India: Just a fortnight after placing the majority of its employees, or “Oyopreneurs”, on furlough or temporary leave in the United States, United Kingdom and many of the other countries in which it operates, Softbank-backed hospitality chain OYO is furloughing more employees around the world and accepting a 25 per cent pay cut for all workers in July.
The Indian budget lodging startup is being impacted by the coronavirus pandemic in a similar vein to other booking platforms in the travel sector, with its revenues believed to have plummeted by up to 60 per cent since the start of the global lockdown. While its Indian team escaped relatively unscathed from the previous furlough and lay off round, all employees in the country have been asked to accept a 25 per cent reduction in fixed compensation between April and July.
Speaking to employees in a virtual town hall meeting this week, OYO chief executive Rohit Kapoor said: “Today, our company is taking a difficult but necessary step for India, whereby we are asking all OYOprenuers to accept a reduction in their fixed compensation by 25 per cent. This will be effective for April-July 2020 payroll.”
“This has certainly not been an easy decision for the leadership team to make. This crisis has made a deep impact on our business,” he added.
Kapoor assured employees who had been put on leave that they will receive an ex-gratia amount equivalent to 60 per cent of their fixed monthly salary, taking place in two transactions in May and June. They will also continue to receive benefits including health insurance, parental insurance and education allowance for those with children.
When approached by TechCrunch, OYO declined to comment on the numbers of those who had been furloughed.
In a recorded video statement earlier this month, founder and chief executive, Ritesh Agarwal revealed OYO’s occupancy rates and revenues had dropped by “over 50 to 60 per cent” since the turn of the year, but praised OYOprenuers for their efforts to “do right by their society and the communities we serve in these really testing times in which we are expected to stand up”.
Signs have been increasingly financially ominous for OYO, as it posted losses in February totalling $335 million on $951 million revenue globally for the financial year ending 31 March 2019.
It represents another significant blow to OYO’s major backer and controlling shareholder, the Japanese multinational conglomerate company SoftBank, owned by Masayoshi Son, which has seen a number of its prized portfolio startups suffer well-documented downfalls since the Covid-19 outbreak began.
One of those, commercial real estate company WeWork, looks set to pursue a lawsuit against the firm for pulling out of a $3 billion share purchase deal, claiming that it had breached its obligations under an original agreement. Adam Neumann’s company itself pulled out of a scheduled initial public offering [IPO] last year.
Another SoftBank gamble, Uber recently withdrew its 2020 guidance for gross bookings given the current unpredictability of the market, as well as wrote down $1.9 billion to $2.2 billion on the value of some equity investments it had made.
In the meantime, OYO is placing a renewed focus on extended term stays, with demand rising sharply for 30 day-plus stays among displaced workers and medical staff on the front line against the coronavirus.