Blitzscaling Hotels in China — with OYO JiuDian (酒店) CTO Zou Jia

Original article via The Harbinger (link):

Tim interviews Zou Jia, CTO of OYO JiuDian (OYO China), a Chinese hotel chain operator that since November 2017 has scaled to over 500,000 rooms on its platform by February 2019 and raised over $800 million from Softbank’s Vision Fund. OYO JiuDian partners with fragmented hotel owners in China by aggregating them onto its platform through leases or franchises and through renovations, standardizes the user experience. Jia shares insights on why he moved back to China from SF, OYO JiuDian’s consumer product philosophy, how they manage supply, the fragmented Chinese hotel marketplace, and how he’s applied blitzscaling learnings from Uber China and Mobike to OYO JiuDian and more.

TL;DR 👇🏻

• OYO JiuDian’s mission is to enable consumption upgrade to satisfy travel and stay needs for Chinese consumers in lower-tier cities who are less economically well off; the focus is on a consistent, standardized service and offering to improve safety and user experience
• Use cases range from visiting relatives, business travel in small cities, and enabling smaller hotels to support large domestic tour groups
• Core app philosophy is to simplify clicks to booking (2–3 clicks) via guessing/pre-filling information whereas competitors take 5–6 clicks.
• Key customer for OYO JiuDian is the hotel owner (10,000+ hotels on its platform with over 500,000+ rooms across 320+ cities). 95% of Chinese hotel marketplace is fragmented and unchained; OYO JiuDian aggregates and provides various tools to 1) standardize hotel room quality and management and 2) streamline operational best practices
• OYO JiuDian’s near-term tech focus is on building a strong middleware tech platform to enable front-end product to iterate fast to cater to user needs while abstracting core pieces to enable compatibility with underlying infrastructure; also requires hiring key engineering talent from mature companies such as Alibaba who have seen this type of scale
• OYO JiuDian’s organization and tech infrastructure is wholly separate from OYO India to enable the company to run faster and localize. For foreign companies to win in China, autonomy is key: focus on solving Chinese problems, with Chinese people, the Chinese way.

Edited by Tim Chen. Link to SoundCloud (here), also available via Apple Podcasts, Google Play, etc. [Editor’s note: this interview has been edited and condensed for clarity. The opinions expressed in this article are Jia’s own and do not reflect the views of OYO JiuDian; Tim Chen is Head of International Product at Mobike and Partner at TheHarbingerChina]

Introduction

Today I’m here with Zou Jia, CTO of OYO China, welcome! So would love to start off with our friends and folks who are not too familiar with OYO and OYO China (JiuDian), can you tell us about your background and why joined OYO?

Jia: Well I grew up in Beijing and I went to the US when I was 15, did my high school and college in Minnesota, and then went on to do my PHD in Berkeley. That was too much time at school I guess. After that I did 3 years at Google as a software engineer, I figured I didn’t want to be in Academia I wanted to be building stuff. I was working on Google Wallet, which was more or less a failed product but I learned engineering techniques — how to build engineering culture, etc. That really set the foundation for me as an engineer.

Moving forward I wanted to go to a smaller place where I can have bigger impact so that’s why I joined Uber. I was very lucky, the second week I joined Uber, Uber started a growth team in China, I was part of that founding team, we were able to help the operations people on the ground and help the business go from 1% market share to 45% in a very short amount of time. Of course we made a lot of mistakes on the way and after two years we decided to merge with Didi. After that I did a short stint focusing on Uber southeast Asia, I had fun traveling and made lots of friends. The business seemed like it was growing but also facing the same competitive pressure in China.

