Episode 10: Prasun Choudhary - Building OYO Japan
About Prasun Choudhary:
My next guest on The One Percent Project is Prasun Choudhary. He is the operating partner of OYO Hotels Japan. He joined OYO in 2015 and as a founding member first headed OYO’s expansion in South and East of India and now Japan. Prior to OYO, he has spent a significant amount of time in corporate banking and strategy consulting.
Japan is a unique market traditionally and culturally. Market entry for any foreign entity intriguing. We kick this conversation off with Prasun on how he navigated through Japan’s traditional mindset to launch OYO Hotels Japan.
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In this conversation, he talks about:
Building OYO Japan.
What does he look for when hiring for OYO and how did he navigate through Japan’s traditional hiring process?
How has the OYO model disrupted the Japanese hospitality market?
Operational learning from running OYO in emerging and developed markets.
The impact of COVID and post-COVID hospitality trends.
Ritesh Agarwal’s leadership style through the pandemic.
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Transcript:
*The transcripts are not 100% accurate.
Prasun: First OYO and then Japan. So as I said, I have been with OYO for a long time now; pretty much form the initial days. And again... It was just my excitement, I wanted to work for a start-up to see how a company is built, how a company is grown and how a business is built up - because it was always one of my key motivators of joining a start-up and that's how I was looking to work with start-ups and that's how I came in touch and came to OYO.
I think I was lucky to join it in the very early days because the Eastern part of India and then the Southern part of India launched Nepal. So for all those businesses recruited a lot of people, built new businesses.
So you get to see how a company grows. You get to see how a business is grown, the challenges of building, having that patience to build it phase by phase; while you also need to show growth. So all of those combinations has been a great learning journey.
I think 2018-19 is when we started expanding globally. We had pretty decent business in India and our partners, our owners, were seeing the value that OYO was adding to their business and seeing the value of how OYO as a full stack model was helping in managing giving them new technology, managing and helping within operations, getting demand. So it is a full stack model and that's where we thought "Let's go global".
And Japan was always on the cards because, as you know, SoftBank is one of our key investors and has always been a great supporter of OYO - and that's where we thought that, as OYO was expanding globally, Japan also was in a very important market for us; and I was lucky enough to be given this opportunity to come to Japan and build the business in Japan.
So that's the first answer to the first part. Coming to the second part - Yes, Japan is a very unique market. Everything, everyone, every process, every company strives for perfection.
So just to give you some data... I was reading an article some days back - and if my numbers are correct - out of the hundred companies which are more than a hundred years old, close to 50% of them are based out of Japan. So you can understand people strive for perfection. They are not looking for very short term gains. They are looking how to build a company, how to build an organization for long term.
So that's why it's a very, very unique market. As I said, everyone strives for perfection. Very high cultural values. Very high values in terms of "How is the product working?" If there are any challenges, it has to be made perfect for the partners; for everyone.
So I think these are some of the challenges. Customization - the product has to be localized and customized because as a language Japanese is the most prominent language used across business across every place. So you have to customize your product and customize your technology to make sure it is well suited for the end user and our partners.
Pritish: You have built OYO within India as well as in Nepal, and obviously you have built quite a strong team in Japan. One thing I would like to understand... What kind of people do you see to be a great fit within OYO?
Prasun: I kind of look for two or three things. The first is curious. If the candidate is really curious to understand new things, to explore new things, not take things as it is, questioning and trying new things. So I think that I always look that.
Second is an ability to change. Start-ups are very dynamic, I would say, while it sounds really great and everything, change can happen very fast. Change can happen very fast and you have to be ready for that change. If we try some model and it does not work, we cannot be too emotional about it. We just need to change things and move on and try something new and work on it.
While the basic model always still exists, but when you go to new markets you have to be ready for change. So I think that is the second thing I see - how much are they eager to change, or how curious is he to understand things?
And my third is common across other industries, as well - that you have to be ready for a long -- It's a tough job. So you have to be ready for some kind of sacrifices because of the long hours and because of the amount of effort which needs to be put and it's not just -- Yeah. To put it very bluntly, it's not just a 9 to 6 job. So you have to be pretty much into it to build the business. So I think primarily I look for these three things.
Pritish: How difficult was it for you to actually find the right talent within Japan; because as you mention, people there are very devoted to their companies and they have hundreds of years of legacy?
