In a significant move that underscores its aggressive expansion strategy in the European market, Oyo, the Indian hospitality unicorn, has acquired Paris-based Checkmyguest, a platform managing rental properties including homestays and luxury apartments. The deal, valued at approximately Rs 230 crore ($27.4 million), was structured as a stock-and-cash transaction, with Oyo issuing 79.2 million shares for the acquisition. While the exact size of the cash component remains undisclosed, this acquisition marks a crucial step in Oyo’s journey towards becoming a dominant player in the global vacation rental market.
Understanding the Deal
Checkmyguest, a company with a robust presence in Paris, not only manages a vast inventory of rental properties but also operates a home renovation business. According to reports, Checkmyguest was valued at $110 million before the acquisition. The strategic purchase allows Oyo to acquire premium home inventories in one of Europe’s most sought-after tourist destinations, Paris, through a share swap arrangement. An Oyo spokesperson noted that while the transaction involves a cash outlay, this would be quickly offset given Checkmyguest’s strong cash-generating capabilities.
In addition to the core business, Oyo also acquires Studio Prestige, an apartment rental service, and Helpmyguest, a property design and renovation company, as part of the deal. These brands align well with Oyo’s broader strategy of offering end-to-end solutions in the hospitality sector, from property management to design and renovation, thereby enhancing its value proposition to property owners and guests alike.
Oyo’s European Expansion: A Lucrative Market
Oyo’s interest in Europe has been evident since its entry into the market in 2019 when it acquired @Leisure Group from Germany’s Axel Springer for $415 million. The acquisition of Checkmyguest is the latest in a series of strategic moves aimed at consolidating Oyo’s position in the European vacation rental market, which has shown significant growth potential.
A person familiar with Oyo’s performance highlighted that Europe is expected to be the company’s most lucrative market in the long term. While Oyo’s revenue from hotels in India has grown by 1.8 times, the income from its home business in Europe has increased by 2.1 times, indicating the immense potential of the vacation rental market in the region.
As of March 2024, Oyo operated approximately 85,000 homes, primarily in Europe, and 18,000 hotels across India and Southeast Asia. The company’s strategy of acquiring established players in key European markets has allowed it to rapidly scale its operations and build a strong brand presence.
The Strategic Fit: Why Checkmyguest?
The acquisition of Checkmyguest offers several strategic benefits for Oyo:
Premium Inventory Access: Checkmyguest’s portfolio of luxury apartments and homestays in Paris enhances Oyo’s offerings in the premium segment, catering to a more affluent clientele. This is crucial as Oyo seeks to diversify its customer base and tap into higher-margin segments of the market.
Complementary Businesses: With the acquisition of Studio Prestige and Helpmyguest, Oyo can offer a more comprehensive range of services, from property rental to renovation and design. This not only strengthens Oyo’s value proposition to property owners but also helps in differentiating its offerings from competitors.
Strengthening European Footprint: Paris is one of the most visited cities in the world, and establishing a strong presence here is vital for any global hospitality brand. Checkmyguest’s deep roots in the Parisian market provide Oyo with a ready-made platform to expand further into France and other European countries.
Operational Synergies: The acquisition is expected to generate significant operational synergies, particularly in areas such as technology integration, marketing, and customer service. By leveraging Oyo’s existing technology platforms and global reach, Checkmyguest’s properties can be marketed more effectively to a global audience.
Financial Implications and Funding
The deal comes at a time when Oyo is actively raising fresh funding to support its operations and expansion plans. Last week, it was reported that Oyo’s founder, Ritesh Agarwal, led a $175-million funding round for the company, with the balance amount being raised from family offices and high-net-worth individuals. This infusion of capital is expected to provide Oyo with the financial flexibility needed to pursue its growth ambitions, including the acquisition of Checkmyguest.
Oyo’s financial performance in the fiscal year 2024 has remained stable, with consolidated revenues from operations reported at Rs 5,388 crore, compared to Rs 5,463 crore in the previous year. The company also reported a profit after tax of Rs 229 crore, indicating that it has managed to achieve profitability while continuing to invest in growth.
The valuation of the Checkmyguest deal was calculated based on Oyo’s latest share price of Rs 29, which was established during a down round in the private market. The issuance of 79.2 million shares for the acquisition represents a significant equity commitment from Oyo, highlighting the strategic importance of this deal to the company’s long-term plans.
Oyo’s Global Strategy: The Role of Oyo Vacation Homes
The acquisition of Checkmyguest fits neatly into Oyo’s broader global strategy, particularly its focus on the vacation rental market through the Oyo Vacation Homes brand. Oyo Vacation Homes has become central to the company’s strategy in Europe, where it operates properties in several countries, including Spain, France, and Norway.
The European vacation rental market is highly fragmented, with numerous small operators managing individual properties. Oyo’s strategy has been to consolidate this market by acquiring established players and integrating their operations into its global platform. The acquisition of Checkmyguest is a continuation of this strategy, allowing Oyo to further expand its footprint in a key market like France.
Oyo’s entry into the European vacation rental market began in earnest with the acquisition of @Leisure Group in 2019, a move that gave Oyo access to a large portfolio of vacation homes across Europe. Since then, Oyo has continued to build on this foundation, acquiring Croatia-based Direct Booker in 2022, which operated 3,100 vacation homes, and Danish operator Bornholmske, adding 700 more properties to its portfolio.
Challenges and Opportunities Ahead
While the acquisition of Checkmyguest presents significant opportunities for Oyo, it also comes with its share of challenges. The European market is highly competitive, with established players like Airbnb, Booking.com, and local operators dominating the space. Oyo will need to leverage its technology, marketing, and operational expertise to differentiate itself and capture market share.
Moreover, the integration of Checkmyguest into Oyo’s global operations will require careful management to ensure that the expected synergies are realized. This includes aligning Checkmyguest’s operations with Oyo’s existing platforms, optimizing property management processes, and ensuring a seamless customer experience.
On the other hand, the acquisition provides Oyo with a significant opportunity to strengthen its position in the premium segment of the market. As travelers increasingly seek unique and luxurious experiences, Oyo’s expanded portfolio of premium properties in Paris and other European cities positions it well to cater to this demand.
Conclusion: A Strategic Move with Long-Term Implications
The acquisition of Checkmyguest by Oyo is a strategic move that underscores the company’s commitment to expanding its presence in the European market. By acquiring a platform with a strong presence in Paris, along with complementary businesses like Studio Prestige and Helpmyguest, Oyo is well-positioned to enhance its offerings and capture a larger share of the lucrative vacation rental market.
As Oyo continues to execute its global strategy, the integration of Checkmyguest will be a critical step in realizing its long-term goals. The deal not only provides Oyo with access to premium properties but also strengthens its overall value proposition by offering end-to-end solutions for property owners and guests.
Looking ahead, Oyo’s ability to navigate the competitive landscape, effectively integrate its acquisitions, and continue to innovate will be key determinants of its success. With the European market expected to play a central role in Oyo’s growth story, the acquisition of Checkmyguest marks a significant milestone in the company’s journey towards becoming a global leader in the hospitality industry.