Comment: OYO downsizing shows risk of rapid growth strategies

More than 1,000 employees in India alone have been let go

Ralph Hollister
Ralph Hollister

GlobalData analyst, travel & tourism, Ralph Hollister weighs in on OYO’s recent job-cutting and how its downsizing illustrates the risk of aiming for rapid growth.

"After what seemed to be a meteoric rise for OYO in the lodging sector, the company will now be laying off 15-20% of its employees in India and South Asia.

Oyo group chief executive officer (CEO) Ritesh Agarwal hinted that this step has been taken to drive ‘tech enabled synergy’, but it is likely that the change in strategy is spurred by the increasing pressure from Softbank to show profitability as soon as possible.

It is common for companies in the tourism industry to change strategy due to changes in the micro and macro-economic environment. Because of the company’s aggressive expansion into a range of markets such as the US and UK, it is now more difficult for the unicorn to scale back operations and focus primarily on core markets such as India.

Significantly reducing staff numbers provides a short term fix to improve profit margins. More importantly however, the company’s core business model needs to be scrutinised to evaluate its ongoing viability. Attempting to standardise low cost accommodation in a range of source markets is proving a difficult challenge to overcome. 

Softbank - a major investor in OYO – is gaining a reputation for encouraging rapid growth strategies. The situation bears resemblance to that of WeWork, another company, which was heavily backed by Softbank and which recently hit the headlines after aborting a planned IPO."

For all the latest hospitality news from UAE, Gulf countries and around the world, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page.

Most Popular

Newsletter

Reports

Human Capital Report 2017

Human Capital Report 2017

The second annual Hotelier Middle East Human Capital Report is designed to explore the issues, challenges and opportunities facing hospitality professionals responsible for the hotel industry’s most important asset – its people. The report combines the results of Hotelier Middle East's HR Leaders Survey with exclusive interviews with the region's senior human resources directors.

Hotelier Middle East Housekeeping Report 2016

Hotelier Middle East Housekeeping Report 2016

The Hotelier Middle East Housekeeping Report 2016 provides essential business insight into this critical hotel function, revealing a gradual move towards the use of automated management and a commitment to sustainability, concerns over recruitment, retention and staff outsourcing, and the potential to deliver much more, if only the industry's "image problem" can be reversed.

From the edition

From the magazine