SoftBank-backed Indian hospitality chain Oyo Hotels and Homes (OYO) is laying off over 1,000 people in India as it undertakes initiatives to restructure its teams across businesses and functions.
In an email to employees across India and South Asia, OYO founder and group CEO Ritesh Agarwal said the decision to ask some of his colleagues to move to a new career outside OYO has not been ‘easy’. He, however, did not indicate the number of people the company is looking to retrench at the moment.
The move has been reportedly undertaken to cut down on redundancy as OYO plans to carve out its strategy “to drive its success in 2020 and beyond.”
Going forward, the strategic objectives of the company this year will revolve around maintaining sustainable growth, operational and customer excellence, profitability, and training and governance, said Agarwal.
This, in turn, would mean letting go of some roles at Oyo that will become redundant, he added. The company has been ramping up its focus on tech-enabled synergy, enhanced efficiency in a bid to remove duplication of effort across businesses or geographies, Agarwal said.
“As a result, we are asking some of our impacted colleagues to move to a new career outside of Oyo. This has not been an easy decision for us,” said Agarwal. “Every Oyopreneur is important to OYO and ensuring their well-being both during and after their tenure is our number one priority. I want to thank them for their efforts and apologize for the impact this is causing,” he added.
OYO has been adopting all measures to ensure that its outgoing colleagues receive as much assistance and support as possible through this transition, Agarwal said, adding that Oyo stands strong with its people – not just with those who are impacted, but also with those who will remain an integral part of Oyo beyond today.
The company late last week made headlines for reportedly retrenching thousands of staff across China apart from India. According to a report by Bloomberg, the company has sacked 5 per cent of its total headcount of 12,000 employees in China.
Earlier last month, Oyo had rejigged the leadership team wherein it elevated India and South Asia CEO Aditya Ghosh to its board of directors and appointed Rohit Kapoor as its new CEO for India and South Asia.
Kapoor was earlier leading its new real estate businesses.
The layoffs are also being seen as the outcome of Japanese technology and investment firm SoftBank Group Corp’s changed global strategy.
After an enormous loss from investments in ride-hailing company Uber and office-sharing startup WeWork, SoftBank has reportedly asked its portfolio companies, including those in India, to focus on profitability and stop pursuing a growth-at-all-costs strategy as it struggles to raise funds for its second Vision Fund.
Earlier this month, SoftBank’s Latin American portfolio company Rappi said it has laid off 6 per cent of its workforce.
SoftBank, through its Vision Fund, has so far pumped in about $1.5 billion in OYO, pegging its valuation at $10 billion.
According to experts tracking the sector, the problem with OYO has been its aggressive expansion over the past year in multiple countries and spending hundreds of millions of dollars buying hotel firms.
OYO’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.
OYO, meanwhile, is staring at other challenges too. It has attracted the ire of hotel operators who have been complaining about being blindsided by fee increases. In fact, a group of hotel operators in the southern city of Bengaluru have slapped criminal charges on the startup for allegedly withholding money due to unfair fee increases. OYO reportedly charges a roughly 20 per cent franchise fee on room revenues. Hotel operators, however, claim that it charges much more.
OYO is currently present in 800 cities in 80 countries, including the U.S., China, Europe, the UK, Malaysia, Middle East, Indonesia, and Japan. The company counts India and China among its largest markets.