OYO to combine hotel and residential divisions in Japan

Japan: SoftBank-backed hospitality chain OYO is to merge its short-term residential and hotel divisions in Japan in the latest stage of its business restructuring due to the coronavirus pandemic.

Pre-pandemic, OYO had expanded its portfolio to operate over 35,000 hotels and 125,000 vacation homes, including more than 1.2 million rooms in 80 countries and 800 cities worldwide. The chain had reached unicorn status, with a rumoured valuation of around $10 billion in December, and had diversified into various travel and hospitality segments, including short-term rentals, casino hotels and co-working stays.

After posting losses in consecutive years [$335 million for the year ending in March 2019, a 544 per cent loss increase from $53 million in 2018], the group said it had been on course for overall profitability by 2022, but to now achieve that goal, it has set about reducing its operating and working costs. Significant layoff rounds in the thousands have already taken place across its teams based in the United States, the UK, India and China, caused by the rapid drop in demand.

According to OYO Hotels Japan operating partner Prasun Choudhary in an interview with Nikkei Asian Review, the new combined entity will “provide a single platform covering all the availabilities from hotel rooms, to residentials for rent, to vacation rentals”. He added that its conglomerate investor, SoftBank, was “supportive” of the merger.

The merger between OYO Hotels and residential brand OYO Life is set to be concluded on 31 July, according to an internal email seen by Nikkei Asian Review, which will reportedly see the former absorb the latter and be named as OYO Japan in the country from that date. Its aim is to reduce both sales and marketing costs, as well as enhance awareness for the brand among Japanese consumers.

Sources claimed that OYO Life had been struggling to break even for some time and had fallen well short of its aim to provide one million residential rooms. Having launched last year in order to simplify the renting of apartments through a mobile app, it is believed to have signed contracts for some 6,300 rooms and occupied just over 50 per cent of that number.

OYO Technology & Hospitality Japan country head Ryoma Yamamoto told Nikkei Asian Review: “We are probably the only tech company that provides all types of living spaces in Japan. Providing the single platform will be much simpler in branding.

“Given the Covid-19 situation, completing processes online will be more important than ever [to minimise infection risks],” he added.

Meanwhile, OYO Hotels is reported to have maintained an occupancy rate of just over 40 per cent for the month of July so far. In March, it was managing 5,857 hotel and Japanese style-inn rooms.

The Japanese government recently launched its Go-To Travel travel subsidy programme to revive the country’s hard-hit tourism sector, something which Choudhary believes will help OYO “very significantly”.

He said: “Japan has always been an important business for us. This is not only because it is the ninth-largest hotel industry in the world, but the fact that SoftBank is here makes it a very strategic market for OYO.

“There have been challenges since we landed in Japan, but in terms of opportunities it is still huge for us,” he added.

In Europe, OYO’s Vacation Homes division has also undergone a period of restructuring, after Raj Kamal was named as its new CEO, replacing Tobias Wann in the position.