OYO founder Ritesh Agarwal confident about growth despite negative headlines
Ritesh Agarwal shares insights during an interview with Cheddar Business. (Picture: GQ India)
Despite job cuts and record losses of $350 million in 2019, the founder of hospitality unicorn OYO Ritesh Agarwal stressed the firm still employs 25,000 staff while another 200,000 people work at their contracted hotels.
In recent times, OYO, the unicorn hotel start-up from India, has come under some scrutiny following massive lay-offs, reports of staggering losses and WeWork’s IPO fiasco.
Ritesh Agarwal, founder and CEO of OYO, shared his comments on these topics with Cheddar Business during an interview.
We find out more about Agarwal’s plans for OYO.
Gradually reducing losses
In 2019, OYO recorded record growth in terms of new properties and revenue increase but saw record losses of $350 million at the same time. While some may find this concerning, Agarwal points out the company’s trend of losses decreasing year-on-year.
According to the founder, losses in mature markets like India fell from 25% to 14% of revenue in 2019 while the country contributed over 60% of OYO’s total revenue. This makes last year the third year in a row for losses shrinking in the hotel company’s home market.
In newer markets like China and the USA, where the group is expanding aggressively, losses still make up a much higher percentage of revenues.
Impacts of coronavirus on business in China
OYO saw exceptional growth in China last year and was hoping to continue its positive trajectory in 2020. The outbreak of COVID-19 during the Spring Festival came as a huge blow to these plans and all but halted further project development in the country.
So far, the impact has been severe, however, Agarwal feels it’s too early to predict the full effect the pandemic will have on OYO’s growth and overall business in China. While there have been significant losses to-date, final numbers will depend on the duration of travel restrictions and the time it takes for things to go back to a pre-coronavirus state.
As of the taping of the interview, OYO was planning on keeping as many of its hotels open as possible to support local staff and avoiding unpaid time off for employees.
What’s up with the lay-offs?
While the interviewer’s persistent questions about the exact number of OYO’s recent lay-offs went unanswered, Agarwal did eventually address the issue.
He explained how the company’s restructuring in January had led to many duplicate jobs which required downsizing the team. Centralising partner support by setting up remote chat and phone support was another reason for letting go of large numbers of employees. The CEO emphasised that everyone who has lost their job was being supported with appropriate severance pay.
Despite cutting so many jobs, Agarwal stressed that OYO still employs 25,000 staff while another 200,000 people work at their contracted hotels.
When asked how WeWork’s recent IPO fiasco had impacted OYO, Agarwal stated that high-value companies like his own will now place a bigger emphasis on becoming profitable more quickly. In OYO’s case, he is confident that the company’s mature markets like India and soon China and the US will help him achieve this goal.
He also stressed that OYO was following the business plan put in place together with board members and shareholders, which outlines that losses will be reduced in the coming years. However, he was not able to give a date for when OYO would shift from red to black.
Other key goals include further growing the company’s portfolio, driving revenue and effectively managing costs to keep losses in check.
Since complaints from owners claiming unfair or lacking compensation by OYO have been heard repeatedly, Agarwal also stressed that good partner relations were one of his top priorities this year.