One of the world's fastest-growing hotel brands, India-based Oyo, is gearing up for a $300 million expansion in the United States.

And Dallas will be its home base, Oyo chief operating officer Abhinav Sinha said.

The hotel chain, founded in 2013 by then-19-year-old Ritesh Agarwal, operates 23,000 hotels and 46,000 vacation homes in Europe, Asia and the Middle East. In September 2018, it raised $1 billion for international expansion from big-name investors Softbank Group, Sequoia Capital and Lightspeed Venture Partners.

"We have established a niche for ourselves in hospitality by bringing chic hospitality and design at bargain prices," said Sinha, who is based in India.

The company partners with existing hotels, rebrands them as Oyo franchises and streamlines booking, pricing and technology services. In return, it gets a percentage of monthly revenue. It's adding one hotel partner a day in the U.S. but wants to ramp that up to three or four. It has been operating in the U.S. for about four months, signing deals with 50 hotels in 10 states.

A search for Oyos in North Texas lists two properties in Dallas and one each in Fort Worth and Irving. The company said eight more properties are in the pipeline in North Texas. That would add to a budding Oyo presence elsewhere in Texas, with hotels in Houston, San Antonio, Killeen, Tyler, Groesbeck, Texarkana and Wichita Falls.

Oyo is entering an already crowded U.S. hospitality market, where room demand remains at record levels and many budget hotels have a single owner.

Jan Freitag, a lodging insights expert at research firm STR, said room growth has slowed and demand has shot up but pricing and revenue have not increased greatly.

In the budget segment, Frietag said hotels are increasingly converting to big chains or closing, which gives a price advantage to the survivors. Brand-name hotels also tend to see greater success, though he said it depends on the brand.

Sinha said the U.S budget market is "a sweet spot that works really well with Oyo's capabilities."

An Oyo-branded hotel near Dallas Love Field. (Lynda M. Gonzalez / Staff Photographer)

Dynamic pricing

Oyo provides hotels with global brand recognition and more efficient systems, Sinha said. Its partner hotels are run and booked through Oyo's website and app or other travel sites.

Sinah would not provide details on the percentage of revenue the company takes from its hotel partners, saying it varies by agreement based on the hotel and Oyo's investment. Its contracts are typically five years.

Oyo's booking system uses dynamic pricing, similar to airlines or other demand-based industries where what consumers pay can fluctuate throughout the day. Sinha said Oyo's U.S. hotels are seeing occupancy increases of 30% to 40%, and average revenue spikes of more than 60%.

Hasubhai Patel, who owns Oyo South in Dallas, said in a statement provided by Oyo that the company has helped it grow occupancy.

"I have been in the hospitality business since 1982, and my brother has been in this business since 1978. We decided to give some of our independent hotels to Oyo because ... it seemed more like a true partnership," Patel said in the statement. "Today, when I look back, we are very happy now as the business at our hotel, which was mediocre earlier, has grown considerably. Occupancy has grown by over 50%."

Patel said he's considering converting another of his hotels to Oyo. "We feel this relationship is only going to get stronger in the long run," he said.

But management at two other North Texas Oyo locations — Dallas Love Field and Fort Worth East Gateway Ball Park — gave the company less stellar reviews in interviews with The Dallas Morning News. They complained about Oyo's pricing practices, its revenue-enhancing claims and booking services.

Manan Patel, a manager at the Love Field Oyo, said the only reason his hotel is still working with Oyo is the contract. He said Oyo has "no idea how the market works."

The Love Field hotel has been operating under the Oyo name for a few months, but Patel said it stopped accepting Oyo-booked customers because of losses resulting from extremely low pricing and payment issues.

The hotel's bookings increased, but Manan Patel said rooms were priced as low as $15 or $20 a night. He said the hotel also saw a rise in room damage and had a TV stolen.

"Eventually, it turned out to be a nightmare for all of us," Patel said. Oyo still receives a portion of all monthly revenue, and the hotel will stay in the company's name until its contract ends early next year.

An Oyo representative said the company is working with the Love Field hotel owner and didn't know about the concerns until recently.

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Mixed feelings

Pete Jariwala, owner of a Fort Worth Oyo, said he has mixed feelings about signing on. Oyo promised him renovations and increased bookings as part of a four-year contract, he said.

"The only good thing is [Oyo] investing money into the property," he said.

Jariwala said renovations took longer than he expected and Oyo tried to book rooms before completing the work, forcing him to turn away guests. He also said deep discounts on room prices surprised him.

Previously, his hotel listed rooms at $60 a night. Oyo dropped it as low as $15 to $20 in the first two months. He said bookings could have been boosted by dropping prices as much as $10 below local competitors — without hurting his profit.

"We have bills to pay," Jariwala said.

A company representative described the Love Field and Fort Worth hotels as early-stage properties and said it can take time for the relationship between Oyo and the hotel to gel.

Sinha acknowledged there might be "isolated instances" of unhappy Oyo owners. "The primary places where we ever have such a situation are where we don't find the commitment of the hotel partners toward our customers," he said.

He also disagreed that reduced prices lead to losses for hotel operators, primarily because costs of running a hotel are relatively fixed throughout the industry. He said filling an additional room adds only $10 to $12 to that cost.

"These isolated instances are [hotel owners] not being clear about our value proposition," Sinha said. "I'm very happy to have the majority of the partners that are absolutely happy with the pricing positions."