Wishful thinking of rental businesses

Can loss-making Indian rental businesses make money?

Rental startups are predicting a successful future. They are banking on millennials, who prefer to buy, instead of renting. Initial numbers are small, and millennials are getting old.

Jeff Alworth writes,”Next year the oldest millennials turn 40. The youngest will be in their mid–20s. Most millennials are in their thirties, that time in life when people settle into careers and marriages, when they take on mortgages and car payments, when they start having kids.”

Furlenco, Rent Mojo and Grab A Rent are busy offering furniture, appliances, gym equipment, iPhones and smart home devices. The most successful rental startup, Furlenco has 1 lakh paying customers. Businesses such as Drivezy and Zoomcar offer cars on rent. Oyo and Nestaway are offering housing on rent with fully equipped rooms and apartments. Eyewear startups want to disrupt mom and pop shops.

Rental businesses incur long term costs, and earn from short term leases. Wrong business models will lead to losses. Regus isn’t just ten times bigger than We Work, it is also profitable. Oyo claims to replace Marriot as world’s number one hotel brand. Marriot’s net income was about INR 15,000cr, while Oyo’s loss was INR 2385cr.

Case Study: How Ace Hotel changed the hotel industry by being small and profitable. Link