Bill Gates Is Someone I Am Inspired By: Ritesh Agarwal, Founder and CEO, OYO Rooms
In a free-wheeling interview with Annurag Batra, Chairman and Editor-in-Chief, BW Businessworld, Ritesh Agarwal, Founder and CEO, OYO Rooms talks about the future of OYO Rooms, his perception of being an Indian and more.
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Since you started, what are the three things about India that have changed positively? Tell us something about India that needs to change, but hasn’t?
Among the three things that I feel have changed very positively is the hunger of young Indians. That has changed disproportionately. A few years back a lot of young Indians used to say they need this job or I need to do this better. Recently, I was at one of our call centres and I was speaking to our young Oyopreneurs. I asked, ‘What do you aspire to do in the next ten years?’ One of them said, ‘Ritesh, the company that you’ve built — I want to build a company a little bit bigger than that!’ So, the aspirations and hunger of young Indians are world-class and they aspire to be number one in the world.
The second thing that I feel is very good, specifically about young India, is that they understand the western world, but at the same time, are genuinely proud of being Indians and of their Indian heritage. There is an Indian dream that young India has, which is not the same as the dream a young American would have. And, the third thing which is very fascinating to me is how technology and the Internet has really changed our lives. I feel India has done really well on these three fronts.
The one thing that I would like to change further is fundamentally the ability to continue to question the system of education and the way it has been run for many years. When I dropped out of university I was asked questions. But in the Thiel fellowship, one of the things we sign in the contract is that we would never let the university interfere with education. Education is important, but it may come from anywhere, rather than the formal education system. I feel that the formal education system is great but it should provide avenues and formats to learn in a manner which is not just unidirectional.
What is Ritesh Agarwal’s leadership style? How do you create Oyopreneurs? How do you work with a bunch of talented people and leaders?
More often than not, when you start your business, there are two kinds of people that you end up recruiting. Either the ones that you have worked with earlier or the ones that you went to university with. Unfortunately, I had never worked in a professional organisation before and I did not go to a university. So the only friends I could have invited were my high school friends, who were not as excited about this opportunity. So I had no choice but to bring high quality, top-notch professionals.
I call myself the Chief Clarity Officer (CCO). So my job is to say what is the direction and what are the things we are not going to do. After that, I’m not the best technology guy. I’m not the best finance guy. I’m not the best sales guy, so on and so forth.
What I’m good at is telling people what not to do and then bringing the best people to do the job. So in the last six years, I have brought in probably 16 key leaders who have directly reported to me. Now 15 are with the company.
The 16th person is also with the company, but has now become my boss. So he’s on the board now. Till now all 16 are with the company. All of these are highly trained professionals coming from very successful backgrounds.
Are there any expectations you have from the Budget as an entrepreneur and as a key player in the hospitality sector?
I’m sure the government is looking into it. This is one of the most important Budgets, especially since we are at such a critical juncture before the big dream and aspiration of getting to be a $5=trillion economy that our country aspires to be. I think there are a couple of things I would like to talk about.
The first one is, as you can see, in our country the domain of startups is one of the places where there are more and more foreign direct investments (FDI). There are more and more infrastructure investments that companies like OYO and other companies have done.
Secondly, as our country grows, infrastructure investments will be the single biggest factor for long-term success. These are things that people don’t appreciate in a natural manner.
I know that you’ve set a 2023 target for OYO becoming the largest hospitality chain. But tell us what we should expect from OYO in 2020?
The year 2019 was very important for our company. We started in 2019 by being primarily an India-based company with over 95 per cent of our revenues coming from this part of the world, and with close to 2,00,000 rooms under our belt. We start 2020 with million-plus rooms under our management.
Now we are one of the largest hotel companies in the world, hosting hundreds of thousands of customers every day at OYO Hotels and Homes in more than 80 countries across the world. So when I look back at 2019, I feel very thankful that I was able to create this big impact, create the opportunity to serve so many customers, asset owners and to ensure that more than 90 per cent of our revenues in our mature market still comes from repeat customers and via word of mouth publicity, rather than from only new customers.
