OYO, an Indian hotel chain backed by SoftBank, is currently in the process of laying off over 5,000 employees worldwide. China will take the hardest hit due to the impact of the COVID-19 epidemic on its tourism industy.
The epidemic has caused OYO’s China business to shrink dramatically. Given that the Chinese market was considered to be crucial to OYO’s global expansion, the company now intends to fire about half of its 6,000 full-time employees in the country.
The layoffs are part of OYO’s strategy of becoming profitable. Since its founding in 2013, OYO has been expanding rapidly, with a current valuation of roughly $10 billion. After WeWork’s failed IPO last fall, the valuations of several other startups in SoftBank’s portfolio plummeted.
“In the previous stage of our development, we added a lot of features to the platform and established a brand and market share,” said Ritesh Agarwal, founder and CEO of OYO. “Our primary goal in 2020 is to achieve profitability while growing our business.” Agarwal said that OYO’s global workforce will decrease by about 17%, down from 30,000 in January. In addition, the company will prioritize improving relationships with hotels and strengthening corporate governance. He added that global reforms were in full swing. “When our restructuring process is complete, OYO will have more than 25,000 employees worldwide,” he said.
Before the coronavirus outbreak, the number of OYO China employees was expected to decrease by a mere 5%. After the epidemic broke out and China’s tourism industry cooled down, OYO had to abruptly change plans and readapt, sacking significantly more people. “Our business in China has been affected by the novel coronavirus epidemic. In some provinces, we are working to keep as many hotels as possible. This is a difficult time for our hotel partners,” said Agarwal .
Previously, Chinese hotel owners have protested in front of OYO’s office building, accusing the startup of breaching contractual agreements. Increasing turmoil may complicate SoftBank’s efforts to raise the second Vision Fund, the world’s largest venture capital fund.