LatAm List – Oyo Rooms, an Indian hotel network recently laid off thousands of employees and slashed other costs as it faced pressure from its biggest investor SoftBank. The Japanese tech giant invested about $1.5B in Oyo through its $108B Vision Fund to promote the company’s global expansion. The hotel chain currently operates in 18 countries, including Mexico as of February 2019.
Mexico has approximately 70 properties operating under the hotel brand and, according to Country Manager Francisco Sordo, Oyo plans to be the biggest hotel group in property numbers in the country in 2020.
“We already have more than 300 ‘oyopreneurs’, as we like to call our brand collaborators. Our growth and reception have been extraordinary. We have hotels in Tijuana, Guadalajara, Leon, Aguascalientes, Mexico City, Monterrey, Cancun, Merida, Puebla… truly, the geographical footprint and offer that we’ve rapidly reached allow us to serve clients in the entire country,” said Sordo in an interview with Expansion.
In Asia, however, Oyo has been scaling back its operations, laying off 5% of its 12,000 employees in China, as well as firing 12% of its 10,000 employees in India, with an expected 1,200 to be cut in India over the next few months. The company lost about 65,000 rooms and stopped selling rooms in more than 200 small Indian cities. In an effort to acquire market share, Oyo started offering its rooms for prices as low as $4 a night.
Ritesh Agarwal, founder and CEO of Oyo Rooms stated that the company is focusing on sustainable growth and profitability in an e-mail addressed to employees, according to The New York Times.
“Unfortunately, some roles at Oyo will become redundant as we further drive tech-enabled synergy, enhanced efficiency, and remove duplication of efforts across businesses or geographies,” wrote Agarwal.
Oyo hotel owners in China started protesting outside the company’s offices for allegedly violating contractual agreements.
“We will launch the VIP owner program, and contact owners regularly, to ensure that the interests and needs of theirs and ours are equally taken into account,” said the company in a statement.
It’s not the only company in SoftBank’s portfolio to recently run into trouble. WeWork, also back by the Japanese company, failed its IPO in 2019 which brought its valuation down drastically to $8B from $47B. Slack Technologies Inc. and Uber Technologies Inc. also experienced a drop in share prices. Rappi, a Colombia on-demand delivery startup has also laid off hundreds of employees.
Investors are more cautious now with SoftBank’s Vision Fund which aims to provide startups in different regions with fuel for expansion.
Read more on Bloomberg, The New York Times, or Expansion.
