Expecting a long lull due to Covid-19, Oyo gives pink slips to US staff

According to ET, SoftBank-backed Oyo Hotels & Homes has laid off hundreds of employees in the US across divisions like sales, business development and HR since March end, recently sacked employees and company insiders told ET. As per some media reports, Oyo had previously laid off about 360 employees, a third of its then staff in the US, in February.

Sources said the company’s capital investment on US hotels has come down to a quarter of what it was spending earlier, in the face of the Covid-19 outbreak.

“Oyo is expecting a long lull in the US and is laying off a lot of people in its corporate division and some employees at hotels too. Finance and operations are very thinly manned right now and others are being asked to go,” a person familiar with the matter said. “Costs there are very high and the leadership thinks that the accounted cash flows will go out of order if costs are not brought down drastically.”

The job cuts have come amid the Covid-19 outbreak, which has caused more than 10,000 deaths in the US so far, crippled businesses and led to job losses. Oyo had in January announced a restructuring exercise, which involved job cuts, to reduce costs. It wasn’t immediately known if the latest US job cuts were part of that restructuring programme.

Oyo spokesperson didn’t respond to specific queries emailed to the company, but said ET’s sources were erroneous. “While we will not disclose specific employee data, we can confirm that this pandemic has impacted the hospitality industry at a global scale and Oyo is not immune to it. We will shortly announce further details as we finalise specific decisions to ensure Oyo’s long-term success,” the spokesperson added.
Sacked employees who were handed the pink slips in the first week of April said unsustainable high salaries, lack of transparency with hotel owners and an everchanging product have been the key issues with the company in the US.

Roles in business development account for a chunk of these layoffs, people ET spoke to said.

“Covid-19 has been very tough for the hospitality industry but it is not the primary reason for Oyo’s troubles and the situation the company finds itself in,” said a business development manager who was handed the pink slip.
“Everybody in Oyo, including me, was paid way higher than what they would get elsewhere — about 25-40% higher. But, not a lot of people deserved that kind of compensation for what they delivered.”

Another employee who was fired said the product within Oyo changed a lot. “There wasn’t enough transparency with contracts and issues have only compounded. Hotels didn’t want us to exercise so much financial control on rates,” he said.

In an interview to Bloomberg last month, Oyo founder Ritesh Agarwal had said the company would fire about 5,000 employees globally as part of the restructuring exercise announced in January, with a significant number of job cuts taking place in China. Agarwal told Bloomberg that Oyo’s global headcount would be about 25,000 after the dismissals.

People familiar with the matter said the company was also renegotiating contracts in the US and that its commission from the owners for some hotels had come down drastically.
“The contracts changed so much that as a sales person I found it hard to keep track of the numbers. And they didn’t put much money in advertising. So, no one knew what we were trying to sell. For a company that calls itself one of the biggest, unlike other chains like Best Western, they didn’t have enough recognition on the ground. That was sketchy,” a former employee said.

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