OYO Reports its First Net Profit at INR 16 Cr
Oravel Stays Ltd which operates travel tech brand OYO has reported its first ever profit after tax in Q2 2024. In a letter to the company’s top management, founder Ritesh Agarwal shared that Q2 FY2024 has turned out to be company’s maiden profitable quarter with profit after tax (PAT) of over INR 16 crore. Agarwal, during an employee townhall earlier this year, he had also shared that OYO expects to clock Adj. EBITDA of nearly INR 800 cr in FY2024.
OYO has also published its Annual Accounts for FY2023. It has achieved operational profitability in FY2023, clocking an Adjusted EBITDA of ~INR 277 crores. In the Annual Report, OYO attributes this achievement to its focus on core markets, centralisation of key functions, cost optimization initiatives, divestment, and rationalisation of non-core businesses.
The company’s revenue from operations in FY23 stood at ~INR 5463 crores in FY23 up from INR 4781 crores in FY22, marking a ~14% increase. It also narrowed its losses to INR 1286 crores. Its Adjusted Gross Profit Margin rose to 43% of revenue and it’s Adjusted Gross Profit increased by 23% to INR 2347 crores in FY23 from INR 1915 in FY22.
The company reduced the number of hotels in FY23 to 12,938 from 18037 in FY22, citing an increased focus on quality customer service across OYO hotels, globally. It still maintains the largest footprint in terms of hotels in India and SEA, as compared to other full stack short-stay accommodation players (as of June 2023).
The overall Gross Booking Value (GBV) increased by 25% reaching the ~INR 10,000 crores milestone, of which GBV from the hotels business, stood at ~INR 6172 crores, marking a y-o-y growth of 35%. GBV per storefront on hotels clocked a record growth of 82% to ~INR 399K in FY23 from ~INR 219K.
The company in its filing said that the OYO app is the 4th most downloaded travel app globally (as of July 2023) and the most downloaded travel app in key Asian markets. Its popular loyalty program OYO Wizard retains its position has the largest loyalty program among leading travel brands with over 13.5 million members, as of June 2023.
He also covered some key priorities of the company. “We have started thinking of shifting our mindset from offering a value first offering to an experience first offering for your customers. We have taken some initial steps in this area with initiatives such as ‘Spotless Stays’ and Super OYO’. The program’s pilot across 250+ hotels has seen customer satisfaction score improve by 35%. Today there are over 1000 hotels tagged as Super OYO’s spread across 140 cities in India. We have also increased focus on the expansion of our premium portfolio with the launch of a premium resort brand, Palette, in India. Today, average customer service ratings of OYO hotels in India have gone up to 4 out of 5 in 2023 from 3.5 in 2022.”, he added.
Referring about international markets, he said, “We integrated more technology and innovations into our existing offerings in the Europe Homes business (DanCenter, Belvilla & Traum) such as 24×7 homeowner and customer support, launch of the Belvilla app, flexible booking options and stays, and tech-enabled cleaning services, among others. Progressive innovations like remote locks and contactless check-ins are reshaping the way we deliver hospitality services in the VRMC segment in Europe. We see immense potential in future growth markets like the US & UK.”
Malaysia has also contributed towards the growth. OYO has added more than 100 hotels on its platform in last six months taking the total count to more than 500 OYO hotels across Malaysia. OYO Malaysia has maintained a consistent growth trajectory ever since it turned EBIDTA positive in 2022.
Recently, global ratings agency Moody’s (Moody’s Investors Service) shared that it expects OYO to remain EBITDA positive for FY24. Moody’s in its report said that OYO will generate around $50 -$55 million EBITDA, after shared based payment expenses in fiscal 2024, supported by a strong demand recovery in the hospitality business, increase in the number of storefronts on OYO’s platform, and cost optimisations.
Ratings agency Fitch also upgraded its rating on OYO and said that they expect OYO to deliver positive EBITDA and CFO (Cash Flow from Operating Activities) in FY24, led by a greater reduction in operating costs than expected, ongoing demand recovery in the travel and tourism industry and stable gross margins.