Loss, layoffs, rights protection, will OYO repeat the tragedy of WeWork?
Editor’s note: This article is from the WeChat public account “PropTech Study Society” (ID: cv_seal), by Ellie.
OYO turmoil
Thousands of layoffs, just to be listed as a surprise before the cold night?
After breaking WeWork, Sun Zhengyi ’s second son in the Asia-Pacific market, OYO, is not in a good position.
WeWork layoffs in front, OYO follows.
Recently, a number of foreign media have revealed that OYO hotels are undergoing mass layoffs in India and China.
According to Bloomberg, OYO has laid off 5% of its 12,000 employees in China and 12% of its 10,000 employees in India due to poor performance, and plans to continue cutting 1,200 jobs in India in the next 4 months people. The number of layoffs is about 3,000.
Responding to this, PropTech Research Institute asked OYO hotel public relations personnel for verification. The other party did not give a positive response.
However, PropTech Labs learned from insiders of OYO that the 12,000 employees in China reported by Bloomberg include outsourcers. As of press time, there are still 7,000 employees in OYO China.
OYO internal staff revealed to PropTech Labs that the team is indeed undergoing internal adjustments. OYO’s layoffs are to reduce costs and prepare for the 2020 IPO.
“It is estimated that the number will be very small by the middle of 2020.”
Previously, according to Indian media Inc42, OYO plans to list in the United States from 2022-2023. SoftBank hopes that OYO will achieve annual profit by fiscal year 2022, and OYO may close auxiliary businesses whose EBITDA is not positive by July 2020.
At present, the process of listing OYO has been advanced.
For the listing news, internal employees of OYO interviewed by PropTech Research Institute said that OYO plans to go public in 2020. But he found it difficult to go public.
Is the layoffs all underperforming departments? The internal employee told PropTech Labs that each department would cut a portion.
This is not the first news that OYO has been retrenched.
Since December last year, OYO employees have reported on the pulse that OYO has begun to lay off staff, involving city general managers (CGM), business development managers (AH), and workersProject manager (TR) and other positions. In addition, some employees reported that the executives of Qianyu Hotel, which OYO acquired last year, have also left OYO.
From the above news, OYO’s layoffs are far more than the 600 people reported by Bloomberg.
OYO employees once disclosed in the vein that “China’s two major business units have laid off 3,000 people.” In response, the above-mentioned OYO internal staff said, “This depends on business development and is dynamic.”
OYO staff broke the news (Source: Pulse)
OYO is in arrears with the owner’s account, 2.0 mode declared failed
OYO ’s massive layoffs are simply a cost-cutting blitz, or is it a business model that has to be withdrawn from China as a whole?
As early as December of last year, there were rumors in the industry that OYO Hotels will withdraw from the Chinese market in 2020. However, after multiple verifications, PropTech Institute did not receive accurate news of OYO’s overall withdrawal from the Chinese market.
In just two years, from hurricane to layoffs, why did OYO come to where it is today? As the first example of counterattacking the Chinese market from the Southeast Asian market, is OYO going to give up so soon? Has the hotel industry’s “Pinduoduo” business model failed in the Chinese market?
OYO, founded in 2013, is based in India and did not officially enter the Chinese market until the end of 2017.
In September 2018, OYO received a US $ 1 billion round E financing led by the SoftBank Vision Fund, of which US $ 600 million was used to develop the Chinese market.
After that, OYO China ushered in a moment of high light.
Under the name of “Pinduoduo” in the hotel industry, OYO has entered more than 300 cities in China in less than two years, and the number of hotel operations has exceeded 10000 homes. But along with the rapid expansion, people question the quality of OYO hotels.
At the end of May 2019, OYO China announced that it will upgrade from 1.0 mode to 2.0 mode with guaranteed income. As of December 2019, OYO has established a 2.0 model cooperation relationship with more than 9,000 hotels.
But the 2.0 model has buried a huge hidden danger.
Under the 2.0 model, the cooperation model between OYO and hotel owners has changed from the commission commission in the past to a sharing model in which OYO provides the owners with a guaranteed income and revenue exceeding the guaranteed bottom. The owner, while receiving OYO guaranteed income, also transferred the hotel’s online operation rights and pricing rights to OYO.
