[Abstract] according to six current and former employees, Oyo began to lay off more than 2000 employees worldwide last week. Prior to the layoff, Oyo had about 20000 employees in 80 countries and regions.
Tencent technology news comes from India’s new company Oyo, which is mainly engaged in hotel and lodging industry. It used to be one of the fastest-growing technology start-ups in India. However, according to the latest news from foreign media, the company is now rapidly downsizing. At the same time, many technology companies invested by Softbank group, a major shareholder of Oyo, also have business problems. Softbank also puts forward more requirements for Oyo.
According to foreign media reports, in recent weeks, the economy hotel company Oyo has pulled out of more than 200 cities, cut thousands of hotel rooms, started mass layoffs, and cut other costs because it is under pressure from its largest investor, Softbank group of Japan, to curb huge operating losses.
Oyo’s retreat was swift and complete. According to internal data of current and former employees obtained by foreign media, in India alone, Oyo has reduced more than 65000 rooms since October last year, about a quarter of the rooms it provides to tourists. According to company documents and a current employee and a former employee, Oyo also stopped selling rooms in more than 200 small cities in India this month.
Last week, Oyo began cutting more than 2000 jobs worldwide, according to six current and former employees. Prior to the layoff, Oyo had about 20000 employees in 80 countries and regions.
Oyo said some data obtained by the press were inaccurate, but declined to elaborate. In an email to employees on Monday, Ritz angova, the company’s chief executive, said Oyo was focused on sustainable growth and profitability – which means layoffs are needed.
“Unfortunately, some of the roles of Oyo will become redundant as we further drive synergies in technical support, improve efficiency, and eliminate duplication of effort across businesses or geographies,” he wrote in the email
An Indian media first reported in December that Oyo’s layoffs were coming.
Oyo’s move is part of a broader retreat for start-ups invested by Softbank group. Softbank group manages a $100 billion vision fund and has invested heavily in global start-ups in recent years. This gives many young technology companies the incentive to expand, but the founders of these companies usually think little about profits.
Last year, some of the start-ups in which Softbank group took a stake began to struggle – most notably Wework, the second landlord for office buildings, which failed to go public as investors questioned its losses. Wework eventually ousted the CEO and lowered the valuation from $47 billion to less than $8 billion. This has become a landmark event that shocked the global technology industry, and the investment myth of Softbank group and sun Zhengyi has also been broken.
The decline in Wework has raised questions about other start-ups invested by Softbank and whether these young companies can make money. Last month, dog walking service wag made several rounds of layoffs, and Softbank sold its shares at a loss. Katerra, another construction start-up funded by Softbank, also cut jobs.
This month, Softbank’s investment in start-ups has seen a steady increase in layoffs. RAPPI, a South American restaurant delivery service, and getaround, a San Francisco car sharing start-up, say they are laying off workers. Zume, a $2 billion company that uses robots to make pizzas, has cut more than half of its workforce, and has also announced it will stop making and distributing pizzas.
Some investors and start-ups say they are now carefully approaching Softbank’s vision Fund – or, in some cases, avoiding it altogether.
Josh Wolfe, an investor in Lux capital, a venture capital firm, is critical of Softbank’s strategy, saying: “we have advised almost all companies to avoid this, and no one else can say that the emperor is not dressed.”
Softbank declined to comment on Oyo and other start-ups it invests in.
Angova founded Oyo in 2013 to organize small independent hotels in India into a chain hotel. The company sells rooms online and takes a piece of every check-in.
Angova, who has become a business star in India, said he hopes to make Oyo replace Marriott as the world’s largest hotel chain by 2023.
But as Oyo tries to expand globally (partly driven by Softbank), it has spent a lot of money on incentives to attract hotel owners and customers to its website, which has led to a loss in the Indian business, which it has said will remain at a loss for at least 2021.
Sun Zhengyi, CEO of Softbank, started investing in Oyo in 2015. Softbank and its vision fund now hold half of its shares. Although sun Zhengyi called Oyo a gem of his fund’s investment company and urged its rapid development, he later changed his position.
As Oyo’s losses increased, according to current and former employees, the company’s executives told employees that Softbank required it to make a profit by mid-2020 on its EBITDA target.
Another sign of the shift in Softbank’s stance is that Yahoo Japan terminated a Japanese apartment leasing joint venture with Oyo last November. Current and former employees say most of the Oyo employees involved in the Japanese joint venture have been fired or relocated.
Oyo faces other problems in India. On Friday, the Indian government’s tax department visited the company’s headquarters on the outskirts of New Delhi, asking for a large number of documents. The tax department and Oyo said the government was checking whether the company had properly withheld taxes related to supplier fees.
Foreign media reported this month that Oyo provided thousands of unlicensed hotel rooms and sometimes free rooms to government officials to influence law enforcement. Foreign media also described how some Oyo employees cooperated to commit fraud against the company.
Angova said in an email on Monday that the media reported that the described employee behavior had violated the company’s code of conduct.
“We take all allegations very seriously and are investigating each one.” He wrote.
According to current and former employees, in order to curb losses, Oyo has also cut staff and supplies, such as mineral water and cleaning fluids, at its own hotels. They say Oyo employees who run hotels are instructed to turn off lights, elevators and even hot water boilers to save more electricity.
Current and former employees say morale among thousands of Oyo employees around the world has plummeted.
Prajit Singh, the Oyo business development manager who left the company in September, said employees who criticized the company’s practices faced greater unemployment risks. “It’s a culture of silence,” he said.
Unable to find another job, Singh said Oyo’s reputation in India has deteriorated so much that other employers are reluctant to hire its former employees. “They looked at me as if I had committed a crime while working at Oyo,” he said. (reviewed by Tencent technology / Chengxi)