Here's Why This Hospitality Unicorn is Scaling Back And Laying Off Employees

Latest reports say SoftBank-backed OYO has laid off around 200 employees from Delhi and rolled back operations massively
Here's Why This Hospitality Unicorn is Scaling Back And Laying Off Employees
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Hospitality unicorn OYO had a rough 2019, especially towards the end when several reports of unpaid dues to hoteliers, police complaints and protests against the company came to fore. The company began the year with plans to achieve profitability and cut expenses. Since then, the company has been making the headlines for laying off employees and scaling back operations.

Most recently, media reports revealed that the SoftBank-backed hospitality company is notifying thousands of staffers individually about their status in the organization via emails. Around 200 employees from Delhi were laid off on January 13, 2020.

The reports also said that the layoffs are part of the company’s ‘new strategic objectives for 2020’. The development comes right after it was reported that OYO fired about 5 per cent of total 12,000 employees in China and laid off around 1,200 people in India.

These layoffs were speculated to have been coming in December 2019 and it was reported the company might fire 2,000 of its employees by the end of January 2020.

Why the Layoff?

According to a Bloomberg report, the layoffs are a part of OYO’s restructuring plans in both India and China. 

The company is reportedly offering a month's salary to sacked employees who worked for a year, two months’ salary to those who have worked for two years and three months' salary for those with three-year stint.

Apart from this, it is also offering variable pay due to the sacked employees, gratuity for the period worked and three months of medical coverage.

Also Read: Everything You Need To Know About Why Hoteliers Are Suing OYO Founder

Scaling Back Operations

Media reports have also said OYO is scaling back on the number of rooms. According to a New York Times report, the company over the last few weeks pulled back its operation from a dozen of cities, cut down on thousands of hotel rooms and slashed other costs. This comes after it was reported that SoftBank has been tightening its grip on OYO and other portfolio companies.

OYO has reportedly dropped 65,000 rooms in India since October 2019. In January 2020, the company has also reportedly stopped selling rooms in more than 200 small Indian cities.

In November 2019, the company’s valuation report revealed that its losses has increased six folds to reach INR 2,384.69 crore in FY19 from INR 360.42 crore in FY18. These results indicate that the company might need to forget its listing plans for now.

According to the MCA filing, reviewed by Entrepreneur India, OYO’s revenue from operation increased to INR 6,456.9 crore in FY19 from INR 1,413 crore in FY18. The report also showed the total expenditure increased to INR 9,027.53 crore in FY19 from INR 1,835.38 crore last year.

Also Read: Oyo's 8-year-old Journey is a Quintessential Indian Legend in the Book of Business World Stories (Infographic)

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