Traditional Budget hotels in Southeast Asia rush to compete with the growing OYO

With the growing competition between hotel-tech chains with their millions invested from venture capitals, what will the smaller players do the change their business models to keep up within the sector?

Southeast Asia has always been popular with budget-conscious travelers, both for flights and accommodation. On the back of leisure and business travel boom in the region, the budget hotel sector, estimated by the industry to be worth USD 17 billion, will continue to grow, driven by the 350-million strong and growing middle class population.

This long-term outlook bodes well for the travel industry in the region. This includes hotel tech startups such as ZEN Rooms and RedDoorz, who address the market of regional budget travelers.

At the same time, the incumbents face competition from India’s hotel tech unicorn OYO, which is said to be raising funds at a USD 10 billion valuation. Backed by deep-pocketed investors like SoftBank and Airbnb, its persistently growing presence in Southeast Asia will have its impact on local players. Some analysts believe they’ll have to brace for lowering their room rates to match OYO’s.

Small hotels have a tough time in the digital era

Technology is an important aspect for the hotel sector when it comes to attracting digitally-and-mobile savvy millennial travelers, who search and plan their trips online. A 2016 survey by Topdeck Travel quoted by travel news site Tripzilla found that social media and peer-influence are top factors influencing millennials’ next travel destination.

However, many small and independent budget hotels have a harder time to cater to these tech-savvy travelers as they lack the money, brand trust, and marketing experience to stand out against larger hotel chains.

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