At SoftBank-backed Oyo, the pink-slip scare isn’t over yet.
The USD 10 billion Indian hospitality giant will let go over 5000 employees globally, the company said Wednesday. This comes a month after slashing over 2100 people from India, China, and the US.
Ritesh Agarwal, the 26-year-old founder and CEO of Oyo, in an interview with Bloomberg, said that the company’s “global headcount would fall by about 17% from 30,000 in January.”
This translates into 5100 officials, who would be fired in the ongoing restructuring process that kicked off in January after SoftBank pulled up its portfolio companies following WeWork’s canceled initial public offering in September.
“The worldwide overhaul was in full swing. By the time our restructuring process is complete, OYO will have over 25,000 employees worldwide,” Agarwal told Bloomberg.
“In our previous phase, we added a lot of properties to our platform and built the brand and mindshare,” he said. “Our first focus of 2020 is growth with profitability.”
To “prepare for strong and sustainable growth in 2020, and beyond,” Oyo in January laid off about 1200, 600, and 360 employees in India, China, and the US, respectively. In this round, the Bloomberg report said, the job cuts would largely impact Oyo’s business in China, where economic activity has slumped down due to coronavirus outbreak that has infected almost 80,000 people and claimed over 2700 lives. The company plans to let go about 3000 people in China, almost 50% of its 6,000 direct full-time staff in the country. Oyo will also “temporarily” lay off some of its 4,000 discretionary workers, who might be invited back once the business recovers, the report said. Prior to the coronavirus spread, Oyo was planning to reduce only 5% of its workforce in China.
“In China, the coronavirus has hit us and in specific provinces, we are trying hard to keep hotels open, as many as possible,” said Agarwal. “It’s a tough time for our hotel partners.”
Oyo, founded in 2013 as an online hotel aggregator, grew to become the world’s third-largest hotel chain in the short span of six years. The Gurugram-based startup claims to have 1.2 million rooms across 40,000 properties in over 80 countries.
This rapid growth has come at a price for the young startup. The company is reeling under mounting losses.
For the financial year (FY) 2019, its losses shot up over six times to USD 335 million as compared to FY 2018. According to a report by American travel research firm Skift, Oyo’s losses climbed further and between April and June, the first quarter of FY 2020, its losses stood at USD 181 million, more than half of what it saw for the entire last financial year. A Reuters report said the company expects losses in India and China, its two largest markets, to continue through 2022.
Oyo has been so focussed on growing the number of properties that it got subpar hotels onboard. Moreover, over the past few years, Oyo had splurged money on wooing customers by giving them deep discounts, sometimes even more than 50%. But this practice has deteriorated the quality of customers, luring primarily unmarried couples looking for a place for a few hours, various state hotel association members told KrASIA previously.
Meanwhile, its domestic and global hotel partners aren’t too happy with how Oyo runs its business. Many of its hotels, India and abroad, have complained about Oyo arbitrarily slashing minimum guarantee promised to them and charging penalties so that it doesn’t have to pay them their full dues.
The company, Agarwal said, is also prioritizing improved relations with hotels and stronger corporate governance.