So how difficult was it actually for you to bring people within Japan into your team? And, I am assuming, start-ups are something of a new concept within Japan as well?
Prasun: Very, very good question. Very good question. I think, yes. This was the most difficult part of my job - to build the team. When I landed in Japan and when we talked of building teams, it always came out as the biggest problem in Japan. And second, as you said, people are really very devoted to their companies. They want to work for their companies for as long as possible.
So it was very tough, again, in Japan and it's also a very recruitment-based market. So it's not typically reaching out to individuals or to individual candidates. It's not something very common in Japan. Everyone wants to come through a recruitment agency.
So I think that makes your job easier as well as tough as well. That means you may not be able to find talents through LinkedIn and through other sources. It's not a very common practice, but it's easy in the sense that then you just have to find the right recruitment agencies and the right partners who can work for you.
So we also work with two recruitment agencies; where we understood that these two or three are people who really understand our culture and understand what kind of candidates we are looking for. I think once that was done, after a few months they understood and then they were able to get the right candidates.
And obviously, in these cases, in start-up everyone is a sales person. That's the way I can take it. As a person who started the Japan operations, I landed here the first day and we didn't even have a company at that point in time. I came here and recently we established the company and everything and we started hiring.
So everyone is a salesperson. I am a salesperson in the sense that I am selling my start-up. I am convincing other people to join it and that's what all of us do in a start-up. You have to; when you are meeting partners, you are explaining to them the importance of who you are and how a full stack model will help you.
When you are meeting guests, you are explaining to them how you are very different and "You should try our app?" and "How does it work?" And when I am meeting candidates I am really convincing them and motivating them to join OYO to see how it's a great growth opportunity.
The same thing - very honestly, the same thing which I felt about the start-up - is that if you want to experience building a business, if you want to see a how a business grows, if you want to understand the challenges of growing a business... this is the right place for you!
And I think that is the way you also find the right fit; because if someone is not too excited about what you are doing, he or she may not be the right fit for -- I mean, for this company. We all have to move on.
I think -- So that's the way I built the company, using recruitment agencies and explaining to them what our model is and then meeting as many candidates as possible. Basically, that became my full-time for the first three or four months - literally. My full-time job. That's the only way possible.
Pritish: Would you say that the OYO model has disrupted the Japanese hospitality industry, or it is a continuous innovation process that OYO has implemented?
Prasun: I think in Japan it's a combination of both. It's a combination of both. Japan, as you understand, as I said everyone strives for perfection. So the hospitality is also quite -- Very developed. It's one of the best hospitality industries across the globe.
That is how you will say - and it reflects in the prices. It's typically one of the highest ADR markets. I think the US, Japan and the UK. These are one of the highest ADR markets. That means people are ready to pay. That means there's a value for that money which consumers and guests pay.
But the other thing we also realized is when you go and meet a lot of budget hotel owners across Japan, across Osaka, Fukuoka, Nagoya and multiple cities when you go. There are also a lot of owners who are quite old and are running their operations in a very stable manner for a long time. And if I can use --
-- There is still, in some places, technology can be old. And especially in these kind of hotels. So we try to work on that part. They are still innovating. I will not say that. I mean, there's a long way to go. So we are still innovating trying to work with them. That's the way we kind of approach the problem.
The second way was also to make sure that people understand that it's a full stack model. It's not just about one part of it. So for a partner it's about getting all the benefits of just -- With one technology and with one company, they can be rest assured that all their other issues will be handled. The OT will be handled. The operating system is given by OYO and the direct demand comes through OYO.
So all of these things are handled. We help them in setting some operating standards, which are already great in Japan, but trying to get a few more things which can be improved. That's the way. It was a combination of all of this, I would say, that we have been trying for the last one and a half year or so - and also trying to innovate, as you rightly said.
So there's something called Ryokans in Japan. Ryokans are more like hot water on the same baths that are there; and you have a hotel where you can go with family, have those baths, have dinner and a good long course meal. We wanted to see how this can be improved or how a new brand can be made out of this, which is more appealing to the millennial as well as to the outside world - and we worked with them to launch an OYO Ryokan brand as well.
So yeah, it has been a combination and a journey; learning, innovating - and the journey keeps on. The journey keeps on.
Pritish: OYO as a business is in emerging markets as well as in developed markets like Japan. So how do you see the contrast between these two markets when you look at consumer side or implementation side?
