OYO suspends payment of monthly revenue to hotels; invokes force majeure

Hospitality firm OYO said it is suspending payment of monthly benchmark revenue to its hotel partners as it is finding impossible to discharge its obligations under the master service agreement due to Covid-19 pandemic.

In light of this pandemic and various restrictions issued by the governmental authorities, your hotel's revenue has been significantly and adversely impacted and it is unlikely to improve in the next few months, OYO said in a letter to hotel owners.

This abrupt, extra-ordinary and unprecedented drop in your hotel's revenue as a result of the Covid-19 can hardly be considered to be in the ordinary course of business. OYO's performance and obligation in relation to the benchmark revenue under the agreement has become extremely onerous and commercially impracticable, it added.

This letter provides notice of the occurrence of a 'force majeure' event effective from March 12, 2020 on account of the outbreak of COVID-19 being an extraordinary circumstance, which is beyond our control and which could not be avoided by any amount of foresight and care and its severe impact on our performance under the agreement, the hospitality firm said.

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"In these exceptional and trying circumstances, you will appreciate that it is impossible for OYO to discharge its obligations under the agreement including, inter alia, the provisions of benchmark revenue," the letter said.

Consequently, OYO will find it virtually impossible to continue to operate the agreement from the point of view of the object and purpose in relation to which the agreement was first executed.

"As such, OYO is left with no option but to invoke Force Majeure in as much as the pandemic and related consequences have adversely impacted the operation of the premises and the business of the Hotel and to put you to notice that it is constrained to exercise its rights thereunder to suspend payment of the monthly benchmark revenue and/or any other amounts payable to you under the agreement," the letter said.

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In this regard, and in the interim, "we propose a revenue share model effective March 12, 2020 whereby our commercial engagement, in supersession of the existing commercial terms, under the agreement will be 10 per cent of net revenue," it noted.

OYO said it is regularly reviewing the position and will communicate once the Force Majeure event / COVID-19 situation has ceased and when it will be able to resume performance of its currently affected obligations under the agreement, the letter said.

Commenting on the development, Federation of Hotel & Restaurant Associations of India (FHRAI) Vice President Gurbaxish Singh Kohli said: "The hotel industry is in the midst of a massive economic catastrophe and OYO's behaviour is absolutely below the belt".

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The company has decided to invoke the force majeure clause, via which they are completely suspending payments to hotels and which isn't even in the agreement that hotels have signed, he added.

"Oyo has anyways been regularly defaulting on payments even much before the pandemic and is now using it as an excuse to completely back out of their agreements," Singh said.

Covid-19: OYO CEO Ritesh Agarwal takes 100% pay cut for rest of the year

The CEO and founder of OYO Hotels & Homes, Ritesh Agarwal will take a 100 per cent salary cut for the rest of the year and the company’s entire executive leadership team has taken a voluntary pay cut starting at 25 per cent and going up to 50 per cent to enable building the runway for the company.

The cuts will be effective April 2020, and the decisions have been taken in wake of the ongoing Covid-19 pandemic, which has impacted the travel and hospitality industry in a big way.

The company management has also taken several other measures to ensure business continuity including assuring that all employees in India, including over ten thousand on payroll and tens of thousands of OYO managed assets staff including lots of hotels which will open post lockdown will continue to receive their salaries and benefits without any interruptions during this unprecedented period of a countrywide 21-days lockdown.

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“The current situation the world over is deeply concerning to each and every one of us. OYO is doing everything to support the world with its limited resources in this pandemic from making isolation centres to finding a safe place for first responders. Given the current business situation, which is unprecedented for our industry globally, I am foregoing 100 per cent of my salary for the rest of the year. I am grateful to my leadership team, that have also taken pay cuts and support the company during these tough times. We at OYO stand committed towards the fight against COVID-19 and will try to do everything in our control to reach out and help people while also ensuring long term success of the company, and our ability to continue delivering on our mission to bring better living spaces for all, at the right prices, globally,” said Agarwal in a statement.

In line with the Government’s direction, OYO has taken a series of measures to accommodate frontline medical staff, aircrew, corporates, tourists, PGs as well as foreign nationals stranded in the nationwide lockdown.

The company is focusing on a two-pronged strategy to minimize the possibility of infection and maximize social distancing and hygiene. Some of its hotels are being identified to partner with hospitals for setting up safe, pay per use quarantine facilities. Some others are focused on providing safe shelter to local and foreign tourists and travelers who are stranded in cities owing to the lockdown.

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OYO is in touch with various state governments as well as authorities to understand how some of its properties can be of assistance during this crucial period. Recently, OYO also partnered with Apollo Hospitals to offer sanitized beds and facilities in certain COVID-19 exclusive hotels it identified within its network in the proximity of Apollo Hospitals. The partnership will be active in six cities- Mumbai, Delhi, Hyderabad, Chennai, Bengaluru and Kolkata for the purposes of self-quarantine and isolation for suspected COVID-19 patients that require medical observation and supervision.

Additionally, the company has also reached out to corporates and is keen to support the lodging requirements of individuals who are at the frontline of India’s fight against Coronavirus through a combination of OYO Hotels or OYO LIFE offerings.

