Oyo to cut about 5,000 jobs in broad overhaul, highest reductions in China

Oyo Hotels plans to cut its global workforce by about 5,000 to 25,000 people, with the deepest reductions in China after business there crumbled in the wake of the coronavirus outbreak.

The start-up, one of the largest in SoftBank’s portfolio, is reducing staff in China, the US, and its home country as it seeks to boost profitability. Oyo expanded rapidly after its founding in 2013 and reached a valuation of $10 billion, but investors have soured on money-losing businesses after WeWork’s meltdown and SoftBank has pushed portfolio companies to prioritise profitability.

“In our previous phase, we added a lot of properties to our platform and built the brand and mindshare,” said founder and CEO Ritesh Agarwal in an interview. “Our first focus of 2020 is growth with profitability.”

Agarwal said the global headcount would fall by about 17 per cent from 30,000 in January. The company is also prioritising improved relations with hotels and stronger corporate governance, he said.

The coronavirus is contributing to a dramatic retrenchment in China, a market once deemed crucial to Oyo’s global expansion. 

The firm intends to fire about half its 6,000 direct full-time staff in the country, people familiar with the matter said, asking not to be identified. Of the remaining 4,000 so-called discretionary workers — hired in support areas such as call centers and clients’ hotels —a portion will be temporarily laid off but invited back once business recovers, one of the people said.

The staffing reductions are up sharply from an envisioned reduction of about 5 per cent of Chinese employees prior to the epidemic, which abruptly chilled travel across the world’s no. 2 economy. It also follows the dismissal of 12 per cent of its 10,000 staff in its home country of India, people familiar with the matter have said.

”In China, the coronavirus has hit us and in specific provinces, we are trying hard to keep hotels open, as many as possible,” said Agarwal. “It’s a tough time for our hotel partners.”

Hotel owners in China had protested in front of the company’s offices, accusing the startup of violating contractual agreements. The growing turmoil may complicate SoftBank’s efforts to raise a successor to the Vision Fund, the world’s largest pool of start-up investments.

“The global restructuring exercise at Oyo was announced in January 2020 and the recent developments in China are in line with the same. China is a home market for Oyo, and we will continue working with our thousands of retained OYOpreneurs to deliver against our core mission of creating quality living experiences for millions of middle-income people around the world. During the tough coronavirus situation, we will continue to support the benevolent and resilient Chinese society, in every possible way. We want to thank our partners, employees and customers for standing strong together,” said an Oyo spokesperson. 

The restructuring in China is in line with the global restructuring exercise announced in January 2020, said sources. 

Oyo had said it was streamlining operations and will focus on its US and China markets. In China, a big chunk of the restructuring exercise has been completed.  In the next few weeks, our restructuring there would have concluded. Overall, about 30 per cent of Oyo’s Chinese workforce will be impacted by this restructuring exercise.

HANDING OUT THE PINK SLIP

• The company intends to fire about half its 6,000 direct full-time staff in China
• Of the remaining 4,000 so-called discretionary workers, a portion will be temporarily laid off but invited back once business recovers
• The reductions are up sharply from an envisioned reduction of about 5% of Chinese employees prior to the coronavirus epidemic