Pink Slips to US Employees: OYO furloughs staff due to reduced revenues amid COVID-19

Ritesh Agarwal, CEO of OYO, in a video address today talked about his plans for OYO. He reported a 50-60% loss in the entire tourism and hospitality industry. Even in February 2020, OYO fired 360 employees in the US. Besides the US, the company had also fired thousands of employees in other countries as well. India and China, two of the biggest markets of OYO, were impacted the most because of layoffs at that time.

Oyo Hotels & Homes, the Indian budget lodgings service backed by SoftBank Group Corp., is placing thousands of its employees globally on indefinite furlough as it tries to survive through the coronavirus pandemic, according to people familiar with the matter. 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.

In January, even before coronavirus reached pandemic proportions, the company had already fired thousands of employees. They cut minimum guarantee agreements with hotel partners to stanch cash bleed.

"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 to ET. “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."

Reported people have said that the layoffs have come in the wake of COVID-19 outbreak which led the revenue of OYO decreased to 50% of what it was earning before. It is worth noting that the US is one of the worst impacted countries from coronavirus. So far, over 12K people have lost their lives to COVID-19 in the country.

Founder Ritesh Agarwal told employees in a video message that tough decisions are necessary for the health of the business. He will forgo his entire salary for the year 2020. Some key position employees will also take a cut-off salary of up to 50%. Negligible employees over the world will be furloughed for 60-90 days.

Will OYO sack employees in India?

Till now, there have been no reports of OYO laying off employees in India in these tough times. However, the company did go through a major downsizing effort at the turn of the year. As of now, OYO is resorting to options like suspending payments of hotel-partners. This move includes leveraging some notorious clauses in the agreement to mitigate the revenue impact.

In the wake of the virus outbreak, OYO has also set up a global welfare fund. The company will direct it towards the benefit of the employees at hotels, asset partners and staff impacted by COVID-19. Agarwal has also forgone his salary for the year. With these initiatives in place, OYO firing employees in the US raises an eye on the practices of the company.