Land Grab: How Softbank-OYO duo is disrupting real estate globally

Softbank’s Vision Fund (SVF) has metamorphosed several companies into global giants, and shaped as many industry trends. With the current portfolio of about 50 companies, the two-year-old $100 billion fund, it is said, is taking over tech, one industry at a time.

Transportation and logistics, fintech, health tech, enterprise tech and online B2C platforms, Softbank has cornered them all. Now it’s gobbling up real estate, pouring billions into physical infrastructure via companies betting on tech playing a central role in the assets’ utilization and valuation.

The recent $200 million funding in Clutter, a physical storage startup, led by the SVF says it all. In the past, it has invested up to $5 billion in WeWork, $850 million in Compass, $865 million into Katerra, $400 million in Opendoor.

And then, of course, there is OYO. Once a budget hotel listing platform, the five-and-a half-year-old company has transformed into India’s largest hospitality chain. Thanks to the billion dollar boost it received from Masayoshi Son’s visionary fund and other investors over the years.

After raising the first few rounds of funding, OYO set out to establish its empire in the Asia Pacific in 2016. That was then. Now it wants the world. And it’s going all out to make that happen, disrupting the sector along the way. Because OYO is not a hospitality company anymore. It’s a real estate business focussing on living, community and lifestyle — with offerings spanning across hotels, serviced apartments, short- and long-term rentals, weddings, travel packages, etc.

To put OYO’s recent global expansion into perspective, it has earmarked $600 million for China, $100 million for Indonesia and $50 million for the Philippines. In February 2019 alone, OYO announced its entry into Saudi Arabia and Japan’s rental market with a joint venture with Yahoo! Japan Corporation. Overall, it has presence in 13 countries including India, Malaysia, Sri Lanka, Nepal, U.K., Singapore, U.A.E., and the U.S. At the end of 2018, OYO claims to operate 458,000+ rooms globally.

OYO may have taken a leaf out of McDonald’s playbook. The global behemoth, rather than merely relying on food, diversified revenue stream and became the primary landlord to several of its restaurants across the globe. The company owns about 15% of 36,000 restaurants including some of the most iconic McDonalds around the world. The lease payments made by franchisees is what helps the company sail through fast-food market slump.

India, for OYO, has become a test bed for different models that it would like to introduce to the world. The notion that OYO is a hospitality company will soon expire. OYO Life has evolved the company beyond hospitality, with which it has also assumed the role of a landlord (to put it mildly). In all probability, OYO, which has emerged as a multi-faceted organization , will keep experimenting with business models and technology application to bring the real estate industry in the 21st century.

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