After letting go of thousands of employees in India and China last month, SoftBank-backed Indian hospitality company Oyo has laid off around one-third of its staff in the US, a market where it entered with much fanfare in February 2019.
In the last week of January, Oyo laid off around 360 US employees in a bid to take a more balanced approach to growth, American travel research media Skift reported.
Oyo slashed jobs across categories like business development managers, talent acquisition leads, and area general managers. California lost more than 50 business development managers, while Florida saw more than 20 job cuts in the category, the report said.
Last month, amidst business restructuring and hiring top management to lead the international business, a Bloomberg report said the company gave pink slips to “5% of its 12,000 employees in China partly due to non-performance and dismissed 12% of its 10,000 staff in India,” adding that another 1,200 people from India team may be kicked out over the next three to four months.
In the US, the six-year-old startup, claims to have 19,000 rooms in over 250 hotels across 30 plus states.
In an email to its American team, Oyo Chief Operating Officer Abhinav Sinha revealed the new company strategy while announcing the layoffs. The company’s new mantra is going to be “sustainable growth and profitability,” which will “help the company embark on the next phase,” he wrote.
According to Sinha, Oyo will achieve its strategic objectives by balancing the speed of its growth with operational capabilities and focusing on core businesses and rationalizing growth avenues, and reducing operating costs through deploying technology across systems and processes.
“Unfortunately, as we move towards more sustainable growth, and towards a new profitability focused plan, some roles will become redundant,” he said. “We will be primarily redirecting resources from sales and sales support functions to functions that build our operational capabilities like revenue management, data science & machine learning, engineering, and other areas.”
“These decisions have been really difficult to make,” he added. “But I am confident that these are the right decisions for the business today.”
Oyo has been facing backlash in its home market, India, which is also its largest market with about 10,000 properties, for compromising quality in favor of lightning-fast growth. Experts believe that Oyo has been so focussed on growing the number of properties that it got subpar hotels onboard and that it has failed to properly manage these properties. 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.
“While we are proud to have grown so quickly, we recognize that we sometimes got ahead of ourselves and are now implementing those learnings,” an Oyo spokesperson told Skift.
Oyo’s founder Ritesh Agarwal recently told Skift that after restructuring, he feels, “it’s put your head down and execute.”
“At the same time, any of the restructuring that’s happened, we’ve tried to be very, very competitive in terms of making sure we do it the right way, ensure that there is more severance than what is required as per contracts to make sure people have the time,” he said.
Oyo, which claims to be the world’s third-largest hotel chain with 1.2 million rooms across 80 countries, has been going through a rough patch for a while. Apart from a slew of hotel owners ending partnerships with the company, accusing Oyo of charging an increased fee and withholding payments, and a sudden tax raid by government officials in one of its offices in Gurugram mid-January, the company is struggling hard to manage investors expectations and perceptions.
The company is also reeling under losses. While it posted a net loss of USD 332 million for the year ended in March 2019, another report by Skift puts Oyo’s net loss before tax between April and June at USD 181 million, “which was alarmingly equal to 54% of the net loss it had for FY19. A Reuters report said the company expects losses in India and China to continue through 2022.
Citing sources, a recent report by local media Economic Times (ET) said, Oyo has also offloaded about 25% of its unprofitable properties in India across businesses. It follows the alleged SoftBank’s ultimatum to cut down properties that are making losses by March 2020 so as to take the first step toward profitability.