At the same time I came across this opportunity at Mobike back in China and decided that it was something one very exciting and two, opportunity for me to play an even bigger role in an even smaller startup that is trying to climb a huge growth curve. So I decided to move back to Beijing. Again, rode the growth curve on that company grew the business from 400 thousand trips per day to over 20 million trips per day. Much bigger than Uber in terms of trips but smaller in terms of GMV. That was also a huge learning for me — learned how to operate a function to operate at a business executive level at Mobike. Fortunately or unfortunately that business came to an end when Mobike was bought by Meituan in 2018. After that I stayed on for 6 months to help with transition but I always knew I wanted to do something even smaller with bigger impact and I came across OYO JiuDian opportunity. In China we call OYO “OYO JiuDian,” JiuDian the Chinese word for hotels, just to differentiate from OYO with rest of world. I joined OYO JiuDian in October of 2018 signing on as CTO, right now run both product and engineering and data within OYO JiuDian, leading a team of around 600 people.

You really nailed it in terms of moving from Academia to building products while moving to ever smaller roles where you can have out-sized impact. I’m curious, when you were at Uber China you were straddling both the US and China and traveling between, and then moving to Mobike which is back in China. What was going through you head? A lot of haigui (overseas Chinese returnees who studied abroad) move back looking for startup and entrepreneurial opportunities; did you ever think you would move back to China?

Jia: That’s a really good question. In the back of my mind, I always knew that Beijing is the place I’d consider home ever since I was little. I wasn’t born in Beijing but I grew up here and have lots of good friends here. The atmosphere, the culture, it had a sense of home for me. I always missed this when I was in the US. I always felt something was more or less missing; there was this belonging I couldn’t get anywhere else in this world. That has since changed a little bit but that was always in the back of my mind, that drove me to work on Uber China for example. At that time I had the choice to focus on Uber China or something else and it was a simple decision — I wanted to keep this connection, I wanted to have the opportunity or setup so maybe later on I can come back to China. And it did happen as it turned out. I can’t say I totally planned for it but there was a seed planted along the way.

Consumer Product

Makes sense, I think when people think of belonging, it’s either moving people from A to B with Uber, or last mile at Mobike or having a place to stay like OYO JiuDian. So, in your words, what is OYO JiuDian and what does it mean to the Chinese consumer?

Jia: From the outside it might look like another hotel chain but the key differentiation between us and the rest of the hotel ecosystem in China, is that it focuses on the everyday consumer, especially those who are not doing as well in life in terms of economics, or their way of life. So this is very similar to the PinDuoDuo model. Some people brand us as the PinDuoDuo in the hotel industry which has some truth in it but the key similarity is that we focus on the people who live in “5 huan wai” (outside 5th ring road in Beijing), that is Huang Zheng’s (CEO of PinDuoDuo) key point, that “xiao fei ze sheng ji”, or consumer consumption upgrade is not getting the Beijing people to live the lifestyle of those in Paris, but people who live in Anhui, Henan, or small counties and towns and get them an experience that is more like in Beijing. That is the vision that we share, and it is a very exciting thing when you think about how big of a population you are impacting.

That is a great point, for those listeners not familiar, Anhui, “wu huan wai” are folks who live in lower tier cities and don’t have the economic spending power or access to high level goods that folks in Beijing or Shanghai or first tier cities do.

Jia: Right, but at the end of the day they also need a place to stay at when they’re traveling or when their relatives come to visit or when they are visiting their relatives, they also need a place to stay if their relatives’ sofa isn’t available. For them, we want to provide the best experience possible for the cheapest value So that’s the market we focus on and the problem we try to solve.

OYO hotels’ five values: clean, safe, chic, warm, convenient

Premium: Curated, fashionable and high quality

Economy: Standardized service, snug, good quality-to-price ratio

Light: Quick, hassle-free, best bang-for-buck necessities

It would be helpful to learn more about what the marketplace dynamics look like. Taking a step back, in the US in the 90s there were a lot of budget hotel chains that were gobbled up by Hampton Inn and thus formed these massive chains — so to unlock value it was to aggregate and standardize. Is that a similar approach you guys are taking in China?

Jia: I guess at the end of the day it is about ROI. For every single RMB that is spent, what kind of experience are you going to get? And no matter who you are, having a place to stay, a roof over your head, is a basic need. And so what we’re trying to do is to get hotels to these customers with a nice comfortable bed, with clean toilets, and relatively noise free environments. Those are the key things we realize our customers care about. So when you walk into an OYO hotel you won’t have a fancy lounge, there won’t be a bar, but these travelers will have a nice place to stay for the night.

