OYO hotels are firing thousands of staff across China and India, people familiar with the matter said, adding to growing signs of trouble at one of the largest startups in SoftBank Group Corp.’s portfolio. The firm is undergoing a restructuring, trimming redundancy in China and India, leading to thousands of dismissals.
SoftBank-backed startups making layoffs this month:
– Rappi ?
– Zume ?
– Getaround ?
– OYO ?
— Ryan Browne (@Ryan_Browne_) January 10, 2020
OYO’s downsizing is another setback for Masayoshi Son’s SoftBank, whose portfolio has been buffeted by recent trouble at WeWork and slumping share prices at Slack Technologies and Uber Technologies. According to reports OYO has let go of 5 per cent of its 12,000 employees in China due to non-performance. This amounts to around 600 employees in the Chinese unit. Meanwhile, in India, OYO is dismissing 12 per cent of its 10,000 employees, which is around 1,200 workers. The company plans to shed another 1,200 employees in India over the next three to four months.
Adding to the Company’s challenges, hotel owners in China have been protesting in front of the firm’s offices, accusing it of violating contractual agreements.
The growing turmoil may complicate SoftBank’s efforts to raise a successor to the Vission Fund, the world’s largest pool of startup investments. Michael Norris, a research and strategy manager at Shanghai-based consultancy AgencyChina, said “OYO is one of SoftBank’s current crown jewels. Issues in China, one of OYO’s largest market, continue the Vision Fund’s woes, making raising a similar-sized second Vision Fund a challenge”.
Masayoshi Son has been a keen supporter of OYO’s founder Ritesh Agarwal, helping fund the hotel company’s fast international expansion. However, with rapid growth, its reputation has suffered due to customer complaints about bad experiences along with grievances about poor or unfair treatment from several of the over 20,000 hotels owners in its chain.
— Mingtiandi (@Mingtiandi) June 26, 2019
In its aggressive effort to acquire market share, OYO offered hotel stays for as cheap as USD 4 a night, according to a person familiar with its practices. The firm stocked up on rented room inventory by signing exclusive deals and guaranteeing income to hotel owners. It’s allegedly reneging on those guarantees, the cause of the protests outside its Chinese office.