Prasun: Very, very good question. I think a few things - a few things to put it into perspective. I think consumers in both these markets - and that's what we are feeling and at least that's what the data also suggests - is that the consumer is looking, the new millenial consumer, the new generation, is looking for value for money.
Second, they are more about traveling and exploring rather than -- Yes, there is also that thought process of enjoying the room and enjoying the facilities, but it's more about exploring. It's more about going out and trying more new places and visiting more new places. So I think what it brings is to the value for money caution across the globe has increased compared to what it was a few years back. That is one thing.
Second, we think the more and more millennial travelers - if you may call them the budget travelers - is increasing every day. It's increasing every day because people have started traveling at a very early age and a lot of them prefer to travel alone or with a few friends. So I think that is also a trend which we see. That is also a trend which we see. So this common across all the markets.
Coming to -- On the other side of the industry which is, yes, the developed markets, the hospitality, the technology - because the consumers expectations are much more different than what you see in the emerging markets. There is difference in both of them and we have been able to quantify some of them. We are still exploring others.
It should not be too theoretical, but more in terms of how it can be executed in terms of your actions taken; and it could be as simple as saying "How do you change your app in a developed market?" and "How do you see it in a different way in an emerging market?" Like what are the important things which people look at or how does the ADR function in a developed market compare to an emerging market?
In some markets the bookings are made much in advance - like cities like Tokyo and London, the bookings are made one or two months in advance; while in a lot of other cities the bookings are made just one or two days before the actual check-in.
So that's the way we segregate the different markets. We try to quantify them based on the key parameters and based on the key consumer trends and also the owners’ expectation. That's the way we have been working.
Pritish: As you grow and build in a new market, there are some best practices and you would have adopted something from Nepal, some from India and some from Japan. Are there any best practices from Japan that have been used or shared with other markets, or similarly, other market practices coming to Japan?
Prasun: Yes. Yes, absolutely. We keep learning from each other and that has been one of the core of OYO from the day we have started building and when we were in India, we used to learn from. Each other region and when we have grown globally, we are learning from each other, the other nations and other countries. That's certainly a part of it.
So I think one of the key things, something which comes on the top of my mind, is SOP manual documentation is very, very important in Japan. So it can't be just lying all over here and we launch something. Everything you build, you need to have an SOP for that.
Everything you do, you need to have a manual for that. Everything you do, you need to have a documentation for that. That is very, very important and taken as the bible in Japan.
So I think that is something which we learned when we landed in Japan, when we were building the business. While we had a lot of those things; but putting it in a very formatted manner, in a very standard manner, visiting it and re-visiting it every few months - is very, very important.
So I think that is something which we build in Japan and it has been used across other markets as well in a very --- Because it helps them. If for no one else, at least a new joiner can just go through it and he can understand the entire -- Everything about OYO.
So I think that is something which we learned, which comes on the top of my mind. There are multiple other things which we are learning slowly and we'll want to take to take it to other markets; while form other markets, as you said, there are multiple other things which we are learning.
Like in London, as I said, bookings are made much in advance. Now what does the consumer trend look like? I think some of the changes which we have done there, how can we implement it. Tokyo as well, and especially for the Tokyo market. So I think that's the way we have been learning.
Pritish: How do you make sense of COVID and its impact?
Prasun: It's huge. It's huge and it's very, very detrimental. Never less. Nothing less than that, I would say. The hospitality industry has really gone to 10-12% occupancy. They had lines just shut down, which is very closely linked to hospitality. So yeah. It's very, very detrimental for all of us.
The tough part is we all are still not sure when everything is going to come back to the normal. People are still thinking about it. The COVID cases... sometimes it goes down and we still see countries wherein like India, Brazil -- The cases are still coming up in large numbers. So it has a very detrimental impact and the occupancies have ganged up.
We have to make sure that we work closely with third partners to make sure - What are some of the value addition things which we can do, even in these tough times? Like across the globe and even in Japan we have launched sanitized states. So there is a proper format and there is a proper process (SOP-made) to sanitize all the rooms and to sanitize the hotel - because we feel a lot of guests will feel more comfortable, we think, with sanitized states. That "Yes, this hotel is sanitized in a proper way. The rooms are sanitized".
So you have to look for those small innovations, those innovations which we can be helpful and where the consumer -- It could be helpful for the consumers as well. And just hope that things are coming back to normal and that it bounces back sooner than what we expect.