Oyo plans to entice coronavirus-stricken hotels in Japan with cash

Oyo Hotels, one of the largest start-ups in SoftBank Group’s portfolio, is promising cash to hotels in Japan that join its platform as bookings plunge in the coronavirus-stricken country. The Indian start-up, looking to get more hotels into its network and expand its reach, will pay new members a lump sum equal to a proportion of their past year’s revenue, the company said in a statement on Friday. Dubbed Oyo Partner Support Program, the offer is available immediately and will run indefinitely, the company said, without giving further details.

Oyo has struggled in Japan despite having the full endorsement and support of SoftBank’s ubiquitous brand. The SoftBank name is on one of the largest wireless carriers, Japan’s leading web portal and the Fukuoka SoftBank Hawks, which have won five of the last six baseball championships. Oyo’s push for rapid growth in the market was hampered by technical problems and a public backlash from hotels, leaving it far short of its targets.

The coronavirus outbreak has contributed to a dramatic retrenchment in China, where Oyo is cutting about half of its staff. The company is reducing its global workforce by about 5,000 jobs, to 25,000 people as part of a worldwide overhaul.

Founder and Chief Executive Officer Ritesh Agarwal has said he is prioritising improved relations with hotels and stronger corporate governance. Tourists from China and South Korea, among the hardest-hit by the virus, account for nearly half of overseas visitors to Japan. The country’s tourism industry is also bracing for the likely delay of the Tokyo 2020 Summer Olympics.

“Japan is an extremely important market for Oyo and we intend to contribute to it over the long term,” Agarwal said in the statement. “This is our response as a global hotel group to Japan’s lodging industry in the time of crisis.”

Income tax officials conduct surprise search at SoftBank-backed Oyo

Oyo Hotels and Homes said on Friday income tax authorities had carried out a surprise search at one of its four offices in Gurugram. "There is a routine TDS survey in progress in one of our offices. We are cooperating with the authorities, and are committed to engaging with all relevant stakeholders," an Oyo spokeswoman said.

It was not immediately clear what prompted the search and Oyo did not elaborate. The director general of investigation at India's Income tax department could not be immediately reached for comment.

The news comes at a time when Oyo’s major shareholder SoftBank faces renewed investor scrutiny after being forced to bail out one of its best known portfolio companies, the cash-burning, office-sharing firm WeWork, for about $10 billion last year.

The latest development adds to Oyo's challenges as it faces backlash from some hotel owners in India who say they have been blindsided by hidden fees.

In November, internal projections showed Oyo's India business will likely make losses until 2021.

OYO: Toxic culture, troubling incidents reported at SoftBank's India jewel

Oyo, a start-up that offers budget hotel rooms, has grown into one of India’s most valuable private companies and aims to be the world’s largest hotel chain by 2023.

But at least part of Oyo’s rise in India was built on practices that raise questions about the health of its business, according to financial filings, court documents and interviews with 20 current and former employees, as well as others familiar with the start-up’s operations. Many spoke on the condition of anonymity for fear of retaliation from the company.

Oyo offers rooms from unavailable hotels, such as those that have left its service, according to the company’s chief executive and nine of the current and former employees. That has the effect of inflating the number of rooms listed on Oyo’s site.

Thousands of the rooms are from unlicensed hotels and guesthouses, its executives have acknowledged. To deter trouble from the authorities over the illegal rooms, Oyo sometimes gives free lodging to the police and other officials, according to nine of the current and former employees and internal WhatsApp messages viewed by The New York Times.

Oyo has also imposed extra fees on hotels and declined to pay the hotels the full amounts they claimed they were owed, according to interviews with hotel owners and employees, emails, legal complaints and other documents viewed by The Times. Some hotel operators have sought to file criminal complaints against Oyo, which said it withheld payments primarily over the hotels’ customer service issues.

“It’s a bubble that will burst,” said Saurabh Mukhopadhyay, a former Oyo operations manager in northern India who left the company in September.

Oyo is part of a group of prominent start-ups that have sprinted to get as big as possible, fed by money from large investors such as the Japanese conglomerate SoftBank. Now some of those young companies — from the office rental company WeWork in New York to the delivery service Instacart in San Francisco — have started showing cracks in their businesses.

Any fall by Oyo could blight India’s start-up landscape, which has received billions in foreign capital in recent years, spawning other multibillion-dollar companies such as the ride-hailing firm Ola and the digital payments provider Paytm.

It would also be another black eye for SoftBank, which is Oyo’s biggest investor and owns half the start-up’s stock. Masayoshi Son, SoftBank’s chief executive, has hailed Oyo as a jewel of his company’s $100 billion Vision Fund, even as he recently wrote off billions of dollars on other investments like WeWork.

“This is the only company which went global at this scale from India,” Satish Meena, a senior forecaster for the research firm Forrester in New Delhi, said of Oyo. “But as of now, there are serious doubts about the business model.”

SoftBank declined to comment.

Ritesh Agarwal, Oyo’s chief executive, acknowledged in a recent interview that some of his company’s room listings included hotels that it no longer worked with. He said Oyo left those listings up and marked them as “sold out” as it tried to woo the hotels back.

Aditya Ghosh, Oyo’s head of India operations, also said in an interview that many hotels lacked required licenses, leaving them vulnerable to the occasional government raid. He denied that Oyo gave free rooms to officials.

