OYO eyes UP Tourism's loss-making properties as it expands hotel chain

Only 15 of 100 hotels and rest houses run by state tourism are profit-making; efforts to turn around loss making ones by leasing them out to private partners have been failed so far

Fast-growing budget hotel aggregator OYO is exploring the possibility of adding the loss-making properties of Uttar Pradesh Tourism Department to its chain of hotels.

OYO today held preliminary discussions on the issue with UP Tourism Department and UP State Tourism Development Corporation (UPSTDC) officials in Lucknow. “We are keen to partner with the state tourism department for operating their existing assets and turning them around. State government officials have seen our system and how we operate,” OYO Hotels and Homes (operated business) COO Ankit Tandon told Business Standard here.

Noting the company was keen on taking the idea forward, he maintained if it materialised, it would be OYO’s first such arrangement with a state government in India.

Currently, UPSTDC operates nearly 100 hotels and rest houses across the state, of which only about 15 are profit-making or self-sustaining, while the rest are loss-making units. The UP government has long been planning, unsuccessfully though, to turn around these properties by leasing them out to private partners for operation and management.

“The state government is keen on upgrading the tourism infrastructure and ramp up the availability of affordable hotels. Since, the UP tourism units are not in good shape, we are looking for partnerships with private players, such as OYO to operate them on lease or other terms as agreed upon mutually,” UP tourism principal secretary and UPSTDC director general Awanish Awasthi said.

He said the UPSTDC, which had been a loss-making entity over the past several years, has now started to log profits. “The Corporation, which made a profit of about Rs 3.5 crore in 2016-17, saw its profit more than double to Rs 8 crore in 2017-18 and in the current fiscal, the profit is likely to touch Rs 15 crore.”

Meanwhile, OYO, which is South Asia’s largest and world’s fastest growing chain of hotels and home spaces, today launched its mid-market offering ‘Townhouse’ in Lucknow.

“We are planning to launch Townhouses in other major cities of UP, such as Varanasi, Gorakhpur, Prayagraj (Allahabad) etc, in the current calendar year,” Tandon informed.

Awasthi has assured OYO with all the cooperation by the state government and asked the company to create a network of almost 100 Townhouse units in UP in near future. The state government has constructed 20-25 new hotel properties for which private partners would be roped in.

Currently, OYO operates 84 Townhouses in India, including 7 in UP. Pan India, it is targetting to touch almost 500 Townhouses by the end of 2019 calendar.

The OYO bouquet comprises over 8,700 properties in India on franchise, ‘manchise’ or lease contracts. It operates 84 Townhouse properties in Delhi, Mumbai, Noida, Gurugram, Bangaluru, Hyderabad, Chennai, Pune, Nagpur, Kolkata, Ahmedabad, Ghaziabad, Goa, Jaipur and Lucknow.