OYO’s revenue, with the remaining 70% coming from international markets — notably the US, Europe, and Southeast Asia.

Leisure travel, especially religious tourism, is emerging as a major growth driver for OYO in India. “Demand in cities like Ayodhya, Banaras, Prayagraj, and Rameshwaram has been unprecedented,” he notes. The surge was so significant that OYO Banaras registered more bookings for New Year’s than OYO Goa.

“Pilgrimage travel has become a triangle — anyone visiting Prayagraj is also going to Banaras and Ayodhya,” Agarwal explains, adding that the Pran Pratishtha at Ayodhya Mandir has further fueled demand.

International travellers, too, are contributing more — rising from just 2-3% historically to double digits in destinations like Banaras and premium properties like Sunday Hotel in Gurugram, which serves Japanese corporate clients.

Premiumisation play

OYO’s biggest bet now is on premiumisation — a trend Agarwal says is accelerating in India. “The consumer who used to stay at a ₹2,000 room is now willing to pay ₹3,000 for better amenities. This doesn’t mean moving to luxury but expecting more value,” he explains.

The surge is reflected in the company’s focus on its premium brands such as Townhouse, Townhouse Oak, Sunday Hotels, and Belvilla. In fact, the share of hotel bookings has grown from 65% during the pandemic to nearly 77%, while homestays have reduced from 35% to 23% as urban travel has rebounded.

Agarwal attributes this shift to rising incomes and changing consumer aspirations. “As GDP has doubled from $1.5 trillion to $3.5 trillion, disposable incomes have grown. People are spending more on experiences like travel rather than goods.”

OYO’s monetisation strategy has also matured. While revenue-sharing remains the core model, the company has expanded income streams to include food and beverage, events, meetings (MICE), and software services such as its property management system, OYO OS. “We are now at double-digit EBITDA margins on booking value and are targeting mid-teens in the coming years,” Agarwal shares.

Global ambitions

OYO’s international strategy mirrors its domestic approach — build in India, scale globally. “The saying goes, if you can do a good job in India, you can do it anywhere,” says Agarwal.

OYO now franchises close to 2,000 hotels in the US, over 300 in the UK, and manages nearly 100,000 homes in Europe. Its premium Sunday brand, which gained popularity in India, is also expanding in the UK.

A major advantage is the company’s full-stack technology suite, developed in India, that powers everything from reservations to revenue management across geographies. This tech-led approach also enables leaner operations — in some UK hotels, OYO operates without front desk staff, with keyless check-ins managed entirely via smartphones.

Looking ahead, OYO’s investment will be focused on three key areas — technology (especially AI-driven automation), strengthening its premium brands, and collaborating with hotel partners to unlock growth in underpenetrated markets.

“In 2019, we grew faster than we should have. But that experience shaped our disciplined growth approach today,” the young CEO admits. He now operates with four guardrails: maintaining customer ratings above 4.5, ensuring year-on-year income growth for hotel owners, keeping employee morale high, and delivering an EBITDA margin of 10% or more.

“In the first decade, OYO grew from a sapling to a small tree. The next decade is about growing that tree — quickly, but with significantly fewer resources,” he sums up.