Oyo Hotels is firing thousands of workers across China and India, people familiar with the subject said, adding to increasing signs of stress at one of the biggest startups in SoftBank Group Corp.’s portfolio. The firm has let go of 5% of its 12,000 agents in China partly due to non-performance while dropping 12% of its 10,000 staff in India, one of the people responded. It intends to drop another 1,200 in India.
Oyo’s downsizing is another hindrance for Masayoshi Son’s SoftBank, whose portfolio has been struck by recent turmoil at WeWork and slumping share values at Slack Technologies Inc. and Uber Technologies Inc. The billionaire has asked for greater financial discipline among the originators in his portfolio, driving job cuts at smaller gears like Zume Pizza Inc. Other SoftBank investees, including Getaround, Wag Labs Inc., Fair, and Brandless Inc., have had to lessen staff or change business patterns once it became clear revenue and profits were not living up to their once-grand purposes.
If the early reports are to be considered, then most of the layoffs will occur from the sales, supply and operations departments. However, the company has not yet approved which departments will be kicked.
Adding to Oyo’s provocations, hotel owners in China have been complaining in front of the company’s offices, citing the startup of breaking contractual agreements. The spreading turmoil may hinder SoftBank’s efforts to raise a follower to the Vision Fund, the world’s largest pond of startup investments.
SoftBank’s Vision Fund has so far spent about $1.5 billion in Oyo, driving its estimate to $10 billion. The firm also adds Airbnb Inc., Sequoia Capital and Lightspeed Venture Partners as sponsors. It strengthened its real estate business manager, Rohit Kapoor, to CEO for India and South Asia in December to shake up the market.
Furthermore, layoffs in Oyo have arrived just days after a new New York Times news highlighted about “poisonous” culture at Oyo among several other difficulties like unlicensed hotels and guesthouses.
Reacting to this, Oyo founder and CEO Ritesh Agarwal addressed an email to the senior executives saying that the firm has a different view of truth than the report.
In 2019, the group had reported a 2.7X rise in the number of bookings in comparison to 2018. However, the company’s estimate report had shown that Oyo published a loss of INR 2384.69 Cr in FY19, a 5.5X jump from its losses in FY18. While the rates for the firm also grew 3.9X, Oyo’s revenue rose by 3.5X in FY19 as compared to FY18.
In its offensive effort to get market share, Oyo extended hotel stays for as affordable as $4 a night, according to one person close with its practices. The firm also stocked up on rented room table by signing exclusive deals and promising income to hotel owners.
With a collection of more than 35K hotels and 125K holiday homes and over 1.2 Mn rooms over 80 countries and 800 cities, the group is eyeing profitability in different countries by 2022-23.