Mr. Ghosh dismissed what he called “noise” from hotels about extra fees and nonpayment of bills. “The disagreement is about the penalties we charge on customer service failure,” he said.

He added that nearly 80 percent of Oyo’s employees had been at the company for less than a year, so training has been a challenge. “We have just grown very, very fast,” he said.

Founded in 2013 by Mr. Agarwal, then a 19-year-old student, Oyo set out to organize India’s budget hotels, which have traditionally been small, family-run enterprises. The company coaxes the hotels to become Oyo-branded destinations that list exclusively through its website; it then markets those rooms online to travelers and takes a cut of each stay. The start-up also runs some hotels itself.

Oyo is trying to expand globally and now offers more than 1.2 million rooms in 80 countries, including the United States. It employs more than 20,000 people and has raised more than $2.5 billion in funding. Mr. Agarwal has become a business star, hobnobbing with India’s prime minister, Narendra Modi.

But as Oyo has grown, its losses have mushroomed. The company expects to lose money through at least 2021, according to recent government filings. Some efforts to expand in countries like Japan have flopped.

In December, SoftBank and Mr. Agarwal put another $1.5 billion into Oyo to accelerate its expansion. The funding, negotiated over the summer, valued the company at $8 billion.

At the same time, two other big investors, Sequoia Capital and Lightspeed Venture Partners, reduced their holdings. The venture capital firms, which both hold board seats at Oyo, sold $1.5 billion of their stock — about half their stakes — to Mr. Agarwal. He borrowed money to buy the shares and paid the venture firms a price that valued Oyo at $10 billion.

Lightspeed and Sequoia declined to comment.

The current and former workers said that Oyo was never an easy place to work but that pressure increased over the last year.

Mohammad Jahanzeb Gul, who joined the start-up in January 2019 and supervised 23 Oyo properties, said that during the nine months he was there, he sometimes spent all day and night in front of a computer to meet deadlines.

“The culture is really very toxic,” he said.

Mr. Mukhopadhyay, who began working at Oyo in August 2018, said employees were under so much pressure to add new rooms that they brought hotels online that lacked air-conditioning, water heaters or electricity. He and eight others said their managers had asked them to engage in a monthly shell game of briefly inserting these unavailable properties into Oyo’s listings — complete with fake photographs — to help impress investors.

Mr. Ghosh, who left the India job this week and joined Oyo’s board, said that some hotels open in stages and that “there is no padding.”

Saurabh Sharma, who worked for Oyo from 2014 to 2018 as an operations manager, said the company sometimes deliberately withheld payments from hotel owners — a practice that half a dozen other current and former employees also described.

In some cases, they said, the start-up wanted to squeeze the hotel owners into renegotiating contracts that it deemed unprofitable. In others, Oyo wanted to save money and figured that most owners would not press for full payment.

“If 1,000 people shout, we will pay 200,” Mr. Sharma said Oyo managers had told him.

In a police complaint filed in November, Betz Fernandez, owner of the Roxel Inn in Bangalore, said Oyo owed him $49,000 and acted with “intention to cheat and cause wrongful loss” by charging him for nonexistent guests and refusing to pay the contracted minimum monthly payment. Oyo said the dispute was in arbitration.

Oyo’s oversight of its workers was also sometimes so lax that employees brazenly stole from it, said four people who were involved in the start-up’s fraud-fighting efforts.

Because Oyo hotels are popular with unmarried couples looking for places for their trysts, one scheme involved workers at properties run directly by the start-up colluding to keep the guests checked in after they left. The workers then cleaned and resold the rooms for cash to other guests and pocketed the money, the people said.

Oyo has conducted surprise raids at some properties, seizing employee cellphones and checking rooms and records for evidence, they said.

An Oyo spokeswoman said it investigates all fraud accusations and had in some instances fired employees.

Executives have also asked employees to paper over troubling incidents, some workers said.

Mr. Mukhopadhyay said that one night last June, a long-term guest at an Oyo-run property in Noida, near New Delhi, called him. She said three men had raped her in her room.

The next morning, Mr. Mukhopadhyay and another Oyo employee were summoned to the police station, where they pleaded with the guest not to register a formal complaint. Oyo’s legal team also instructed them not to tell anyone about the incident because it could hurt the company’s image, he said. The guest withdrew the complaint and moved out.

In a telephone interview, the guest confirmed Mr. Mukhopadhyay’s account. Oyo disputed some details and said any decision to file a complaint was up to the guest. The Noida police said they had no record of a complaint.

To placate the authorities over unlicensed properties, Oyo managers also gave the police and other government officials free rooms on request, current and former employees said. They said the details were recorded in dedicated WhatsApp groups, one of which The Times reviewed.

Mr. Ghosh said, “We do not encourage or involve ourselves in any kind of bribery or graft.”

Mr. Mukhopadhyay said Oyo’s growth practices contributed to his decision to leave.

“There’s something called integrity,” he said. “I can’t compromise on that.”

In 2019, Oyo saw some interesting travel trends through its properties

In 2019, Oyo saw some interesting travel trends through its properties. In its second edition of Oyo Annual Travelopedia 2019, Oyo Hotels and Homes revealed the following trends:

OYO elevates India & South Asia CEO Aditya Ghosh to board of directors

Hospitality firm OYO on Monday said it has elevated Aditya Ghosh, currently chief executive officer (India & South Asia) for the hotels and homes business, as a member of its board of directors.

