- OYO saw its net loss widen six times to INR 2,384 crore in the financial year ended March 31, 2019.
- Money losing unicorn is now on a job cut spree which will be observed from time to time till OYO starts reaping profits (which is not anytime soon).
- OYO remains one of the largest start-ups under SoftBank’s investment portfolio.
OYO seems to be a leader not only with number of hotels under the brand but it’s also known for its job cut exercise. This time not only India but also in China, a number of OYOpreneurs are soon to lose their jobs.
5% of its 12,000 employees in China and 12% of 10,000 workforce in India have already lost their jobs due to falling under a non-performance metric. It plans another round of 1200 job cut in India in the next 3 to 4 months.
“We continue to be one of the best places to work for and one of the key reasons for this has been our ability to consistently evaluate, reward and recognize the performance of individuals in a meritocratic manner, and enable them to improve their performance,” Oyo said in a statement.
According to the company, the reason for the job cut is that they are undergoing restructuring and trimming in India and China and trying to expand in other cities which comes at a cost. And the cost seems to be imposed on its employees who are fired because they didn’t do well as per their performance metrics in the company.
But is this the actual case? Not really!
The budgeted hotel chain strongly relies on its performance metrics and believes that those who are fit for the start-up will always be helped and elevated while those are failing again and again on their set terms and norms will be removed from the company.
Why this job cut?
Masayoshi Son, the man behind SoftBank also known as a free-spending benefactor encourages young founders to peruse their dream even if it means losing billion dollars. But he has a different message lately, your dreams had better be profitable.
Masayoshi Son arranged a meeting at a 5-start hotel Langham resort and told the company leaders to become profitable by the earliest and stressed on good governance. He signaled his portfolio investees that investors would not tolerate tantrums like crazy voting rights or complicated share structures once they (start-ups) decide to go public. Rather, they should get in shape before they file an IPO.
SoftBank has called for a greater financial discipline that resulted in job-cut activity not only at OYO but at Zume Pizza, Getaround, Wag Labs Inc, Fair & Beardless Inc. & Rappi The start-ups either had to cut their staff or entirely change their business models once it was clear that their present way of working is not reaping anything in return even after injecting millions and millions from time to time.
OYO which is still not profitable is left with just one choice. To shrink and withdraw hotels from markets that are not returning them according to their expectations and go on a job cut spree once again.
It’s not only about malpractices that OYO carries to do business, but it’s also about killing dreams and aspirations of its fellow employees by firing them because they didn’t perform well.
Masayoshi’s Vision Fund is also at a stake and when a billionaire’s aspiration is at a stake there will be some serious repercussions. After WeWork failing drastically, SoftBank doesn’t want to take another chance with OYO which was valued $10 billion after getting investments from the company.
“OYO is one of SoftBank’s current crown jewels. With issues in China which is OYOs largest market, continues the Vision Fund’s woes.” commented by Michael Norris, research & strategy manager at AgencyChina.
SoftBank’s Vision Fund has so far invested around $1.5 billion in OYO (and still no positive returns coming from OYO’s end). Rohit Kapoor, CEO of India and South Asia, was appointed in December to be aggressive in terms of capturing market share.
OYO started offering affordable hotel stays at $4 per night. The company started signing a plethora of hotel owners by committing guaranteed returns and customer’s footfall. It’s now allegedly reneging on those guarantees and commitments that made hotel owners in China protest against OYO. More or less the same scenario that’s in India.
OYO’s exercise of job-cut and then covering the activity by giving reasons that they are remodeling and restructuring doesn’t seem to sync well. But when its major investor pushes on profitability, they need to do something that would at least save them a penny; hence a round of job cut is experienced from time to time.
It’s really hard to tell if this round of job cut is the last round. Everything depends on the temperament and patience of SoftBank’s CEO. If he is emphasizing on being profitable by the earliest it means bad times for the companies who are posting losses every now and then.
For the budget hotel segment, it becomes nearly impossible to chuck off the properties and save cost because this way their presence would shrink. Thus, the company decides to go on a job cut spree.
This will continue to happen again and again till the start-up starts giving positive returns to its investors. Maybe it was too early for OYO to expand globally, or maybe it’s too late for the company to realize this fact.
Whatever the case may be, its employees are definitely at a stake till the time OYO gets profitable. With a number of points standing against OYO’s good governance, there is hardly any point that makes this start-up a healthy place that carries a transparent vision (for its employees and for its hotel partners).
If OYO continues to convert their hotel partners into protestors and if they continue to give their customers bad experiences, the time is not far away when this unicorn will be surviving to cope up even with their monthly expenses.
2020 doesn’t seem to be a very good year for this budget hotel chain. Though the year has just started, it has already communicated that OYO would go on job cut activity from time to time (till they become profitable) and several hotel partners and it’s ex-employees have protested and accused OYO of its malpractices and overcommitting what they can actually deliver.