India’s OYO snags $10M strategic investment from hotel giant China Lodging

Indian budget hotel startup OYO pulled in a big $250 million round led by SoftBank’s Vision Fund last week, but now it has topped that money up with a $10 million strategic investment from multi-billion dollar hotel management firm China Lodging.

Beyond the financial commitment from NASDAQ-listed China Lodging — which was formerly known as Huazhu Hotels and is valued at $6.8 billion — the two companies work together and learn from each other going forward, as opposed to operating some form of joint entity.

There’s no specific business agreement in place at this point, instead the duo will “explore initiating knowledge and technology sharing projects of mutual interest.” A press announcement explained that this could constitute employee exchange program, and the sharing of tech and IP. On a more consumer-facing level, OYO and China Lodging will consider joint loyalty programs and ways to work together on hotel sourcing and procurement.

“We are very excited about this partnership — both in terms of potential opportunities and existing synergies through our complementary strengths and capabilities,” OYO CEO and founder Ritesh Agarwal said in a statement. “Addressing consumers in India and China – two of the world’s fastest-growing markets – through our combined strengths opens up a very large and significant growth opportunity.”

For OYO, that may include learning from a hotel industry ally who operates at scale and in another billion-person market, China. China Lodging operates over 3,500 hotels across some 369 cities in China — 700 of which were opened last year alone. The firm also owns the rights to global brands like Mercure, Ibis and Novotel and operates an OYO-like budget offering, Hanting, aimed at reaching more cost conscious or younger customers.

OYO, meanwhile, is coming at the industry from a more disruptive angle. It focuses on affordable stays using a budget hotel network that offers standardized services like clean towels, free WiFi and hot water which aren’t always guaranteed by the masses of affordable hotels scattered across India.

It’s business model includes both a full franchise model and partial inventory. For China Lodging, around one-quarter of its hotels are operated via a lease and ownership model with the rest franchised or managed franchises.

Now it has closed this new funding, OYO is widely expected to ramp up its international expansion — which has seen it open up in Malaysia last year and Nepal earlier this month. China would be a surprising priority for the company at this point given the maturity of the market and level of competition. More likely is further forays into Southeast Asia and other neighboring Asian markets, but for the time being the startup isn’t commenting on exactly what the plan is.