A Host Of Troubles For OYO

The atmosphere in the OYO Hotels & Homes office in Gurugram, Haryana, was somewhat tense when Fortune India visited on March 16. This was a week before Prime Minister Narendra Modi announced a 21-day national lockdown to contain the spread of Covid-19 (novel Coronavirus) in India. Mask-wearing employees could be seen sanitising their hands as the first casualty related to the pandemic had already been reported in the country—a 76-year-old man who had returned from Saudi Arabia. The confirmed case count by March 15 had crossed 100. And, while domestic travel was still on, foreign travel had plunged after restrictions were imposed by most countries.

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But a lot has changed since then and OYO isn’t the only business to be impacted; companies globally are facing a sharp decline in revenue and even customer sentiment. “The entire hospitality industry is going through a major stretch right now. OYO’s drop in revenue by 50%-60% is still on the lower side compared to five-star hotel chains which have witnessed a 90%-95% decline in revenue. What’s happening right now is an industry-wide phenomenon and not specific to OYO,” says Sanchit Vir Gogia, founder and CEO, Greyhound Research.

That said, Gogia points out that OYO’s asset-light model (it doesn’t own its properties) and lean operations expenses (unlike hotels it doesn’t invest in front office, housekeeping, and F&B staff) will help it survive this crisis. (How it works: OYO provides capital and training to hotel owners to rebrand the property according to its specifications. The partner hotels list their properties on its platform to maximise revenue, and OYO takes a cut of that revenue.)

Gogia, though, feels it could be a reverse for OYO in markets like China and India once the economy is fully back on track. “The current signals show that China is making a very strong comeback. We must use reverse psychology here. Once you let millions of people out of their homes after months of lockdown, they will go out in hordes and enjoy themselves,” he says. “Hospitality will come back but in a measured way with fewer and cost-sensitive travels.”

[Fortune]


Sanchit Vir Gogia: Sanchit is the Chief Analyst, Founder & CEO of Greyhound Research, a Global, Award-Winning, Technology & Innovation Research & Advisory firm. To read more about him, click here.

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