Rohit Kapoor, currently CEO of the new real estate businesses of the company, has been appointed as CEO (India & South Asia) for OYO Hotels & Homes, it added.

Ghosh will join OYO Hotels & Homes founder & Group CEO Ritesh Agarwal, Baja Corporation founder & CEO Betsy Atkins and other industry experts like Munish Varma, Bejul Somaia and Mohit Bhatnagar, among others, on the company's board, OYO Hotels & Homes said in a statement.

In his role on the board, Ghosh will focus on five key areas namely, safety and security, customer experience, corporate governance, revenue management and stakeholder communications, the statement said.

"Ghosh's strong business acumen, problem-solving capabilities, passion for building an organisation with strong corporate governance and a high-performing work culture that thrives on principles of diversity and inclusion, make him the perfect choice for this larger and more strategic role, at a global level," OYO Hotels & Homes founder & Group CEO Ritesh Agarwal said.

The decision will help OYO achieve its goals globally, he added.

On the appointment, Ghosh said, "I am thankful to the board for inviting me into the august group to further build OYO as a global brand to reckon with, by not just growing fast, but growing right."

Ghosh and Kapoor will "work closely through the coming month to enable a smooth and seamless transition", the statement said.

Rohit's remit will now also span the operations of over 18,000 hotels across over 500 cities in India and South Asia, it added.

Softbank-backed Oyo's losses rise six-fold to $332 mn; revenue quadruples

SoftBank-backed Oyo Hotels and Homes' losses ballooned six-fold in the year to March, while its revenue more than quadrupled, a valuation report filed by the India-based hotel chain with local regulators showed on Monday.

The losses highlight a period of rapid expansion by Oyo into markets such as China, the United States and the United Kingdom, which has made the six-year-old startup one of the world's biggest hotel chains by room count.

Oyo reported a net loss of 23.85 billion rupees ($332 million) in the year to March 2019, compared with a loss of 3.6 billion rupees a year earlier, according to the report filed with India's ministry of corporate affairs. Revenue from operations surged to 64.57 billion rupees ($900 million) from about 14.13 billion rupees a year earlier.

Oyo said in a statement the report contained only "certain provisional financials" for the year ending March 2019. "These are not the final audited financials and the same will be issued later by the company along with the annual report that we issue every year."

The report, prepared by a valuer in Gurugram, just south of New Delhi, said the financials for the year to March 2019 were unaudited and all figures were provided by Oyo's management.

The growing losses at Oyo come as its major investor SoftBank struggles to raise funding for a second investment fund in the wake of the failed listing of office-rental company WeWork and amid questions about the path to profitability of other marquee investments like Uber.

SoftBank, which has invested nearly $1 billion in Oyo through its Vision Fund, this month reported its first quarterly loss in 14 years, dragged down by an $8.9 billion hit at the Vision Fund.

Oyo's operating expenses grew nearly five-fold year-over-year to 61.32 billion rupees, while total expenses hit 90.28 billion rupees, the report showed.

Gurugram-headquartered Oyo, valued at $10 billion, allows guests to book hotels through its mobile app and charges partnering hotels a fee on room revenue. It also franchises its brand and offers standardized amenities at hotels on its network.

OYO to expand footprint in Bihar, create 700 new jobs in next six months

Buoyed by its success in Bihar where it launched its operations four years ago, OYO Hotels and Homes aims at expanding its footprint in the state by investing in infrastructure and talent.

The investment in infrastructure and talent will create 700 jobs in the hospitality sector in the next six months, a top company official said.

"Bihar is an important market for us and has been performing well since launch. We will continue to invest in expanding our footprint and serve thousands of customers in Patna," Aditya Ghosh, CEO, India and South Asia, OYO Hotels and Homes said in a statement.

He said "Since our launch in Patna in August 2015, weve worked closely with small and independent hotel owners and utilized our deep expertise in standardizing amenities and guest experiences to empower them as better hospitality players.

Ghosh said OYO's presence in Bihar includes 28 cities including Patna, Bodhgaya, Muzaffarpur, Purnea and Bhagalpur among others.

"We have all the 6 brands from the OYO portfolio in Bihar currently - OYO Rooms, OYO Townhouse, SilverKey, Collection O, Capital O, Palette Resorts. In the coming year, we aim to strengthen these partnerships and support the states vision while continuously creating and delivering outstanding opportunities for business growth, fostering all- round socio-economic development for the State and its people", he added.

Disclosing the companys aggressive growth plans in the state, Ghosh said "we aim at expanding our room count across the state from 5200 plus to 6000 plus by the end of 2019. Our expansion drive would provide 700 direct and indirect jobs to hospitality professionals in the next six months ... ".

OYO aims to become the preferred choice of accommodation for visitors, he said.

Currently, Patna, Bodhgaya, Muzaffarpur, Purnea and Bhagalpur are among the top-performing clusters in Bihar, hosting the highest number of guests. The company aims to double its efforts in delivering a high-quality and trusted hospitality experience to guests as well as drive higher yields for asset owners in Bihar, he added.