Pritish: Got that. So there is a lot of talk about the hospitality industry and how it will be transformed post the pandemic. Do you agree with these predictions or do you see that things will go back to as it was, as previous to the COVID situation, and how is OYO preparing for it?
Prasun: A good question. No. I also feel that there will be a tectonic shift, if I would use that word! It is. It is going to be very different. The new normal will be very different.
If I can just give you a very small example - is that most of the people now prefer takeaways even over a restaurant. A lot of people. Now this is a very -- All of us are seeing. Even in our hotels where we go, there's a restaurant, an outside restaurant. They say that takeaway is possible. A lot of hotels actually encourage that.
In Japan I go to a lot of restaurants and they say if you take away -- If your order for a takeaway, you get a 20% off. Now that's a huge shift where the restaurant owners wanted people to sit in the restaurants and eat and drink - and now to go with a takeaway is a huge shift.
So yes, it is going to have a big shift. I am very sure about it. There will be very, very interesting innovations coming and like I would feel that every guest would want to have a no-touch check in and check out. Like they would not want to have physical interactions, too many if is a technology where they can come in, check in, check out and they don't have to really –- There is just someone standing there to guide them and that's it. They would not want to have too much of human interactions, given what is happening.
Second, they would really want to see something around sanitization. That "How is this room being sanitized? What is the process? What is the SOP?"
Prasun: I think this will some of the -- Which is coming on the top of my mind and which I see being changed. Family travel I think still may take some time because people would be very skeptical or because typically you are very careful with your family and with your kids. So you will wait for some time before you go on and start traveling.
That's the way I see things changing and it will also depend on when the airlines start working back because hospitality is very, very closely linked with the airlines. I also feel that the overall prices, the ADRs, will go down - because it's a very simple demand and supply equation. That means that the demand is not going to be very high in the next few years and it will take time for the occupancy to come back to the pre-COVID normalcy. That means there will be -- The prices will see a correction. That's the way I can see it.
Pritish: Summing this conversation up, how do you see OYO in the next five to ten years?
Prasun: Ten years is too long a time. OYO is just itself six or seven years, you know? Obviously we are building a company not just for a few years. We, all of us, have a very strong feeling that we are building a brand which will exist for years and years to come and which will be a global brand; which is already a global brand, but more and more partners will come on our platform and more and more guests will use OYO as their priary way of booking and staying in hotels.
So that's the way we want to build the company and that's the way we want to build the brand, all of us. All the leaders are quite motivated and quite committed to do that.
In the next few years, as I said - at least for the next few months and years - we see the demand to be suppressed and it may take time for the pre-COVID levels to come.
But that said, we also see a huge opportunity which is that whenever something like this happens the economy section of the demand, the budget section, bounces back quite fast compared to other sections where you really go and stay in very high-end propert
Pritish: Luxury.
Parsun: Yes, high-end property, the luxurious section, I think. And that is great opportunity for OYO because we play primarily in the budget segment and the economy segment and we will see that bounce back pretty fast compared to other segments.
Pritish: A book or a blog that has transformed your way of thinking personally and professionally?
Parsun: I have read a lot of these autobiographies and I always feel very excited reading them like Made in Japan by Akio Morita or Made in America by Sam Walton and the autobiography of Lee Lacocca. I think these kinds of books really motivate me a lot because it's like a journey of someone from his early days, how he fought through, how he built a business, how he or she really struggled across their journeys to build a business. And then you understand that it's not just a sprint. It's a marathon. It's a long journey. So you have to just be focused. Perseverance is the key.
Yeah. So I think I like those kind of books and as much as possible read those things to motivate myself; that it's a long journey and at the end hard work and perseverance will pay off.
Pritish: One thing that you have learned from Ratish during the COVID period, or you see in Ratish which is very admirable?
Parsun: The calmness, the equanimity with which he thinks and, bluntly - at the end, OYO needs to survive. The company needs to survive. The company needs to. The company is here for the long term. Everything that we do, he thinks about "Is it good for OYO? Is it good for our customers? Is it good for our partners?" That's it.
If this is the answer is yes, it's the right decision. I think that calmness to think in these tough times, the equanimity is really commendable.
Pritish: Thank you Prasun for your time. It was lovely speaking to you.
Parsun: Thank you. Thank you. Thanks for your time and thanks for having me on this conversation.