Ritesh Agarwal founded OYO in 2013 as a small startup in India and grew it into one of the largest hotel chains. His idea behind OYO was to create the largest hotel chain of standardized budget hotels by partnering with small hotels, upgrading their infrastructure, and bringing them under the brand name OYO. Within a short span of time, OYO quickly expanded beyond imagination and transformed India’s hospitality sector with its new heights of affordable accommodations.
Shortly after launching, Ritesh Agarwal received a grant of $ 100,000 as part of the Thiel Fellowship, a two-year program from PayPal co-founder Peter Thiel. On November 15, OYO acquired Zostels’s Zo Rooms. The list of funding investors was Softbank Group, Didi Chuxing, Greenoaks Capital, Airbnb, and many more. In September 2018, OYO raised $ 1 billion. It was a point of interest for both travellers and small hotel owners.
As OYO rises sharply, it starts facing challenges that led to a decline in 2020 and 2021. The Indian budget hotel chain that once commanded a dazzling % 10 billion valuation is suffering a harsh reality check. It is facing significant pressure from hotel partners and investors, primarily from SoftBank.
So what went wrong with OYO? Let us dive into OYO’s trajectory, decoding the reasons behind the downfall, extracting the key reasons, and understanding where the company stands today.
1. OYO’s Original Promise
Before OYO’s emergence, India’s budget hotel industry was fragmented; it consisted of small, unstandardized, and unbranded hotels offering inconsistent quality, making it risky for travellers. But OYO promised to change that into-
1.1 Standardized budget hotels – OYO partners with small hotels and rebrands them under the renowned OYO umbrella, offering standardized amenities such as AC Rooms, breakfast, LED TVs, Wi-Fi, daily housekeeping, and hygienic washrooms.
1.2 Technology-driven– Travelers can book affordable rooms online through its websites, and also help hotel owners improve their operations. They can find the prices, locations, book the hotels, and make the payments easily. The OYO app has the added benefit of having the facility to book from any place and at any time.
1.3 Scale – OYO does not own hotels but partners with property owners, offering them to increase the chances of revenue through the brand OYO by converting them into standard rooms. By offering affordable, quality stays, OYO rapidly scaled across India and abroad.
This model worked brilliantly at first. Travelers loved the affordability, and small hoteliers benefited from increased bookings. Investors saw OYO as a “disruptor” and poured in billions to help it scale globally.
2. What Went Wrong with OYO: Core Problems
OYO faces significant challenges, including financial struggle & layoffs, legal disputes, massive drops in valuation, competition from other budget hotel chains and hotel booking platforms, and poor customer experience. Let us discuss one-on-one
2.1 OYO layoff 2022– OYO was one of the leading players in the budget hospitality sector, began struggling with several financial crises after 2021. The company reports a loss of RS. 2300 crores during the financial year, which was accelerated after the COVID-19 pandemic. To overcome these financial losses, the company announced plans to lay off around 600 employees as part of cost-cutting measures.
2.2 Legal disputes –Between 2019 to 2022, OYO faced a series of legal disputes from the hotel owners, who have accused the company of unpaid dues and unfavourable contract terms. The majority of the hotel partners have taken legal action against OYO’s founder. This is not the case only in India, but also in the United States, Japan, and China. They also claimed that OYO has been cheating the hotel owners by using various gimmicks and arm-twisting practices
2.3 OYO’s IPO dream slipping – OYO attempted to go public twice in 2021 and 2023, but both efforts failed due to regulatory setbacks, investor concerns, and legal changes. Now the company is gearing up for the third time to launch an IPO in the year 2026, hoping for a valuation between $6 – 7 billion. Let us hope this time will be successful.
2.4 Massive drop in OYO valuation – OYO, once valued at $10 billion, has seen its valuation drop to $2.4 billion in a recent funding round, according to TechCrunch. The back-to-back delay of IPO has not only cast a shadow on the company’s listing prospect but also weighed on its valuation in the unlisted space.
2.5 Effect of other budget-hotel companies – Companies like Treebo and Fab hotels have also emerged as budget hotels in hospitality, with slightly higher prices but providing top amenities, comfort, and convenience, targeting the same customer base. So, the customers of OYO are shifting towards these budget-friendly accommodations.
2.6 Global platforms competition – The global platforms Airbnb and booking.com are continuously dominating the Indian as well as global markets, providing a wide range of properties at comparable prices to OYO.
2.7 Poor customer experience – Customers are not satisfied with OYO due to inconsistent services. They started complaining about the bad experience at Oyo, including not being able to meet the customers’ needs, like cleanliness, services, and other factors.
3. Why OYO Model Failed?
The following are some of the reasons why the OYO model failed
3.1 Global Pandemic shutdown – The COVID-19 pandemic has several impacts on startup OYO, as the accommodations were closed for a longer duration of time. Due to that, the income of the OYO dropped tremendously. Some of the hotels have to shut down permanently, resulting in a drop in valuation 76% from $10 billion in 2019 to merely $2.4 billion in 2024 in its lasting funding rounds.
3.2 Operational mismanagement – In the United States, hotel owners have raised concerns about OYO’s partner management system, citing its inefficiency and failure to meet payment commitments. In India, more than 200 hotel owners have ended agreements with aggregator OYO over mismanagement of contracts, arbitrary charges, and other disputes.
