The word startup is a very young, thrilling and adventurous word which many engineering students embrace it. But they forget the fact that this very word can smack them down right on their face in no time if they don’t invest their time and dedication into it.
Ritish Aggarwal started OYO ROOMS aka ORAVEL PVT LTD in 2012 with a dream of providing a platform for easy and convenient hotel bookings. The start-up shooted up quite well and managed to achieve many milestones. But like every other PITCHER episode, there is a downfall in this story. The company is now facing the worst of it’s time.
The company is clocking losses of Rs 46.9 crore per month since January 2016. The revenue generation from the business is around Rs 19.2 crore per month. Many well known analytical gurus are estimating the loss of Rs 1.5 Crores per day which is indeed a big hole in their pocket.
The reason for such big losses is calculated to be because of customer acquisition, besides fixed cost. According to some leaked insights, the company spends almost Rs 500 for every new customer which roughly cost a whopping 24 crores per month just so as to get a new 4.8 lakhs customers.
It is reported that this start-up had a net loss of Rs 351 crore for the April-December period of financial year 2016, as compared to the loss of Rs 20.79 crore for the whole of Financial Year 2015, which is an increase of almost 17 times.
However, the CEO of the company, Ritish Aggarwal is optimistic of turning the tables around and earning profits well within 18-24 months after it strengthens its brand recognition. The company has tweaked its business model as compared to the last year. ‘We no longer buy inventory and pay a minimum guarantee to hotels. We reworked our business model last year, where we decided to phase out the inventory we held,” said Abhinav Sinha.
He also added that almost 7-8 lakhs of booking takes place every month with an average ticket size of Rs 1400-1500. On such a purchase, the company earns a commision of 20%. Out of the 7 lakhs bookings per month through the app, only 40% i.e. only 2.3 lakhs consumers return to the platform for a repeat purchase. It is also interesting to observe that Oyo Rooms has a 20% cancellation rate per month.
Although Abhinav Sinha is quite optimistic about the business by estimating good results from the upcoming festive season and the run-up to the New Year which will play a crucial role in terms of generating more revenue for the business. They are expecting a 50% increase in no. of bookings between October to January.
The company is aiming to add more real estate under the its hood. According to Abhinav Sinha, every year the company adds roughly around 250-500 properties in its platform during the off season period and almost 500-1,000 properties during the peak season.
Well, this scenario is the perfect example of an eye opener for many people who are having daydreams about having a start-up just on the basis of a web-series. Calculated risk is something that you need to have in your balls for going out and battling into this tough competition.
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