Just over a year ago, the Indian Oyo Hotels & Homes was among the most important startups in the world and the second largest hotel chain in the world. It had billions of dollars from the Vision Fund of SoftBank Group Corp. and others, and an assessment that doubled in one year to reach $ 10 billion.
Covid-19, and the destruction it caused in travel, exploded a lot. But Oyo’s problems go deeper than the pandemic. The company has already faced problems with its rapid expansion, issues that will not be fully resolved by a post-vaccine travel recovery.
Oyo has seen thousands of hoteliers leave their chain amid complaints from many that they have been treated unfairly. The company’s challenges outside India threaten its global ambitions.
Oyo’s big idea was to book family hotels, decorate them with minimal standards under a single brand and take control of reservations and prices, using proprietary software to increase occupancy and revenue. In return, Oyo charged fees and commissions to hotels.
The model worked in India, where large hotel chains are less common. He faltered in the United States, China and Japan, countries with established low-cost brands. Some current employees and former employees say it is unclear whether the services that Oyo offers hotel owners are attractive enough to attract and keep large numbers of them in its network without the subsidies it has been offering. Revenue at many Oyo hotels did not increase as expected, even before the pandemic, leaving hoteliers frustrated, hotel owners and former Oyo employees said.