If 1.0 is an asset-light operation, relying on brand empowerment and playing the traffic card; then the 2.0 model is too heavy, which is no less than a global-level asset management company.
OYO, which continues to burn money and expand, has the ability to make a fortune for these hotel assets that are not good enough in themselves?
The answer is: No.
Since October last year, OYOs across the country have experienced arrears of payment to owners.
The owner of the OYO Hotel in Xi’an broke the news to the PropTech Institute. “OYO did n’t give up the money in October and one point in December. There is no way for such a rogue company. It means to cooperate with them, if not with them, the following money will not be given. “
The hotel owner stated that OYO owed him tens of thousands of dollars, and some of the owners were owed hundreds of thousands or two hundred thousand. At present, owners across the country are making trouble, and there are owners visiting the Shanghai headquarters every day to discuss and demand debt. Some owners provided videos of their rights protection to PropTech.
OYO Shanghai headquarters owners rights protection video (provided by interviewed owners)
How big is the arrears of hotel owners?
PropTech WorkshopA little statistics, if according to the official caliber of OYO 9000 hotels, if each hotel owes 50,000, then all the hotels will add up to 450 million yuan.
OYO Xi’an hotel distribution (Source: OYO owner provided)
The owner who was in arrears with OYO also told PropTech Research Institute, “OYO executives are still cheating every day. Many of their data are fake. Like many owners in Xi’an, they did not talk to them in October. We have cooperated, and there are still bills in November and December. There are more than 200 in Xi’an, and now there are more than 50. More than 150 hotels have been cancelled in the last two months.
What’s wrong with the star unicorn OYO that Sun Zhengyi bet heavily?
The highlight of OYO, The valuation is as high as 10 billion, and SoftBank has invested 1.5 billion
As one of India’s most promising startups today, OYO is valued at $ 10 billion.
According to Crunchbase data, OYO has accumulated a total of 3.2 billion US dollars in risk and debt investment in 15 completed financing rounds.
Among them, SoftBank is the largest shareholder of OYO. According to foreign media reports, Softbank’s cumulative investment in OYO is nearly $ 1.5 billion.
It has been 7 years since the establishment of OYO. For an Internet company, 7 years is not short. For investors, 7 years has basically reached the exit cycle.
After WeWork withdrew its listing application, CEO of SoftBank Group Sun Zhengyi said in an interview with Nikkei, “I used to be envious of the size of the US and Chinese markets, but now we can see that many hot and fast-growing companies Small markets like Southeast Asia. “
Sun Zhengyi bet OYO heavily in the Southeast Asian market.
Now it seems that after WeWork’s listing failure and Vision Fund’s fund-raising obstacles, as the second important seed of SoftBank, ensuring the successful listing of OYO has become a priority for SoftBank.
According to Indian media reports, after learning from the failure of WeWorkIPO and declining valuations, SoftBank now strengthens its control over OYO.
According to The Economist, SoftBank has issued an ultimatum to OYO, requiring its self-operated hotel business toEBITDA profitability will be realized by March 20, and the auxiliary business will achieve EBITDA profitability by July 2020.
OYO is currently working to achieve profitability within the SoftBank deadline.
OYO’s self-operated business currently includes Oyo Townhouse, Silverkey, Collection O, Oyo Flagship, Oyo Homes, etc. Ancillary businesses include Weddingz.in, which OYO acquired in 2018.
According to reports, OYO will close ancillary businesses that have failed to achieve EBITDA profitability by the end of July 2020.
In addition, according to Indian media Inc42, about 8,000 hotels franchised by OYO are not among these targets. Inc42, citing sources who asked not to be named, said that OYO hopes to “make a” stable change “this year and hopes to achieve a full year of profitability next year.”
Unfortunately, OYO, like WeWork, not only loses money for many years, but also the loss is expanding further.
According to OYO’s valuation report, OYO lost Rs 23.8 billion in FY19, a 5.5-fold increase from Rs 3.6 billion in FY18 loss.
The report shows that OYO ’s expenditure in FY19 increased by 3.9 times, and revenue only increased by 3.5 times. The evaluation report also predicts that OYO will be profitable in 2022.
OYO expects to continue to lose $ 285.9 million in 2020, but aims to turn losses into profits by 2022 and achieve a profit of $ 45.2 million.
