Covid-19 Forces Oyo To Merge Japan Ops, New CEO On Anvil

Homegrown hotel and hospitality unicorn OYO will be merging its hotel booking business and apartment-rental operations OYO Life in Japan in the aftermath of the pandemic. The company will also be promoting OYO Life country head, Ryoma Yamamoto, to the CEO position of the combined entity called OYO Japan.

Another top executive, Ryota Tanozaki, has been promoted to serve as Yamamoto’s deputy. The SoftBank-backed company had aggressive growth plans in Japan before the Covid-19 brought out operational challenges and crippled the company.

Only last year, Yahoo had canceled its joint venture with OYO Life in Japan. Though the reason is not yet clear, an OYO spokesperson had told Inc42 that it has bought back the ownership earlier held by Yahoo Japan, in the joint venture company, OYO Technology and Hospitality, Japan.

A Bloomberg report also highlighted that the company had shut down its regional offices in Sapporo, Sendai, Nagano, Hiroshima and Omiya, Saitama Prefecture at the end of June. Tanozaki, who was then serving as the chief business officer at OYO Hotels, said that the company was looking to downsize its Tokyo headquarters. The moves are part of the company’s ongoing effort to downsize internationally as it adapts to much smaller tourism industry.

OYO has been vocal about its dried up revenues ever since the Covid-19 led travel restrictions. The company’s founder and CEO Ritesh Agarwal had come on record in April to confirm OYO’s occupancy rate and revenues have dropped by more than 50 to 60% and the company’s balance sheet has come under severe stress. Meanwhile, startup layoff tracking website Layoffs.fyi estimates that OYO’s revenues are only at about 30% of its pre-Covid levels.

The decline in OYO’s revenues have led to furloughs, 25% salary deductions and layoffs across all 80 countries it was operating in. According to a Dallas Business Journal report, OYO laid off nearly 90% of its workforce in the US, most of whom were furloughed in April amid declining revenue as Covid-19 shut down hotels business across the globe. In China, the layoffs impacted 3000 employees.

“We knew this crisis was real and could take time, but we were hopeful that we could leverage our global resources to re-engage after the furlough… However, the reality is, the impact on our business has been deeper, and the recovery has been slower than what we had anticipated,” OYO COO Abhinav Sinha wrote in an email to employees.

In India, the company has started the year with a massive lay off round in order to cut its additional expense and clear its path to profitability. The layoffs impacted nearly 3000 employees. But currently, the sole reason to adapt to new models, layoffs and other such practices is to survive the pandemic.

In India, OYO has also adapted a hybrid workplace model to help the company operate in full capacity without compromising on the health and safety of its employees. It had also divided its workforce into three categories — corporate employees, capability functions and field staff. Dinesh Ramamurthi, chief human resources officer at OYO explained that the field staff is already stepping out and attending office following all the health and safety protocols, whereas employees in the other two categories can choose to work from home or ‘work from anywhere’.

Update: 4th August 2020

Headline updated.