Protests from hotel and asset owners, mishap come in way of Oyo's dream run

Oyo Hotels & Homes, mostly in the news for its billion-dollar fund raising rounds and expansion in foreign shores, is facing a tough time lately.

Over the last three months or so, the company has been grappling with a series of protests by hotel owners, who have been alleging that the hospitality giant has not paid their dues. The latest protests have taken place in Patna. While the company claims the protests are motivated, the news that caused an uproar and prompted Oyo to act was the electrocution of a 15-year-old at one of its branded hotels.

Countrywide protests

Over the last few months, the company faced protests from hotel and asset owners all over the country. The company has seen protests erupt in places, including Bengaluru, Pune, Jaipur, Shimla, Manali, Ahmedabad, Bhopal, Bareilly, Vizag, Gangtok and Delhi, among others.

The latest incident happened in Patna where hotel owners got into a major tiff with Oyo employees, asking for unpaid dues. Oyo launched in Patna in August 2015 and has expanded its footprint to 100 plus hotels and 1,800 rooms in the city. Overall, Bihar has 350 hotels and 5,200 rooms.

The company said that the allegations against it are baseless and motivated. “Majority of the protesters are not associated with Oyo hotels. The company has an over 99 per cent retention rate and seen no disruption in operations or bookings in over 90 per cent of Oyo hotels in Patna,” said a spokesperson.

The company further said that it has been paying all dues on time. “As an organisation, we have always cleared payments well on time and as per contractual agreement. We have been engaging with our asset owners on a one-to-one basis, and to address concerns, if any. In case of any discrepancies with respect to certain calculations and amounts accrued, the issue is separately discussed and evaluated between Oyo Partner Support representatives and the Oyo hotel owner. This in no way affects any other payments that are accruing to either parties,” the company said.

However, hotel owners claim that they have time and again complained to Oyo about deep discounting and late payment of dues. “On a daily basis, the room tariffs keep on going down. There are times when a room rent is down by almost 80 per cent. Payments are held back and we have to go on fighting to get our dues. After my contract ends, I will independently run my hotel,” said a hotel chain owner in Delhi, who has four properties in New Delhi and Gurgaon.

Safety audit after death

Priyanshu Kumar, a resident of Dehradun and a national-level shooter who had travelled to Delhi to participate in a competition, was accidentally killed when he was electrocuted by an appliance that was in the room he was in. While investigations are on, the company said it is going to go for a safety audit.

“The concerned property is closed and sealed till further notice. To ensure a thorough and unbiased investigation into the matter, personnel working in and associated with this property have been placed under suspension. As a first step and a precautionary measure, we are going to initiate electrical audits. The aim is to identify the root cause of the incident and also ensure that we take all possible steps to ensure the safety of our guests and employees across all the properties under Oyo,” said the spokesperson.

The allegations

Not getting paid dues on time

Deep discounting affecting business

Asset owners have no control over hotel operations

The owners complain most hotels running in severe losses, while Oyo keeps taking money from investors

Oyo is booming, and yet some hotels are complaining about its pricing

India’s Oyo Hotels and Homes shot out of nowhere to become one of the world’s largest hotel chains with a simple promise of “hassle-free” online booking, transparent pricing and cheerful lodging.

But as the Softbank-backed startup pushes toward profitability, an increasing number of Indian hotel operators who have partnered with it are complaining about being blindsided by fee increases.

The backlash against Oyo - while limited to a small share of the more than 10,000 hotel owners in India who work with it - comes at a crucial time for an emerging-market unicorn valued at $10 billion and its major investor.

Softbank, which has invested nearly $1 billion in Oyo, through its Vision Fund, is struggling to raise funding for a second investment fund in the wake of the failed offering of office-rental company WeWork and amid questions about the path to profitability of other marquee investments like Uber. Oyo has not yet turned a profit.

In the background of the discontent is the disruption Oyo has brought to India’s lodging market – often to the delight of India’s middle-class travelers and to the dismay of hotel owners who have seen room rates driven down at a time when economic growth has slowed.

Oyo charges hotels a roughly 20 per cent franchise fee on room revenues when hotels join its network, but some Indian hotel operators say the startup often ends up taking half or more of revenues through fees that were not initially disclosed.

A group representing hotel operators in Bengaluru called for a criminal probe into Oyo last month, saying the company was withholding money because of unfair fee increases.

Two hoteliers in the southern state of Karnataka filed separate police complaints last month accusing Oyo of deceitfully increasing commissions, and accusing Oyo’s 25-year-old founder and CEO Ritesh Agarwal of fraud.

Agarwal successfully appealed to the Karnataka High Court for a stay order on one case in Bengaluru, the court website shows, and a police official said the order barred police from investigating.

In the other complaint, in the town of Chikkamagaluru, police are investigating, an official there said.

Oyo has denied the allegations and said Agarwal declined comment on the legal complaint. The company said it operates with a high level of “integrity, transparency and commitment” with its partners.

Agarwal said hotel operators who have raised complaints represent a tiny fraction of Oyo’s network and were seeking to drive prices higher at the expense of consumers.

“On an annual basis, Oyo is able to retain 99 per cent of its asset owners. If, for instance, people were unhappy, our retention rate would have been lower,” he told Reuters.

