IPO-Bound OYO Under Fire Again For Denying Reservation To A J&K Man

In what appears to be a major blunder, a man from the Union Territory of Jammu & Kashmir was allegedly denied reservation at an OYO hotel.

Acting on it, OYO promptly issued a statement saying it was ‘appalled’ by the incident and immediately delisted the hotel from its platform.

The controversy blew up after a purported video surfaced on the social media platform wherein a person was denied a hotel reservation due to his J&K ID. In the video, a woman was seen denying reservation citing “police orders”. 

The Delhi Police later registered an FIR on the matter and stated that, “Some netizens are trying to discredit the image of the Delhi Police through willful misrepresentation of the video in circulation which can attract penal action.” 

At The Recurring End Of Fire

The incident prompted a host of reactions from netizens. Many Twitter users were left baffled, questioning the motive behind the move. Many others termed the incident discriminatory and called for strict action against the hotel staff.

The person in question, Syed Faizal, was also quoted as saying that ‘it was lthe first time he has faced such kind of discrimination.’ He further added that, “It was really disturbing. How could they do this to me just because I am a native of Jammu and Kashmir. I showed them my passport and my Aadhaar card and still they did not allow me in.”

Earlier too, the company was rebuked online over such incidents. 

Back in 2020, A Delhi University student from J&K had also alleged that his father and his sister were not allowed at an OYO hotel in Delhi after they revealed that they were from the UT.

Prior to that, in 2019 too, another J&K man was also allegedly refused a room because he was from J&K.

This is in addition to OYO-affiliated hotels denying rooms to unmarried couples, despite there not being a law against it. 

The Scaling Problems

But, the controversy has pointed to an overall rot within OYO. The company has been in the line of fire for many years for a host of reasons. 

To begin with, the blitzscaling by the company prior to COVID led to a multitude of problems including a fall in quality services. Time and again, users have pointed out the poor quality of rooms and services, adding that, at times, the rooms don’t even match the pictures put up on the app. It was evident when a disgruntled customer even started a website to highlight his bad experience at an OYOhotel back in 2019.  

Many industry leaders have pointed out that the hospitality major is yet to get its hands on the quality control aspect, which is why guests have repeatedly complained of the service issues.

In addition, the company seems to have no control over the comings and goings at its partner hotels. Despite booking a room on the app, many a times, even hotels turn away the customers, leaving many of them stranded with no recourse. 

Interestingly, while OYO revolutionised the market in India, it was not an obvious fit for markets like the US and Europe. These regions already had well-established players and largely the same predictable quality, landing OYO in a soup as it struggled to keep up overseas. 

To put things in perspective, OYO had a presence in 127 cities and 1,229 storefronts across India and Malaysia. Fast forward to 2021, OYO Hotels has grown its presence to more than 10,000 cities and 159,000 storefronts across 35 countries.

Back in 2020, CEO Ritesh Agarwal had told Inc42 that, “A company cannot compromise on that front either. “ He had also recalled in the chat with the publication that, ”In 2016 when OYO launched in Malaysia, the company felt that it was growing too quickly and decided to take a pause and historically, it grew the slowest in FY 2016-17. But then it utilised that time to improve on its customer service and eventually, it probably turned out as one of the best years which helped us grow from there through 2019.”

The Ghost Hotel Saga 

As if the scaling issues were not enough, the company recently also faced another big blunder.

In December last year, a group was left stranded in Puducherry after they realised that the OYO hotel they had booked did not exist at all. 

This led to an outpouring by customers on social media platforms, citing their complaints and how OYO had taken booking for non-existent hotels. The controversy led to OYO CEO, Rohit Kapoor, publicly apologising to the aggrieved party.

In 2017, a group visiting Nainital was also allegedly denied rooms despite pre-booking in advance.

OYO has been in the dock for a slew of reasons ranging from complaints of unpaid dues by local and global hotel partners to protests in the US by hotel owners over the company’s entry. The company has also faced questions about its asset-heavy model, which busted in a big way as COVID locked people indoors and ravaged the hospitality sector. 

Such has been the situation that the affordable lodgings unicorn might go for a lower IPO offering than what was submitted in its DRHP. The company has also been looking at reducing the IPO size amid market volatility.

Founded in 2013 by Ritesh Agarwal, OYO last raised $5 Mn from US tech giant Microsoft at a valuation of $9 Bn. Earlier in July 2021, the startup closed $660 Mn in loan funding from global institutional investors.

The hospitality unicorn is backed by marquee investors such as Masayoshi Son’s SoftBank, NASDAQ-listed Airbnb, Lightspeed Venture Partners, Innoven Capital, among others. The startup to date has raised $4.1 Bn from 26 investors across 19 rounds.