SUMMARY
L&T Infotech, Vodafone Idea, TCS and others have cut back on their business with OYO
The biggest concerns are around service quality and security issues
OYO had recently laid off nearly 3K employees as part of a restructuring move
Amid internal restructuring and focus on self-operated businesses, OYO is now facing the flak of its corporate customers. While reports over the past month or so have said that many hotel partners have complained about the kind of clientele that OYO gets and how there are no background checks done, this time around corporate partners are upset with the quality of service being provided by OYO.
An ET report citing former employee and hotel partners of the Gurugram-based hospitality unicorn said that corporates like L&T Infotech, Vodafone Idea, Tata Consultancy Services have cut back on their business with OYO for employee accommodation.
The concerns revolve around the safety and security of female employees as well as service standards and quality issues. This loss of business coupled with disputes with hotel partners means that OYO’s corporate business has reportedly stayed flat over the past year.
It has been reported that OYO’s offline sales channels, which includes the corporate segment, contribute about 18% to its total revenue. A former employee reportedly said that OYO is not in a position to manage many of these issues.
Responding to the story an OYO spokesperson said that in the last 12 months, this business has grown 80% in revenue from a year earlier. The company also said it has several solutions and mechanisms in place to address customer concerns over services and safety.
“We have undertaken a series of safety measures to strengthen our guest experiences. These include an escalation matrix, in-app SOS button on check-in to intimate Oyo Safety Response Team or the police about any emergency, in-person on-ground assistance and CCTV surveillance and security in required areas, among other things,” the spokesperson added.
Earlier this month, reports surfaced that SoftBank has given OYO a deadline of March 31, 2020, to phase out contracts and end ties with hotels that are not EBITDA-profitable. This has been attributed to the investor’s ambition of seeing OYO listed publicly in the US in 2022-2023.
The company reportedly has a deadline of March 2020 to post positive EBITDA for its self-operated hotels and July 2020 as the deadline for positive EBITDA of its ancillary businesses.
It is to be noted here that Oyo’s self-operated business includes Oyo Townhouse, Silverkey, Collection O, Oyo Flagship and Oyo Homes, etc. These are nearly over 800 properties, where it reportedly makes investments through leasing arrangements with the owners of the properties.
Ancillary businesses include Weddingz.in, which OYO acquired in 2018 etc. The idea here is to shut down ancillary businesses that do not report an operating profit before end-July.
Soon after reports surfaced that OYO has pulled out of dozens of cities, cut thousands of hotel rooms, and slashed other costs, purportedly due to pressure from lead investor Japan’s SoftBank. After mass layoffs and change in business strategy to focus on profitability, the revenue from corporate business is a key element for OYO’s future plans.
Update: January 28, 2020 | 5 PM
After the story was published, OYO shared a media statement claiming that it has “witnessed a strong growth trajectory in its corporate bookings. The company’s corporate channel witnessed an 80% increase in revenue on a Y-o-Y basis. Today, OYO’s corporate channel contributes to over 30% of the hospitality company’s total revenues and it counts Utkarsh Small Finance, Think & Learn (P) Ltd. (BYJU’S) and Extramarks Education among its over 8,400 clients.”