Softbank, which owns a roughly 45 per cent stake in Oyo, declined to comment.

‘PLATFORM FEE’ AND ‘VISIBILITY BOOST’

Oyo says it is in constant contact with its hotel partners. “We have always disclosed any changes applicable to contracts with asset owners,” Oyo said in a statement.

For their part, owners and managers say Oyo has introduced fees - including a “platform fee” and a fee for a “visibility boost” - which they only discovered in monthly statements.

Reuters interviews with 22 hotel owners and managers who run hotels under the Oyo brand in 10 Indian cities suggest the discontent has grown since late last year.

Several hotel groups have organized protests. Amitabh Mohapatra, head of one such group in northern India, says over 300 hotels have quit Oyo’s India network this year, while Kunal Rajpara, who heads another group in western India, said a few dozen hoteliers from Ahmedabad ditched Oyo last month.

Inside Oyo Hotels founder Ritesh Agarwal's $1.5 bn share buyback plan

Shares buybacks are not uncommon. They are usually done to provide liquidity to employees holding ESOPs or for a company’s promoters to rack up their shareholding when the firm has excess cash or the stock price is low (in case of a listed entity).

In the start-up world, it is unprecedented for a founder to buy back shares from investors and this is what makes the case of Oyo Hotels & Homes so interesting.

The company’s founder, Ritesh Agarwal, has proposed to buy back shares worth $1.5 billion from early investors Sequoia Capital and Lightspeed and also infuse another $500 million in the company. Agarwal, who will see his shareholding go up to about 30 per cent from 10 per cent currently, is pledging his shares to finance the share buyback.

Oyo had said in July that Agarwal would raise debt through newly-incorporated Cayman Island entity RA Hospitality Holdings, which will be financed by Japanese banks Nomura and Mizuho. Interestingly, Oyo’s largest shareholder Softbank is also domiciled in Japan.

The buyback plan has been approved by Indian anti-trust watchdog Competition Commission of India, The Economic Times reported on Tuesday.

What this means for Oyo

A higher stake in the company by founder Agarwal will enable him to exercise stronger control over it.

Currently, Oyo is in a phase of aggressive international expansion. Last year, it entered China as OYO Jiudian and in 18 months had on-boarded 10,000 hotels. Early this year, it launched in Japan through a partnership with Softbank, and in Europe, where it acquired Amsterdam-based holiday rental company Leisure, besides announcing a plan to invest $330 million to grow business in the continent. A similar investment is committed to the US market.

What this means for shareholders

Lightspeed, which invested in the company in 2014, is said to be selling all of its 13.4 per cent holding in Oyo for estimated $1 billion, according to The Economic Times. This translates to a 50x return over an overall investment of $20 million.

Sequoia is also taking a part-exit through Agarwal’s share buyback. It is expected to gain $500 million from the deal over an investment of $27 million across rounds.

While the proposed transaction is a smash-hit liquidation event for the investors, their exits at this point have raised eyebrows, given Oyo’s recent announcement of a planned IPO in 2021-20. The company expects an eye-popping valuation of $18 billion at the IPO.

What this means for Softbank

Truth be told, Oyo is one the most important bets of Softbank in India. Softbank has invested over $1 billion in the company since its first investment in 2016; it shareholding now rests 46-48 per cent.

Softbank, which is investing through its Vision Fund, needs steady rise in the valuation of its portfolio, which it shows as profits to its own shareholders.

However, as per a clause in the share agreement between Softbank and Oyo, the former cannot increase shareholding over 49.9 per cent without the approval from the company’s founder and a few major shareholders such as Sequoia and Lightspeed.

Even though Softbank does not want to become a majority shareholder, it needs to offer some exit to existing shareholders without infusing more money itself. The Japanese investor is enabling that through a complicated share buyback by the the company’s founder, a transaction where Softbank is acting as silent guarantor behind the curtains, according to an article in The Ken.

Oyo, Cure.fit continue to be LinkedIn's top two start-ups to work with

Hospitality chain Oyo and fitness start-up Cure.fit continue to be among the top two start-ups to work with in India in 2019, according to a list of 25 such start-ups prepared by LinkedIn.

LinkedIn data shows that the 25 start-ups that featured on its list collectively created about 18,000 jobs in the past year.

Over the next 12 months, these start-ups together are expected to create more than 19,000 job opportunities in the country, a company spokesperson said.

“Growing talent across different roles, regions and geographies continues to be one of our top five priorities this year, and I am certain that we will continue to attract good talent with diversity in thought,” said Aditya Ghosh, CEO, India & South Asia, Oyo Hotels & Homes.

In August, the Gurugram-headquartered company had announced that it will be hiring over 3,000 over the next six months.

Experts, too, believe that hiring and investments continue to be strong in the start-up ecosystem, despite a slowdown. Anup Jain, managing partner of early stage venture capital firm Orios Venture Partners said there is a lot of bullishness in start-up hiring. “Movement of manpower is happening from big start-ups to smaller ones and from corporates to the start-up ecosystem,” added Jain.

Cure.fit, which stood second in the LinkedIn list in terms of attracting talent, said it would continue to invest towards learning and drive tech-enabled innovative solutions.