Chinese User Behavior

Can you share a bit more about your user segments and use cases? For example I read in OYO India, in a lot of places where they operate, electricity is not consistent and so when there is a blackout, users go to OYO hotels because they have consistent AC, wifi, etc. what does that look like for China?

Jia: So we have less of that in China. Our population is even though not economically too advanced, they still have access to a clean toilet, AC, at home. So that’s not the main reason people come here. But it is a good reason for example when you are visiting relatives, or when you are visiting someone near a hospital and you have to take care of the elderly and you need a place to stay at night. And of course a place to stay if you are a business traveler. Business travelers in the big cities of course they will not choose us because the big corporations will reimburse you. But if you’re a small business guy working for a small business, chances are your budget is not as big, but you still need a consistent experience you don’t want to walk into a non-named or non-chained hotel and meet something you don’t want to expect. So OYO gives you that safety and predictability you can have in a chain hotel.

I know one of the bigger trends in China is enabling domestic tourism for the older population, who travel in these massive buses — you can see if you’ve traveled in China — and these folks used to stay in groups in large hotels in these hotspots.

Jia: I think that population is very interesting. When you think about traveling usually you think about what are key top travel season and how do hotels meet those needs? You’re totally right about the elderly population, they’re much more free and they want to avoid traffic so they actually go out and do their travel during non-peak season. The second thing is they always travel in packs — they always go with a travel agency because it is much harder for them to plan and take care of each other. When you go to those travel agencies and when this group is not too economically advanced then you’ll have a problem. If you want to stay in a hotel chain they will usually cost more but if you want to stay in a non-hotel chain, those hotels usually have a small number of rooms, which is not possible to encompass the group on the bus. So what OYO does is we work with travel agencies such that when you have this group, since we have a chain and a large number of hotels in our platform, we can actually split this group up into multiple smaller hotels. So one, this provides customers a good experience at a lower price and two, it helps these hotel owners. Before this these hotel owners can’t take these travel agencies because of the limited amount of rooms but now they can because of room-sharing among these hotels.

You are now in 300+ cities, as CTO and owner of product, what have you seen in terms of similarities across these different users in different cities and how have you thought about the product in a way to fulfill these different users’ needs? Or do they look generally quite similar?

Jia: I think the key here is that we want to make the booking experience as simple as possible. And that’s actually really hard to do. If you have booked a hotel in Meituan or Ctrip, there’s actually a lot of hoops you have to jump through — you have to figure out the date, which seems easy at first glance but could still confuse you. If you think about rooms in a hotel you might take them for granted but there are many many different types of rooms and pricing can be moving up and down on a regular basis. So we of course don’t do this, but what we do look at is to say what is the most simple experience from users landing on the first page to them clicking booking with the pricing shown simply? So we make a lot of assumptions based on data cohorts, based on types of users we have and either have the date or location pre-filled. So when you come in you can actually make a booking in 3–4 clicks which is super simple depending on your use case. So on the product side in general it is hard to make something really simple but we try to do that by learning more about our customers and making assumptions about their behavior. At the end of the booking if we make a wrong assumption we have to make a flow to help you fix that experience. And that’s another part we focus on.

It really does come down to product design. I was playing with the app earlier and looking at places in India and China. The UI does look similar to, for listeners in the West, a Bookings or an Expedia or Kayak but with much less information, so it helps you get straight to the point from A to Z much faster.

