Airbnb confirms $150M-$200M investment in India’s OYO

Airbnb is continuing to widen its focus beyond ‘unconventional’ hotels as it gets ready for a much-anticipated IPO. Following its acquisition of HotelTonight last month, the company has picked today (April Fool’s Day) to confirm that it invested in India’s OYO — a startup that manages budget hotels and other stays.

The deal has been rumored for a couple of months and it is additional to OYO’s (then) $1 billion Series E round which was led by SoftBank’s Vision and included participation from ride-hailing duo Grab of Southeast Asia and China’s Didi Chuxing. The deal, announced last September, also included Lightspeed, Sequoia and Greenoaks Capital and it valued OYO at around $5 billion.

Neither party confirmed the size of the deal announced today, but an industry source told TechCrunch that it is between $150 million and $200 million. OYO and Airbnb both declined to comment in response.

The company has now raised over $1.5 billion from investors to date including this new capital.

More than money, though, the deal is highly strategic for both sides.

OYO and Airbnb had previously been rivals of sorts, but OYO has pivoted towards hospitality services — including logistics and management — rather than simply aggregating budget hotels. Airbnb, with its HotelTonight acquisition, has shown it wants to be a booking destination across different types of verticals.

Geographically, the deal makes even more sense. Airbnb has been keen to take a larger bite out of India for some time. It has begun to see progress, with co-founder and CSO Nathan Blecharczyk recently revealing that the country is one of its five fastest growing markets worldwide. In that light, the companies are exploring opportunities to collaborate which could see OYO properties — in this case more likely villas and Airbnb-like properties — listed on Airbnb’s service.

That exposure could help OYO — which stands for ‘On Your Own’ — as it looks to break into the overseas traveler market, having previously been more popular with local or regional travelers. It may also look to break the U.S. market having entered the U.K. at the end of last year.

Finally, OYO is all the more appealing to Airbnb because it has seen signs of promise in China, which represented a key part of its focus following the Series E round. Overall, OYO claims to cover close to 500,000 rooms across 13,000 hotels and 6,000 homes in eight countries: India, China, Malaysia, Nepal, the U.K, UAE, Indonesia and the Philippines.

OYO is also gunning for Southeast Asia, where it hopes an alliance with Grab can help it break into the region.

“Emerging markets like India and China are some of Airbnb’s fastest-growing, with our growth increasingly powered by tourism to and from these markets. In many of these markets, OYO is empowering local hospitality entrepreneurs to provide more options to more travelers. We share a dedication to offering people more choices when traveling and we’re excited to partner with OYO as we work to make Airbnb for everyone,” said Airbnb’s president of homes, Greg Greeley, in a statement.

“Airbnb’s strong global footprints and access to local communities will open up new opportunities for OYO Hotels & Homes to strengthen and grow while staying true to our core value proposition. We’re excited by the possibilities and committed to bringing benefits to the millions of travelers who can now rely on Airbnb and OYO Hotels & Homes to find a home away from home,” added Maninder Gulati, global chief strategy officer for OYO.

Airbnb recently checked in its 500 millionth guest and the company claims it has been profitable for the last two years. While it doesn’t give out precise financial details — that’ll change with an IPO — Airbnb claimed that Q3 2018 was its strongest quarter of business ever with “substantially more” than $1 billion in revenue during the three-month period.

It’s been a long journey for OYO, which TechCrunch first covered in 2015 when it raised $25 million. CEO and founder Ritesh Agarwal is Thiel fellow who started the company in 2011 when aged just 18. His original business, called Oravel, was an Airbnb clone that later pivoted to become OYO — it’s funny what can happen over time.