Bengaluru based start-up Dunzo, which was Google’s first direct start-up investment in India, lost ground and slipped to the 13th position from last year’s third place. The third spot was taken up by a new entrant TapChief which provides online consultation.

Oyo to rebrand Las Vegas-based Hooters, bring a 35,000 square-foot casino

Oyo Hotels & Homes said on Friday that it was going to rebrand Hooters Casino Hotel in Las Vegas as Oyo Hotel & Casino. In partnership with hospitality investment and management company Highgate, it plans to bring a 657-room and 35,000 square-foot casino.

“Highgate will handle the management of the hotel, and Paragon Gaming will continue to operate the casino,” Oyo said.

Additional amenities include two signature restaurants, four bars, a fitness centre, and an outdoor pool. The property will undergo an exciting transformation, which will be completed this year. “We are excited to be here as we believe Las Vegas is an exciting city, in which to invest, as the market continues to evolve with projects such as the new Las Vegas Raiders NFL stadium and the $1-billion expansion of the Las Vegas Convention Centre. As we continue to focus on bringing to life our popular concept of ‘comfort design’ and delivering chic hospitality experiences, we are increasingly exploring new ways to connect with our customers, from millennials, to young executives and families, in every city we enter,” said Abhinav Sinha, COO and partner, Oyo Hotels & Homes USA.

Hooters, whose restaurant was famous for its chicken wings, shut shop in May 2017 after nine years of operations at the location. It was originally built as a Howard Johnson Hotel in 1973, and went through at least four more rebranding exercises, before being run as Hooters.

“We will be undergoing a renovation and will come up with some of the most loved amenities and experiences that are sure to Las Vegas visitors from around the world. We can’t wait to welcome you to our first hotel in Las Vegas,” Sinha said. The announcement is a part of the Oyo’s recent plan to invest $300 million over the next few years in the US.

Sinha is leading the initiative along with his team across 15 states in US, which plans to expand its presence to cities such as New York, Los Angeles and San Francisco after already establishing a presence in cities across Dallas, Houston, Augusta, Atlanta and Miami. 

“In June, we announced our plan to invest $300 million in the US. As a new-age hospitality firm, we currently offer great living spaces throughout our 112 plus Oyo Hotels in more than 60 cities and 21 states. With our newest hotel in Las Vegas, we are excited to cater to a completely different audience segment and are certain that this will be the perfect start to Oyo’s journey in Las Vegas,” said Ritesh Agarwal, founder and CEO, Oyo.

Paragon Gaming is a gaming company based in Enterprise, Nevada that owns and manages casinos in the US, and earlier in Canada. It managed the Hooters casino as well. “We’ve had great success managing the Hooter’s casino and look forward to continuing on as the Casino Manager and partnering with Highgate to introduce OYO’s hotel brand in Las Vegas,” said Diana Bennett, Paragon Gaming Chairwoman.

Highgate is a hospitality investment and management company operating in markets like the US and Europe.

OYO appoints Mandar Vaidya as CEO for South East and West Asia

Hospitality firm OYO Hotels and Homes on Wednesday said it has appointed Mandar Vaidya as the Chief Executive Officer for Southeast Asia and the West Asia, effective from August 1, 2019.

The appointment comes as part of company's ongoing focus to drive accelerated growth in two of its high potential markets - Southeast Asia and the West Asia, OYO said in a statement.

Vaidya has over 15 years of experience. He would be responsible for driving business growth for OYO in these two regions, which include markets like Indonesia, Malaysia, the Philippines, Vietnam, UAE, and the Kingdom of Saudi Arabia, it added.

"We are thrilled to welcome Mandar to the OYO family as he takes charge of strengthening OYO's presence in Southeast Asia and the West Asia," OYO Hotels and Homes Founder & CEO Ritesh Agarwal said.

These two markets are crucial for OYO's international expansion strategy, he added.

"Under Mandar's leadership, we look forward to establishing a strong relationship with asset owners in these regions while staying true to our mission of delivering a chic hospitality experience at hard-to-ignore prices," Agarwal said.

OYO forays into co-working spaces with two brands 'Powerstation', 'Workflo'

After acquiring co-working space Innov8, SoftBank-backed OYO on Tuesday launched two other co-working brands — mid-scale Powerstation and lower-scale Workflo — under OYO Workspaces.

On Tuesday, OYO confirmed the acquisition of Innov8, the co-working company it was reported to have bought earlier this year.

The initial launch of OYO Workspaces will open the doors to its over 21 workspaces, with 15,000 seats across 10 cities in India. Of these, Innov8 has offices in six cities — Delhi, Noida, Gurugram, Bengaluru, Chandigarh, and Mumbai. It has 16 centres hosting over 6,000 employees of brands such as Swiggy, Paytm, Pepsi, Nykaa, OLX, and Lenskart, among others.

Powerstation has one centre in Gurugram with over a 1,000 seats and Workflo has set up four centres across NCR, Hyderabad, and Bengaluru with a hosting capacity of over 1,500 seats.

Priced between Rs 6,000 and Rs 9,999 per seat per month, OYO Workspaces aims to expand its presence to 50 centres across India by the end of 2019.

The workspaces initiative will be led by Rohit Kapoor, the chief executive officer of OYO’s new real estate businesses.

