Oyo Rooms, one of the hotel industry’s fastest-growing companies by room count, has let go of about 600 employees in China, or 5 percent of its workforce, and 1,200 in India, about 12 percent, and plans to shed another 1,200 jobs in India in the coming months, according to Bloomberg.
The layoffs come on the heels of allegations that the company charges hotels extra fees, does not pay hoteliers the full amounts they are owed and that hotels that have left the Oyo system still are included in its room count, per a New York Times report in early January. There also have been owner complaints about Oyo’s pricing practices, alleging some daily rates have been lowered to unsustainable levels.
The India-based hotel company has received $3.2 billion in venture and debt financing over 15 funding rounds, according to Crunchbase, with Japan-based SoftBank leading the investments. Oyo has been valued at as much as $10 billion this past July.
The layoffs have not stopped the company from making new executive appointments. Oyo recently named Rishabh Gupta as head of the company’s U.K. business, and Raj Kamal as COO of Oyo’s Vacation Homes business in the U.K. and Europe. These appointments follow additional executive changes made in early December.
Oyo’s actions are part of a broader pullback by start-ups funded by SoftBank. Armed with a $100 billion fund known as the Vision Fund, SoftBank has shoveled money into start-ups across the globe in recent years. That has given many young companies fuel to expand, often with little thought for profit.
Last year, some SoftBank-funded start-ups began running into trouble — most notably WeWork, the office space company, which failed to go public when investors began questioning its losses. WeWork ultimately ousted its chief executive and slashed its valuation to less than $8 billion from $47 billion.
Some investors and start-ups said they were now approaching SoftBank’s Vision Fund cautiously — or, in some cases, avoiding it altogether. SoftBank declined to comment on Oyo and other start-ups in which it has invested.
Oyo faces other troubles in India. On Friday, the Indian income-tax authorities visited the company’s headquarters just outside New Delhi, requesting reams of documents. The tax department and Oyo said the government was examining whether the company was properly withholding and remitting income taxes on payments to vendors.
The Times reported this month that Oyo had offered thousands of unlicensed hotel rooms and sometimes offered free rooms to government officials to deter enforcement. The Times also described how some Oyo employees worked together to commit fraud against the company.
Mr. Agarwal founded Oyo in 2013 to organize India’s small independent hotels into a chain. The company markets rooms online and takes a cut of each stay. Mr. Agarwal, who has become a business star in India, has said he aspired to make Oyo the world’s largest hotel chain by 2023, displacing Marriott.
Ritesh Agarwal was among BTN’s 2019 25 Most Influential individuals in business travel.
With the acquisition of Amsterdam based @Leisure Group and to grow the business, Oyo has committed to hiring 1,000 new employees in Europe by 2020. It manages more than 46,000 homes and villas under localized operations including Bellvilla, Dancenter, Traum-Ferienwohnungen and others.