Following its launch in Indonesia in October of last year, India-based hotel management start-up OYO has claimed it is outpacing Singapore-based rivals RedDoorz and ZEN Rooms, which have been operating for four years, en route to becoming the largest, matured foreign start-up of its kind in the country.

As of June, OYO said it had managed 23,000 rooms, much more than the 1,600 rooms managed by ZEN Rooms. RedDoorz declined to reveal the number of rooms it currently manages, though it did announce in late February that it had managed 17,000 rooms.

Assuming there was consistent monthly growth of 414 additional rooms each month since entering Indonesia in October 2015, it is projected that RedDoorz would have managed about 18,600 rooms as of June.

OYO country manager Rishabh Gupta said the start-up focused this year’s first half on “reach”, which meant putting at least one hotel in as many regions as possible, but would focus the second half on “penetration”, which meant expanding its footprint in existing regions.

“Our occupancy rate is 70 to 75 percent across our portfolio. It means demand is there. You might think Cepu [small subdistrict in Central Java] has no demand, yet it’s also selling,” he said on July 30.

The United States’ AirBnB injected earlier this year US$75 million for the Indian start-up to support its investment. OYO has raised a total of $1.7 billion (including from AirBnB), making it the most well-funded among the three hotel management start-ups.

Such start-ups differ from hotel aggregator start-ups including, among others, AirBnB and Traveloka, as the former invested to upgrade its design, amenities and management of listed properties on top of pushing the properties’ online presence.

In return, hotel management start-ups are sticking their brands on properties and charging higher commission fees than hotel aggregators.

A case in point, OYO charges franchising fees at between 22 and 35 percent of revenue whereas AirBnB charges between 14 and 20 percent per transaction.

“These start-ups don’t own the hotels but appear as though they own a share of hotels in different parts of the world,” said Indonesian Hotel and Restaurant Association (PHRI) deputy chairman Sudrajat, whose association does not recognize such start-ups as hotels but accepts them as inevitable trends.

Rival hotel management start-up ZEN Rooms, which manages 330 properties in 12 Indonesian cities as far east as Makassar, announced on July 26 that it raised $15 million from South Korean hotel platform Yanolja, which brought the company’s total funds raised to $23 million.

ZEN Rooms country manager Sam Makhlouf said on Aug. 9 that the fund allocated for Indonesia — a figure he could not disclose — would be used primarily to expand the company’s workforce. The company’s sales team alone quadrupled since it first entered Indonesia.

“Our goal is to double down our presence in Jakarta and also expand much more over the country, of course, in all the big cities but also the small cities,” he said.

Meanwhile, RedDoorz announced on Aug. 18 it raised $70 million led by Singaporean investment firm Asia Partners Fund Management, which brought the start-up’s total funds to $134.4 million.

RedDoorz country marketing head Sandy Maulana said on Aug. 6 that the company would invest its funds “in an aggressive growth strategy” that entails routinely training employees and buying standard amenities such as Wi-Fi routers, bed linens and televisions for new properties.

Sandy added the company was bullish over business growth driven by escalating activity in tourism, which has been Indonesia’s fastest growing economic sector since 2012, according to Tourism Ministry data.

OYO’s Rishabh was equally bullish over growth, saying that the start-up estimated Indonesia had over 60,000 living spaces including large hotels, small hotels and student dorms that provided ample room for growth for hotel management start-ups.

“No one is losing at the end of the day because we are capturing a very different target segment, especially millennials,” he said.

In general, the growth of such start-ups in Indonesia is mainly driven by rising domestic tourism, consumer spending and the millennial population, which generally favors budget accommodation. “It’s the era for start-ups. The era for online bookings,” said PHRI’s Sudrajat.

Popular

Gerindra politician says bigger cabinet would benefit Indonesia

Asia shares rise on rate cut bets; RBA seen turning hawkish

PDI-P considering Anies, Ahok as Jakarta gubernatorial candidates