I will break down my answer into parts. The first is for our customers, then for our asset partners and then our team and then, society at large. Customers are at the heart of every decision. We genuinely feel that our customers need three things — better services, better locations and better prices. If we get these three things consistently right, we will create value for our customers.
The second is for our asset partners. We are actively working with our OYO open programme to ensure that we can bring back the trust of that small percentage of asset partners who’ve had problems in the past. We want to ensure that all our asset partners continue to appreciate, love and believe in the OYO mission.
How important is the China market for you?
Clearly, India and China are our biggest markets across the world. Of course, Europe and the United States are our fastest-growing markets.
China is one of the most important markets for OYO. I think we are one of the leading hotel chains in China, hosting hundreds of thousands of customers every day.
We believe that the middle-income Chinese customer has an aspiration of a better lifestyle, better experiences, but without hurting their pockets. And this is what we’ve been bringing to our Chinese customers, which will continue this year too.
You’re a product of the Internet-led consumer economy — entrepreneurial, asset-light and experience-heavy. Why did you buy hotel assets in Vegas?
OYO manages roughly 46,000 properties worldwide. So these are one or two in scale. OYO continues to remain 100 per cent asset-light — meaning even in these assets, OYO’s contribution to the dollar share in the final acquisition is probably less than five per cent. The primary investments came from third-party partners.
For example, in the Vegas asset, we had a couple of shareholders, a couple of debt providers and so on, who brought the asset to OYO in the process. We are very small capital providers.
And how does that fit into the overall plan of OYO Hotels and Rooms?
The primary intention for OYO in these assets is economic. If we look at the total fees OYO will earn as the business and revenue partner in these assets for the next 20 years, it will be so much more than the capital investment.
You took on a huge debt and you bought back your shares. Tell us a little bit about that.
I have always believed in playing a really long game. So I was provided multiple opportunities to do a potential secondary transaction over the last few years saying, ‘Ritesh, why don’t you sell some shares of yours?’ I have never sold a single share of mine at OYO no matter what, primarily because my focus has been to do the right thing and be a partner and an investor in my company for a very long time.
This was the time when I had the opportunity and I could gather the resources to be able to get the capital to be able to invest in OYO for a very long term and my view is that I am so committed and excited about the upside and the opportunity for OYO.
And what message do you have for other entrepreneurs?
Speaking of a message ... it is just that fundamentally, I don’t expect it to be the case with every entrepreneur. I understand and appreciate that this is unique, but at the same time what I do share is that every entrepreneur thinks about their business in a very long-term scenario. This just feels like something that is very straightforward.
Are you over-leveraging the OYO brand?
I think the one thing that should be aptly clear here is that our core business is hotels and homes. These are the two areas where we continue deploying a significant amount of our time, capital and resources. So this is the first important clarification. Now, how does OYO fundamentally think about any business it should be in? We think about it as a combination of things — does it fundamentally follow the four capabilities that are unique to OYO?
First is the ability to use technology effectively. To be able to predict at what location and at what price we should be able to get into assets. That is supply acquisition. The second is a renovation, or the ability to renovate assets ‘quick and good’.
The third is operating those assets with the highest efficiency while earning the appreciation of customers. And the fourth is distribution/yield management. That is how you bring enough consumers into the asset. Now that being said, at this point in time, there is a massive opportunity just in our hotels and homes business. So we are going to be very focused on these two areas.
Who does Ritesh Agarwal look up to?
Among the few people I look up to is Elon Musk. He’s really been one of those entrepreneurs who has put all his capital behind the business and has built such an incredible company.
Bill Gates is someone I am personally very inspired by given how he has built that business and also given back to society. In India, someone like Uday Kotak, who has built a fantastic business in such a short period, and has made Kotak a powerhouse of Indian banking and economy.