“Armed with insights and technology, we are bullish on growth in the co-working space...Given our experience in the hospitality industry and investment in core competencies that have helped us scale so fast in the hospitality, housing rental, and banquet services business, we believe we are uniquely placed to leverage to create a strong offering for the corporates looking for space as a service," said Kapoor.

He said for a good location, OYO could look at setting up a 300-1,000 seat centres.

Business Standard earlier reported that OYO’s Powerstation brand is aimed at clients whose team sizes are growing and want “managed workspaces” in emerging business districts. Workflo aims to transform regional offices, sales offices, customer support centres, and growing start-ups that want affordable options. It is also for enterprises that are seeking multi-city solutions — budget-friendly, and functional.

Each of the centres will have facilities such as Wi-Fi, air conditioning, free housekeeping services, locker facilities, and CCTV surveillance.

Similar to the hotel and long-term accommodation space, OYO plans to provide affordable office and workstation spaces.

OYO, which has been expanding its hotel business in over 80 countries, would be competing with the likes of co-working giants such as WeWork, which is in more than 287 physical locations in 77 cities and 23 countries around the world.

Relief for OYO after HC restrains hoteliers from banning hospitality firm

The Delhi High Court has restrained various hoteliers welfare associations from issuing any notices or boycotting and banning hospitality company OYO.

The court, in an interim order, said it appeared that the act of hotelier associations was pushing other hoteliers and service providers to act in breach of contract between them and Oravel Stays Private Limited, which operates under the name of OYO.

The court noted that OYO has an appropriate agreement with other hoteliers and service providers and the associations act of calling for boycotting the company prima facie would be illegal.

"The plaintiff (OYO) has made out a prima facie case. The defendants (Hotelier Welfare Associations) are restrained from issuing notices or calling to hoteliers/ service providers seeking boycott or ban of the plaintiff in any manner whatsoever till further orders. The defendants will also not press any such notice that may have been already issued," Justice Jayant Nath said in the interim order.

OYO approached the court seeking an ex-parte injunction to restrain the association and its members from giving effect to any "threats" advanced through its undated notice and as mentioned in news articles.

It also sought to restrain the association from boycotting or banning the company in any manner by "lobbying and colluding with one another" during pendency of the suit.

The court said a perusal of the notice allegedly issued by the association showed that it has given a call to all hotels to support nationwide protest against OYO by boycotting and blocking OYO rooms from June 20.

It issued notice to the associations on the suit and listed the matter for further hearing on August 5.

OYO submitted before the court that it is a hospitality company and in the business of standardising unbranded budget hotels, bed and breakfast and guest houses as per its specifications through online and offline channels.

It said it enters into business arrangements with service providers/ hoteliers who agree to permit OYO to have full control over pricing and any booking brought in by the hotel, and give full authority to it to determine and publish room tariffs on its website and mobile application.

The suit alleged that the association has been "illegally conspiring and colluding with other similar associations... to come together and protest and coerce the plaintiff to submit to the unwarranted, illegal demands, thereby making its business halt and causing grave inconvenience/ unrest to public at large".

It also claimed OYO has more than 1.35 lakh bookings across India in the present period and this may effect the travellers. It also said that the defendants were earlier the business partners of the plaintiff and now have formed an association and have been acting against it.

OYO's hospitality paid loyalty programme touches 1.5 million subscribers

OYO Hotels and Homes on Tuesday said OYO Wizard, its hospitality paid loyalty programme, had reached 1.5 million users, contributing to about 25 per cent of its bookings. OYO Wizard, the company’s reward programme for frequent customers, comes with benefits such as guaranteed discounts, cashback, discount coupons and upgrades. The members usually repeat their use of OYO, twice compared to regular users. For Wizard hotels, in particular, 70 per cent transactions by Wizard members are made on Wizard hotels, resulting in higher income as compared to non-Wizard ones. “Customer experience is a priority for us, and with OYO Wizard, we have created one of the most comprehensive loyalty reward programmes in the industry. With this paid programme, we give our loyal users the power to choose. We find it extremely rewarding to recognise the loyal guests and strengthen relationships by providing high-rated hotels at best price. With OYO Wizard, we strive to reach 3-4X of our customer base by year-end,” said Aditya Ghosh, CEO of OYO (India and South Asia).

At present, OYO Wizard is available across three levels — Wizard Blue (Rs 99 for 6-month membership), Wizard Silver (Rs 199 for 1-year membership) and Wizard Gold (Rs 399 for 2-year membership). Members can avail additional 5 per cent discount on all Wizard member hotels (over and above existing discounts), an additional 10 per cent on Wizard Base hotel selected by the user and Instant OYO Money rewards worth Rs 500, Rs 1,200 and Rs 3,000 for Blue, Silver and Gold, respectively.

There are more benefits provided to members in the higher tiers, including 40 per cent discount vouchers and OYO Money cashback on every check-in. There is an ongoing rewards campaign where Wizard members can earn a free membership upgrade to OYO Wizard Silver by checking-in to an OYO.

Over 6,000 hotels under OYO’s 9,000 hotels portfolio in India have partnered this programme. Currently, every fourth room in India is booked by a Wizard member, the company said. Moreover, OYO Wizard members are saving about four times the subscription fees within the first six months of membership purchase, making it a compelling value proposition for guests.