Editor’s note: This article was updated February 14 after OYO issued a new statement to DealStreetAsia denying any plans to close OYO Life in Indonesia. The company did not address the issue directly in its initial response.
Indian budget hotel chain Oyo Hotels and Homes (OYO) is considering shutting down the Indonesian operations of its co-living arm, OYO Life, DealStreetAsia has learnt.
According to an industry source, OYO Life in Indonesia is beset with high operational expenses, significant customer churn as well as difficulties in retaining co-living supply due to operational issues.
OYO has denied the development.
“We have no intention to close OYO LIFE as we commit to grow the business in Indonesia because the business model works and we are on the right track of positive development in terms of scalability and seizing market potential,” an OYO spokesperson said in a statement emailed to DealStreetAsia on Friday after the story was published.
Multiple sources told us that the SoftBank Group-backed company recently laid off over 200 people in Indonesia. There could be another wave of layoffs taking place as soon as March.
“We can not comment on the downsizing rumors. However, let me assure you that OYO in Indonesia has never been stronger or more relevant than it is today… The journey we have experienced in Indonesia has provided us with some key learnings including how to further strengthen our foundation by better using our resources as well as the technology we have to deliver better value to our partners and customers in Indonesia,” said an OYO spokesperson.
The company is in the midst of a “restructuring” globally. Earlier this year, OYO made headlines for laying off over 5 per cent of its 12,000 employees in China. In India, the company is laying off over 1,800 employees and exiting about 200 towns in the country.
According to media reports, the company had also fired around 360 people in the US, or about one-third of its total headcount in the country.
OYO founder and CEO Ritesh Agarwal told Nikkei Asian Review that the startup’s global headcount will stand at roughly 25,000 after the restructuring, indicating hundreds of employees are being laid off outside India.
OYO announced its launch in Indonesia in late 2018, and months later pledged to invest up to $300 million in the market, which it described as its “next mega frontier” after China.
In October 2019, it launched OYO Life in Indonesia, which aimed to replicate OYO’s success in the budget hotel segment, in the co-living space.
At the time of launch, the company announced that it already had 2,500 rooms across eight cities under its management. By November, the company said it was “exponentially moving toward 5,000 rooms covering more than 10 cities.”
OYO also launched its co-living arm in India late last year, and claimed to be “the largest long-term co-living player in the country.”
Meanwhile, in December, Yahoo Japan announced that it was selling its 33.9 per cent stake in OYO Life back to OYO, thus exiting the venture to focus on other initiatives, it said.
Since its inception in 2013, OYO has aggressively expanded to 800 cities in 80 countries. Over the last two years, it moved into the US, the UK, and the Middle East, and a host of European cities.
In Asia, it expanded its operations in China, Malaysia, Indonesia, and Japan. The company currently counts India and China as its largest markets.
OYO, like other venture-backed startups, has been under pressure to focus on profitability.
The company’s losses widened more than six-fold to Rs 2,384.69 crore during the financial year ended March 2019, even as revenues rose over fourfold during the period. A majority of the company’s expenses are attributed to operational expenses, which escalated to Rs 6,131.65 crore in FY19, a five-fold increase from a year ago.
