OYO Hotels is reportedly reducing its global workforce by approximately 5,000 individuals to 25,000 in a bid to raise profitability, with employees in China being hit the hardest, Bloomberg reported. This comes as the business was impacted by the COVID-19 outbreak, Bloomberg added.
Quoting its sources, Bloomberg said OYO plans to layoff approximately half of its 6,000 direct full-time employees in China. A portion of the remaining 4,000 "discretionary workers", who were brought on board for supporting roles such as call centres and clients' hotels, will be "temporarily laid off". Bloomberg added that they will be invited to return to the company once business picks up.
Quoting founder and CEO Ritesh Agarwal, Bloomberg said that OYO is trying to keep as many hotels open in China as possible, and that it is "a tough time for [its] hotel partners". The layoffs come after OYO cut approximately 12% of its 10,000 employees in India, where the company was founded, Bloomberg reported. Explaining the job cuts, Agarwal said "growth with profitability" is OYO's first focus area in 2020. This comes after the company added several properties to its platform and built the brand name, Bloomberg added.
The job cuts were first announced in January this year in a blog post by Agarwal. While he did not specify which countries would be impacted, he said OYO has been reorganising teams across businesses, functions and geographies in line with its new priorities.
"As we drive tech-enabled synergy, remove duplication of effort across businesses and geographies, and finalize our network plan for 2020, we realise that, unfortunately, we are having to say goodbye to some of our valued and trusted friends and colleagues at OYO. I am thankful for their service and sincerely regret the impact this is causing," he said.
While it was a difficult decision to make, Agarwal said OYO has reasons to believe that this is the right thing to do for the business and for the approximately 25,000 employees who remain with the company. OYO is assisting impacted employees via ex-gratia package, support with outplacement, amongst others.
In 2018, the budget network hotel raised RM4.14 billion in a funding round led by SoftBank Investment Advisers through SoftBank Vision Fund. Previously, OYO said approximately RM2.5 billion from this round of financing will go into strengthening its position in China, which was still in the early stages of growth back then and had a presence in 171 Chinese cities. Meanwhile, the rest of the funds went into maintaining its leadership position in India and expansion into new markets.
Currently, the budget hotel network is also present in Southeast Asian countries including Malaysia, Indonesia, Vietnam, Thailand and the Philippines. In a statement to Marketing, OYO's spokesperson said the changes have no impact on marketing roles and teams in globally, including Southeast Asia. There will also be no key personnel changes at OYO in Southeast Asia.
"The changes are a result of us consolidating the way we work to become more efficient and effective. This involves moving some functions from the field to a combination of technology and centre-led specialised roles," the spokesperson added. He explained that the business is growing and marketing has a key role to play in achieving its business objectives.
When asked how big the team is in each of the Southeast Asian countries, the spokesperson said the countries are at "different stages of growth" and their marketing teams are the "optimal size" for businesses at similar phase of growth. He added that OYO has "lean and efficient" marketing teams with technology at the core of it. All the in-country marketing teams are fully supported by the central marketing team based out of its India headquarters.
"OYO has always proactively initiated several initiatives, launched marketing campaigns and partnerships to stimulate demand and encourage guests to stay at our properties," the spokesperson said. For example, a campaign launched in Southeast Asia this Valentine's Day saw bookings increase by over 90%. The budget hotel network also witnessed a 100% increase in bookings on the OYO app in the region between 14 to 16 February. He added that OYO also runs campaigns that extend its brand of hospitality in the Southeast Asian markets and support initiatives that encourage inbound and domestic tourism in the country.
Last year, the SoftBank-backed company raised US$1.5 billion in financing, with Agarwal reported to invest US$700 million. During that same year, it committed over US$50 million for the next few years in Vietnam, with the aim of transforming the country’s hospitality landscape and creating quality affordable accommodations. OYO said then that it plans to expand its footprint to 10 cities in Vietnam by the end of 2020.
It also kicked off its expansion into Japan through a collaboration with SoftBank Corp and SoftBank Vision Fund to launch OYO Hotels Japan in 2019. OYO Hotels Japan hopes to empower small and independent asset owners in the country with its transformation capabilities and integrated hotel/ryokan management system powered by advanced AI technology that will help owners improve both their efficiency and profitability.
Meanwhile in 2018, Grab and Tencent both reportedly invested US$100 million and up to US$500 million respectively in OYO. At the same time, it also committed an initial capital of US$20 million for its Malaysian expansion that year. Chief operating officer Abhinav Sinha told Marketing previously that it intends to create over 5,000 new jobs in Malaysia over the next few years, and achieve "twenty-fold increase" by onboarding 1,000 hotels over the next 12 months.
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