Consolidation Begins In Budget Hotel Space As Oyo Acquires Zo Rooms For Undisclosed Amount

Zo rooms, the online budget hotel accommodation startup which promised to become a formidable player in this niche has been finally acquired by Oyo Rooms. This acquisition has been confirmed by SoftBank as they shared their earnings report yesterday.

Japanese billionaire Masayoshi Son’s SoftBank, which helped Oyo Rooms to raise $100 million last year, is known to be ruthless when it comes to eradicating their competitors; and this consolidation is seen as an attempt in this direction.

After this acquisition, Oyo Rooms has clearly become the #1 player in this niche as it races ahead of Stayzilla (which doesn’t provide branded rooms) and is miles ahead of newer players like Yatra, MakeMyTrip and GoIbibo.

Talks were on since last three months; and right now, both Zo and Oyo have declined to comment.

Oyo vs Zo

At the time of acquisition, Zo Rooms had 20,000 listed properties, across 30 cities. 300 employees powered their operations.

Comparably, Oyo has presence across 165 cities, and 4500 hotels and 40,000+ rooms are part of its network. Compared to $35 million raised by Zo Rooms (led by Tiger Global and Orios Management) last year, Oyo has raised $100 million led by SoftBank.

Oyo has started operations in Malaysia as well, making it their first international operations; and last year, total of 8,95,000 nights were booked on Oyo’s platform, which is an increase of 34 times compared to 2014. (data as per SoftBank’s statement)

Oyo has already introduced several innovations such as partnership with Ola cabs; women centric budget rooms; dedicated cafe` and hosuekeeping service and more.

How Will The Deal Materialize?

As per details emerging, its an all stock deal, which will be finalized in the next 15-20 days.

Zostel Hospitality Pvt. Ltd, which owns Zo Rooms will get 7% in the new venture, meanwhile the founders will get 2.5%. Rest of the stock would be held by Tiger Global Management LLC, Orios Venture Partners, angel investor Zishaan Hayath and Mato Peric, ex-managing director at Rocket Internet, among others.

Zo Rooms was started with the vision of providing comfortable rooms for budget travellers, under Rs 500. However, it seems that they were not able to compete against a bigger, formidable competitor.

It would be interesting to observe how players of budget hotel niche reacts now, especially , Ibibo, Yatra and MakeMyTrip, who had removed Oyo and Zo listings from their database!

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