Some overseas media have made similar predictions-OYO may not be profitable in India and China until 2022. In the UK, Brazil, Mexico, Indonesia, Thailand and other places, OYO may not be profitable until 2023.
It can be seen that it is very difficult for OYO to turn around from losses by reducing personnel and operating costs in the short term. There is little hope of going public in 2020, but it may still be possible if OYO plans to go public in 2022-2023.
Not a model failure, but a cognitive misunderstanding? Take the first-line experience to sink the market, you will lose the North.
At the end of 2017, OYO, like an invader, generally entered the Chinese single hotel market. It can be described as a stone that caused a thousand layers of waves and instantly made the entire market calm.
As of now, hotel players such as Huazhu and BTG Home, Internet players such as Ctrip, Meituan, and Tongyilong have entered the game, and have launched hotel brands that benchmark OYO.
So, how do people in the domestic wine travel industry view the hotel innovator OYO? As an outsider, does OYO have problems with soil and water?
For OYO’s dissatisfaction with China, many
OYO ’s massive layoffs are simply a cost-cutting blitz, or is it a business model that has to be withdrawn from China as a whole?
As early as December of last year, there were rumors in the industry that OYO Hotels will withdraw from the Chinese market in 2020. However, after multiple verifications, PropTech Institute did not receive accurate news of OYO’s overall withdrawal from the Chinese market.
In just two years, from hurricane to layoffs, why did OYO come to where it is today? As the first example of counterattacking the Chinese market from the Southeast Asian market, is OYO going to give up so soon? Has the hotel industry’s “Pinduoduo” business model failed in the Chinese market?
OYO, founded in 2013, is based in India and did not officially enter the Chinese market until the end of 2017.
In September 2018, OYO received a US $ 1 billion round E financing led by the SoftBank Vision Fund, of which US $ 600 million was used to develop the Chinese market.
After that, OYO China ushered in a moment of high light.
Under the name of “Pinduoduo” in the hotel industry, OYO has entered more than 300 cities in China in less than two years, and the number of hotel operations has exceeded 10000 homes. But along with the rapid expansion, people question the quality of OYO hotels.
At the end of May 2019, OYO China announced that it will upgrade from 1.0 mode to 2.0 mode with guaranteed income. As of December 2019, OYO has established a 2.0 model cooperation relationship with more than 9,000 hotels.
But the 2.0 model has buried a huge hidden danger.
Under the 2.0 model, the cooperation model between OYO and hotel owners has changed from the commission commission in the past to a sharing model in which OYO provides the owners with a guaranteed income and revenue exceeding the guaranteed bottom. The owner, while receiving OYO guaranteed income, also transferred the hotel’s online operation rights and pricing rights to OYO.
If 1.0 is an asset-light operation, relying on brand empowerment and playing the traffic card; then the 2.0 model is too heavy, which is no less than a global-level asset management company.
OYO, which continues to burn money and expand, has the ability to make a fortune for these hotel assets that are not good enough in themselves?
The answer is: No.
Since October last year, OYOs across the country have experienced arrears of payment to owners.
The owner of the OYO Hotel in Xi’an broke the news to the PropTech Institute. “OYO did n’t give up the money in October and one point in December. There is no way for such a rogue company. It means to cooperate with them, if not with them, the following money will not be given. “
The hotel owner stated that OYO owed him tens of thousands of dollars, and some of the owners were owed hundreds of thousands or two hundred thousand. At present, owners across the country are making trouble, and there are owners visiting the Shanghai headquarters every day to discuss and demand debt. Some owners provided videos of their rights protection to PropTech.
OYO Shanghai headquarters owners rights protection video (provided by interviewed owners)
How big is the arrears of hotel owners?
PropTech WorkshopA little statistics, if according to the official caliber of OYO 9000 hotels, if each hotel owes 50,000, then all the hotels will add up to 450 million yuan.
OYO Xi’an hotel distribution (Source: OYO owner provided)
The owner who was in arrears with OYO also told PropTech Research Institute, “OYO executives are still cheating every day. Many of their data are fake. Like many owners in Xi’an, they did not talk to them in October. We have cooperated, and there are still bills in November and December. There are more than 200 in Xi’an, and now there are more than 50. More than 150 hotels have been cancelled in the last two months.
