OYO ROOMS: INTERNATIONAL EXPANSION
Hotel brands – a very competitive environment:
Internationally, competing on price alone can be a downward spiral, especially when the perception of quality is diminished when a non-staple product is commoditized. In premium markets elements like service, exclusivity, and security come into play. Facilities like pool complexes, spas, gyms, golf and other recreational activities can become expected amenities. Hotel management companies focus managers and budgets to cash flow, profitability targets, and occupation cost demands.
However, the industry is changing rapidly, with substitute business models coming up. A Marketline Industry ...view middle of the document...
Also, threat of video conferencing becoming more mainstream to curtail business travel is moderate.
Threat of substitutes in the hotel industry is always highest in recessionary times; one must always consider the downgrading and the cost of travel itself, which would push low cost alternatives to the forefront. Thus, there is a space for OYO to operate in.
Threat of new entrants:
The threat of new entrants low due to high cost of capital, low availability of land, high cost of construction and difficulty securing entitlements. However, once established, the threat of players such as Airbnb gaining more inventories in terms of floor space and leases is high. New restaurants are a high threat to hotel food and beverage operations.
Bargaining power of suppliers:
Suppliers in the hotel industry include property owners, developers, real estate companies, architects, interior designers, interior furnishings, contractors, consultants, information and technology manufacturers.
The current barriers to entry into the international market are very high. Food and beverage in hotels has lost its competitiveness in major hotels due to free standing restaurant competition options outside of hotels.