OYO in talks to acquire nearest rival Treebo Hotels in budget hotel sector

SoftBank-funded start-up OYO, the largest Indian hotel brand by the number of rooms, is in talks to acquire Treebo Hotels, its nearest rival in the domestic budget hotel space, sources close to the development said. The move is expected to bring growth capital to Treebo, which counts SAIF Partners and Matrix Partners as investors.
 
Headquartered in Bengaluru, Treebo operates about 10,000 rooms across 400 properties in the country. The brand’s scale is pretty small compared to the scale OYO has managed to achieve with large funds. OYO operates about 8,700 properties in India with a strength of over 164,000 rooms. The numbers continue to expand month after month.
 
“The deal, once it materialises, will give OYO an access to a readymade talent and help the expansion plans. Treebo has not raised any funds this year and its cumulative fundraising since the launch in 2015 is about $57 million. The deal will enable faster growth for Treebo as well,” said a person familiar with the development. Treebo’s last funding happened in August 2017, when it raised $34 million.
 
OYO declined to comment on the story. Sidharth Gupta, co-founder of Treebo, denied that the company was in talks with OYO. This could be the second-biggest deal in the domestic online travel market. In October 2016, Nasdaq-listed MakeMyTrip acquired its closest rival ibibo in an all-stock deal. MakeMyTrip decided to retain the ibibo brand and the twin brand strategy has worked well. Ibibo remains operational as a brand for the value-conscious consumers, while MakeMyTrip is trying to establish itself as a slightly premium offering.
 

Founded just about four-and-a-half years ago, OYO has expanded from just 20 rooms and a single hotel brand to over 350,000 rooms across more than 13,000 franchised/managed hotels in seven markets, including India, China and the UK.
 
It is adding over 50,000 new keys per month, which makes it the world’s fastest-growing hotel chain. In China alone, OYO operates over 180,000 rooms and is among the top five firms.
 
Besides India and China, where OYO has maximum number of rooms, the brand is now present in the UK, the UAE, Indonesia, Malaysia, and Nepal. OYO will enter many more markets by 2023, when it aspires to emerge as the world’s largest hotel chain by number of rooms. American hospitality major Marriott is currently the world’s largest hotel brand with approximately 1.4 million keys. The start-up raised $1 billion in September from investors including SoftBank. The last fundraising valued the company at $5 billion.
 
OYO and Treebo compete with another budget hotel brand, FabHotels. In October, it was reported that Treebo and FabHotels may merge to have a better scale and stand the growing competition from OYO. Both Treebo and FabHotels have been trying to raise funds in recent months without making much headway. FabHotels, which counts Goldman Sachs as an investor, has raised $35 million till date. Its last funding round of $25 million took place in July last year.