What’s wrong with the star unicorn OYO that Sun Zhengyi bet heavily?
The highlight of OYO, The valuation is as high as 10 billion, and SoftBank has invested 1.5 billion
As one of India’s most promising startups today, OYO is valued at $ 10 billion.
According to Crunchbase data, OYO has accumulated a total of 3.2 billion US dollars in risk and debt investment in 15 completed financing rounds.
Among them, SoftBank is the largest shareholder of OYO. According to foreign media reports, Softbank’s cumulative investment in OYO is nearly $ 1.5 billion.
It has been 7 years since the establishment of OYO. For an Internet company, 7 years is not short. For investors, 7 years has basically reached the exit cycle.
After WeWork withdrew its listing application, CEO of SoftBank Group Sun Zhengyi said in an interview with Nikkei, “I used to be envious of the size of the US and Chinese markets, but now we can see that many hot and fast-growing companies Small markets like Southeast Asia. “
Sun Zhengyi bet OYO heavily in the Southeast Asian market.
Now it seems that after WeWork’s listing failure and Vision Fund’s fund-raising obstacles, as the second important seed of SoftBank, ensuring the successful listing of OYO has become a priority for SoftBank.
According to Indian media reports, after learning from the failure of WeWorkIPO and declining valuations, SoftBank now strengthens its control over OYO.
According to The Economist, SoftBank has issued an ultimatum to OYO, requiring its self-operated hotel business toEBITDA profitability will be realized by March 20, and the auxiliary business will achieve EBITDA profitability by July 2020.
OYO is currently working to achieve profitability within the SoftBank deadline.
OYO’s self-operated business currently includes Oyo Townhouse, Silverkey, Collection O, Oyo Flagship, Oyo Homes, etc. Ancillary businesses include Weddingz.in, which OYO acquired in 2018.
According to reports, OYO will close ancillary businesses that have failed to achieve EBITDA profitability by the end of July 2020.
In addition, according to Indian media Inc42, about 8,000 hotels franchised by OYO are not among these targets. Inc42, citing sources who asked not to be named, said that OYO hopes to “make a” stable change “this year and hopes to achieve a full year of profitability next year.”
Unfortunately, OYO, like WeWork, not only loses money for many years, but also the loss is expanding further.
According to OYO’s valuation report, OYO lost Rs 23.8 billion in FY19, a 5.5-fold increase from Rs 3.6 billion in FY18 loss.
The report shows that OYO ’s expenditure in FY19 increased by 3.9 times, and revenue only increased by 3.5 times. The evaluation report also predicts that OYO will be profitable in 2022.
OYO expects to continue to lose $ 285.9 million in 2020, but aims to turn losses into profits by 2022 and achieve a profit of $ 45.2 million.
Some overseas media have made similar predictions-OYO may not be profitable in India and China until 2022. In the UK, Brazil, Mexico, Indonesia, Thailand and other places, OYO may not be profitable until 2023.
It can be seen that it is very difficult for OYO to turn around from losses by reducing personnel and operating costs in the short term. There is little hope of going public in 2020, but it may still be possible if OYO plans to go public in 2022-2023.
Not a model failure, but a cognitive misunderstanding? Take the first-line experience to sink the market, you will lose the North.
At the end of 2017, OYO, like an invader, generally entered the Chinese single hotel market. It can be described as a stone that caused a thousand layers of waves and instantly made the entire market calm.
As of now, hotel players such as Huazhu and BTG Home, Internet players such as Ctrip, Meituan, and Tongyilong have entered the game, and have launched hotel brands that benchmark OYO.
So, how do people in the domestic wine travel industry view the hotel innovator OYO? As an outsider, does OYO have problems with soil and water?
For OYO’s dissatisfaction with China, many
At the end of 2017, OYO, like an invader, generally entered the Chinese single hotel market. It can be described as a stone that caused a thousand layers of waves and instantly made the entire market calm.
As of now, hotel players such as Huazhu and BTG Home, Internet players such as Ctrip, Meituan, and Tongyilong have entered the game, and have launched hotel brands that benchmark OYO.
So, how do people in the domestic wine travel industry view the hotel innovator OYO? As an outsider, does OYO have problems with soil and water?
For OYO’s dissatisfaction with China, many