(Main pages of OYO JiuDian and Trip.com. OYO makes it easy to immediately click into a room, served based on user GPS location whereas Trip.com relies on traditional user-input)

(While user is one click away from booking on OYO, user has to clarify inputs on Ctrip)

(User only needs phone number via app sign-up to book a hotel room. For Trip.com, user is then shown a listings page)

(OYO has one-click cancellation, simplifying the entire booking and cancel process. Trip.com then shows details of the hotel)

(OYO users could rebook again by the time a Trip.com user is shown the bookings page)

(OYO JiuDian only needs user’s phone number via registered account to pre-book a hotel. OYO front-loads the booking and makes cancellations easier so they can better convert users into booking. It took me only two clicks to book a room. Whereas on Trip.com (Owned by Ctrip, a Chinese company, whose app is similar to OTA competitors such as Kayak, etc.) it takes more than 5 clicks. OYO likely has a stronger comparative advantage in conversion rates taking a user-centric approach to product design rather than a “top-down” binary-tree type design most OTAs use. However, enabling users to more easily cancel reservations could put stress on hotel room inventory management.)

Hotel Owner Product

This is just the forward facing app to the user who books hotels and OYO JiuDian is obviously like a WeWork where it works with these hotels and has massive training staff to get things up and standardized. Can you share a bit more about what are some tools you guys use to manage the iceberg below what people see?

Jia: Let’s take a step back. The key point I want to make is OYO’s customer is two parts: the consumer and the hotel. There are others users such as front desk people, managers, etc. but the most important customer in OYO JiuDian’s ecosystem is the hotel owner. If you have to pick a single user we care about the most about it is the hotel owner because they are our partners; without them we would not be able to provide the hotel experience; without them we would not be able to have the property to operate on; that’s really where everything starts. So the question is how do we help these hotel owners achieve their goal? And their goal usually is getting more business, getting more bookings, getting more GMV, getting more income, and also saving their time and making their job easier. So those are usually the things hotel owners mostly care about. So to that end we built out a couple products to help them.

For example we have a product that focuses on just the owners — all the aggregated data on dashboards for owners that’s shown to them every single day that tells them how have we been doing and what can we do to make our business more successful going forward? It also aggregates a news feed that tells them what are the latest trends, as a small business owner what are the things you care about. And then we see later on we see we can help with financing, supply management, tooh brushes, toiletries, all that stuff and have that as an entry point as a touch point to help our owners more. And also allow OYO to expand its business in the long run. That’s one side.

The other side is about the hotel managers and the front desk; so in order to help the owner and customer more we need to make sure the front desk and the hotel managers know how to do their jobs. How to make their jobs more efficient and help them improve along the way. So we have built a process-oriented and tool-oriented app that basically we give to both hotel operators and front desk; give them a checklist of what they should be doing every day and tools to help them with ‘what are the data you care about’ and what are the particular tools that can help you manage this hotel better. So those are things that we provide. Of course we have a long way to go, right now these are more like processes and tools in the future the vision of course is to incorporate more AI into the system such that the hotel managers can have more input into how they’re doing and the frontdesk and can just be told what to do at different times of day instead of having to think for themselves.

Chinese Market and Supply

At the end of the day it is a two-sided market, you’re bringing together hotels and guests, so in that way it sounds similar to Uber where you have software that connects drivers and users and you have to think about the driver user and think about how to fulfill their needs to serve your users, and at the same time, OYO because you want to standardize and put on your branding, it is more operationally intensive like Mobike, since Mobike isn’t really a two-sided market. Why do you think this mixture of bridging two sides while being a bit operationally heavy is the right way to penetrate the Chinese market? On one hand you can go pure OTA and just bridge hotels and users, or you can go “I’m going to build hotels from 0 to 1” and start from scratch.

Jia: That’s more of a business model question than anything else. We chose this because there are a lot of OTAs in China providing some pretty good experiences. But we chose our particular business model because one the market is huge, 95% of all hotels in China are non-chained hotels. And all of these hotels have trouble with their occupancy rate. If you look at Rujia or Huazhu they all have occupancy rate of 85–95%, but if you look at the hotels that choose to work with us, they all have 25–35%. So there is a huge gap we want to help them bridge. So because of the business model we chose to work on, that’s all the operations and owner-management came after; those are just the core capabilities we had to build in order to help these hotel owners.