3.3 Aggressive expansion – OYO entered over 80 countries within a short span of time, burning cash to acquire market share. But this expansion lacked operational depth, quality control, and regional adaptability.
3.4 Minimum guarantee – strategies, particularly the “Minimum Income Guarantee”, for hotel owners to secure a partnership. However, many properties failed to meet those occupancy targets. This leads to legal disputes, a strained relationship, and reputational damage.
4. Where does OYO stand today?
As of 2025, OYO is still in the market, but its dream of becoming a global hotel giant has been ruined in
4.1 India’s most profitable startup– The major milestone travel tech giant OYO has emerged as the most profitable startup in India for the financial year 2024-25, stating a profit after tax (PAT) of Rs. 623 crores for the year
4.2 IPO plan – Expected in 2021, repeatedly delayed many times, but still trying to go public. Highly anticipated stock market debut in March 2025, at a valuation of $7-6 billion.
4.3 OYO plans to double its company services hotels share from 22% to 44% of booking revenue in FY 25to 1800 hotels across 300 cities in 80 countries.
4.4 OYO Parent PRISM launches “CheckIn” app for premium hotels and holiday homes
4.5 OYO’s premium brand “Sunday” to add 40 new upscale hotels in FY26
4.6 The revenue of OYO has jumped from 16% to Rs. 6225, with 20% of it coming from India as it rebranded its parent company to PRISM.
4.7 OYO is one of the world’s largest technology-driven hospitality chains of hotels.
OYO is no longer the “startup rocket ship” it once was, but it is attempting a more cautious and sustainable revival.
5. OYO’s success story: Strategic lesson for every Startup
5.1 From small startups to the largest hotel chains, OYO started as a small startup in India and became the world’s largest hotel chain due to the right vision, perseverance, and innovation
5.2 Develop New brand – It is not just a startup’s success story, but the best example of how vision, technology, and relentless execution can transform fragmented small hotels into a new brand.
5.3 Keep an innovative approach -OYO transformed India’s hospitality sector with its innovative approach to affordable accommodations
5.4 Accept the challenges – OYO’s story proves that with the right mindset and strategy, anything is possible, despite the challenges
In short, new entrepreneurs can learn to identify a major problem, the reasons behind the problems, analyse the failure, build a strong team, and stay lean and focused. The team leader should have great vision to overcome the challenges and controversies. Study the other problems that other companies have overcome.
6. Conclusion: Is OYO a Failure or a Work in Progress?
So, did OYO fail? Not entirely. The company remains operational, particularly in India, and continues to serve millions of budget travelers. However, its glory days of global dominance and hypergrowth are behind it.
OYO’s story is best described as a cautionary tale of startup ambition. It reminds us that growth at all costs can backfire if customer trust and partner relationships are compromised.
Rise and fall of OYO
Rise of OYO
OYO started as a budget hotel chain in India with very low price of the rooms as compared to other hotels in India. The network of the hotel was very vast, including the metro cities to the tier 2 and tier 3 cities. Within the city, they were located in different part so it was easy for the guests to find the accommodation. The rooms for unmarried couples were an added benefit for OYO Rooms. So its rise was so fast.
Fall of OYO
OYO faced allegations of fraud, mismanagement, breach of contract, and non-payment from some of its hotel partners. OYO faced many challenges that led to a decline in 2020 and 2021. The main challenge was the COVID-19 pandemic, during which many rooms were vacant without customers.
Potential Financial Scam Risk
Another issue was that it was competing with itself; this model was beneficial for the growth of the company, but not for its partners. The partners started incurring losses, and the model collapsed. OYO has faced hundreds of lawsuits from the hotel partners in India. Most of them were about the broken contract and unpaid money.
OYO has tried to launch an IPO three times since 2021, but that was withdrawn after regulators started asking questions.
Poor cancellation services
Their transaction is not transparent. The people who booked through OYO were denied entry to the partner hotel even after paying. Many hotels deny entry to unmarried couples after confirmation.
Cancelled booking, deficient service, and refund delay – these are some problems showing another reality. Local societal and cultural issue is the facing problem with OYO is facing
FAQ
Q: Why did OYO fail?
Oyo failed due to the global pandemic-induced shutdown and operational mismanagement across thousands of properties, resulting in customer dissatisfaction and legal disputes between OYO and its partner hotels. There is a massive drop of 76% in OYO’s valuation. These are some of the reasons behind the failure of the OYO.
Q: What are OYO’s problems?
The startups id under fire from hotel owners across various markets for unpaid dues and unfavourable contract terms. Sebi has rejected OYO’s IPO plan after multiple attempts and revisions to its DRHP. OYO faces fresh legal trouble with a new FIR over alleged financial and contractual issues.
Q: Why is OYO struggling?
There are several factors contributing to the struggle of OYO, including legal disputes, relationship with hotel owners, failure to make promises to offer standardized and budget-friendly stays, financial losses, and rejection of the IPO plan several times.
Q: What happened to the OYO IPO?
SEBI has rejected OYO’s IPO plan several times from 2023 to 2025. The market regulator authority returned the company’s initial DRHP in 2023, requesting updates and revisions. Now, OYO Hotels has postponed its third attempt to launch an IPO.
Q: What challenges did OYO face?
Between 2019 to 2022, OYO faced a series of challenges, including maintaining consistent quality, legal disputes, and regulatory hurdles in key markets, including China, Japan, the US, and India. The fraud allegations in the US and the tax evasion investigation in India are the major problems.
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