Running a unicorn company comes at a price, and sometimes the company has to make some decisions that can affect the lives of several people. This is what the Indian hospitality unicorn Oyo and its employees are going through. To cut down on expenses and in the bid to achieve profitability, the company has begun taking specific measures as they lay off thousands of employees in India and China.
The company has fired almost 5% of the total 12,000 employees in China, and it is said that they have laid off around 1200 people in India as well. The news came into limelight in December 2019 when it was reported that the company has planned to lay off 2,000 of its employees by the end of January 2020. The SoftBank-backed Oyo had to take such drastic measures because of its restructuring plans in both India and China. In the past, Oyo declined any speculations regarding the layoffs and said that they only terminate the contracts of those employees who fail to pass in the performance-based evaluation system.
SoftBank goes hard on Oyo to increase profitability
SoftBank has decided to go after Oyo and other portfolio companies as it gives Oyo a deadline of 31st March 2020 to end contracts or businesses that are not EBITDA-profitable. Oyo is also planning to list the company publicly in the US in 2022-2023, and that can be another reason for such a massive number of layoffs.
The layoffs took place after a recent New York Times report highlighted the “toxic” operations at Oyo because of issues like unlicensed hotels and guesthouses and many others. Ritesh Agarwal, the Oyo founder, responded to this through an email saying that his company had a different view of reality as compared to the one mentioned in the report.
The platform noticed an increase of 2.7 times in the hotel bookings in 2019 as compared to 2018. The financial report of the company’s valuation reported a loss of INR 2384.69 Cr in Oyo. In the FY19, which is a jump of 5.5 times from its losses in FY18. The expenses of the company also increased from 3.9 times, and Oyo’s revenue increased by 3.5 times in FY19 as compared to FY18.
With more than 35,000 hotels, 125,000 vacation homes, and with more than 1.2 million rooms in 80 countries and 800 cities, the company is looking forward to profitability in several countries by 2022-2023.