(OYO has an ROI calculator on its website as an acquisition tool to help prospective hotel owners to understand how much they can make from partnering with OYO)

(These are additional exclusive features OYO-partnered hotels get such as minimum 30-room entry, and free operational services that competitors would otherwise charge for)

Who would you say are your closest competitors in your space?

Jia: We didn’t have any close competitors up until earlier this year when our business grew tremendously. At that point we have Huazhu and some other players coming in with sub brands or spinoffs that try to compete with us but their size is a lot smaller, and we still have a lot to learn from them, but they’re lagging behind in other areas.

OYO’s founder Ritesh said OYO’s goal is to be the world’s largest hotel chain by 2023 and you guys are in over 300 cities and (500,000) rooms and (10,000) hotels (In China). Which is ridiculously fast, like the hockey-stick growth you saw at Uber China, as well as Mobike in China. What does it mean for the marketplace for these suppliers you are disrupting? Are there adjacent industries being impacted? For example OYO india they’re branching into weddings and offer related services.

Jia: Right now we’re still very focused. Even in the hotel industry there are different models we can build. Right now our model is very much like Didi — it focuses on existing supply. Because 95% of hotels are still unchained, because of the huge amount of existing supply, we want to bring them onto our platform and output our operational capacity and make their business better. For example some hotels will need more help in terms of construction, but there could be owners who are stuck with a hotel but want to do something else. These are opportunities for us to buy out hotel as a whole. All of these are different business models that address the same market, so we want to solve these problems first before we move on to adjacent businesses. So we’re still very focused on our core hotel business at this point.

Blitzscaling Best Practices

In China, blitzscaling is the norm — getting big then moving into adjacent markets. How has your experience in growing Uber China, Mobike, and now OYO JiuDian, what does blitzscaling look like for you from a product and tech side?

Jia: So that’s the question that keeps me up at night on a daily basis. I think the key point that I have experienced at Uber and Mobike is how do you build a tech team that can support this kind of growth? And there are a couple things that need to be solved. One is the infrastructure side, you have to make sure your app doesn’t go down, or at least so frequently that consumers lose trust. And that is a very different problem in itself. And when you have to solve it in blitzscaling when your amount of traffic is growing and doubling every month or so this becomes harder. To build on top of that, because the business itself is growing, you have to build a lot of different tools to help that and other parts of the business to grow.

For example in Mobike’s case and OYO the supply is growing so fast so you have to build the corresponding demand systems to catch up with that supply, so that means building features in app, building connections with different OTA providers, and tools your sales people can use and tools your operations people can use to manage supply. All that adds up to a very very large number of tools and features and products that you need to build on a daily basis. And so finding a way to build a bunch of features really fast while keeping the system stable that can support this kind of traffic really is the hardest; it’s what makes this problem so hard. So we tried to do a couple things.

So one you just have to hire. You have to hire good people, who not only focus on building good features but have vision for scaling this long term. So we have a couple of really good people from Alibaba who have seen this type of scale and can build for this type of scale. So getting some key leaders from good companies is very important at the same time you really need people to buy into you and works very hard so we hire lots of young people who are very driven, smart and eager to learn and have them work with our senior leaders to both build up the system but also allow them to learn and scale themselves in a fast paced. That’s the approach we take on the people side.

On the technology side we always try to use something well established. We don’t want to experiment with new things because we simply don’t have the time to and we can’t afford to make mistakes or “zou wan lu” take a roundabout towards certain approaches because we just want to build the system up.

And the third thing we haven’t done at Mobike but I am doing today at OYO JiuDian is building up middleware “zhong tai”. So the interesting part here is that the backend, the infrastructure, is something that usually changes very slowly. It is more rigid. But the front end, the features evolve very quickly because your business model is evolving quickly. So you can imagine you have a very fast spinning gear running on the front, and you have a slow turning gear on the back. And so to bridge these systems creates a lot of friction. So what middleware tries to solve is to abstract a lot of things from features you want to build and use it as a middleware. So when your front end products iterate, stuff you built previously can be reused because it is abstracted. But it also creates a cost because abstraction is hard. So you need really good leaders who can do this abstraction. And two, you need to manage all your stakeholders and let them buy into your abstraction, so they can live with waiting for their features another week or two before they launch but then knowing when they have a new features coming in, it is likely that time to delivery for the new feature is faster. So that is the gist of the middleware tech and team we’re trying to build.

So far it has worked out relatively well but also creates friction such as managing stakeholders and doing the right abstraction is difficult and enforcing that abstraction across your engineering team is difficult but these difficulties we’re tackling one by one and it seems to be working out better and better and we have seen time and again when we don’t do abstraction and don’t do middleware we end up spending more time fixing things later on. So that’s a key learning for me in the past 6 months.

Organization

Definitely a key learning built up from two unicorn, hyper-growth companies under your belt. You mentioned earlier OYO JiuDian is named JiuDian to differentiate itself; OYO is in a lot of other countries now — malaysia, a couple other places in Southeast Asia, and recently even starting in the US. how do you guys share learnings and playbooks? Do you share resources on the tech and product side or are you wholly autonomous?

Jia: Actually we try really hard to keep it autonomous. Our code base is entirely autonomous, we are not using anything from the global team not because they are not doing well or not because we don’t want to but because we want to move as fast as we can. In Europe you can wait two weeks before making a decision, in Silicon Valley maybe you can wait two days, but in China if you wait for a decision for more than two hours you might be late to the game. So just in order to have the kind of speed that China demands, we chose to segregate these two tech stacks and try to move as fast as we can. But having said that we are starting to share some stuff for example the india team has built up a pretty interesting IOT product called OYO switch that we’re trying to help them implement in hotels in China, so there’s some cross starting to come on but due to early stages we’re just starting. It hasn’t be worked on at scale just yet. And our key interest is still to make China business successful. Once we are more stable then we will focus on efficiency and knowledge sharing at a later stage.

Uber China it was wholly separate form Uber core, and Mobike international was separated from Mobike China. Would you say this is a core learning for china components of companies, keeping it autonomous, localizing all the way down to infrastructure level is the best playbook?

Jia: Totally. If you look at the foreign companies that have succeeded in China or worked in China, you have either Amazon who has completely failed because their decision making is too complicated, you have to go through headquarters. Or you have Uber, which did better, still a lot of mistakes made, still didn’t have its’ own engineering team based in china, but still we had it in San Francisco to support China team but communication was still hard. And then you have OYO where we chose to just be a chinese company, all the c-level are basically Chinese and we focus on solving Chinese problems, with Chinese people, the Chinese way. I think that’s a very important lesson.

What’s one thing you have learned while working at OYO JiuDian that is unique in this particular experience that you feel others either in the West or coming from Mobike or Uber haven’t experienced?

Jia: The way I think about it, is every experience is going to be different. So Ray Dalio had this book, Principles, so because every business different and every opportunity is different and you are growing and changing, it is about figuring out a set of principles that really works for you to succeed in the long term. For me, of course there are smaller principles but there are a couple of big axioms that never changes. The first thing is to think deeply about problems and understanding their core and have the problem solving mindset on a regular basis for everything you meet. I started having this mindset when I was at Uber working together with travis (kalanick) and really saw how he approached problems, how he saw every challenge as just another problem to solve. That was eye opening to me. The second thing is to work hard, especially in china. Not just you have to work hard but not working hard is not an option in terms of being able to succeed because things move so fast. But to me because every single opportunity I had, I loved working on it so much, it was never a problem, I did it because I loved doing it, not because people were forcing me to do it. So i know it doesn’t sound very interesting and it sounds boring that everyone has to work hard and everyone has to understand problems but at the end of the day these are the axioms I come back to time and again.

And I think over the course of these three companies when you reflect you realize there are no silver bullets but it is through routine work you put into habit and that mindset. So thank you so much for taking the time to share that and your current journey with OYO today with us. Thanks Jia!