Several people familiar with the development said that OYO Hotels & Homes is exiting unsustainable businesses and assets in an effort to achieve consolidation and profitability.
Sources said Oyo has abandoned some co-working space across India and cut its rental condominium business, Oyo Life, in the past two to three quarters to trim losses and focus on its core hotel business.
They added that OYO has given up two co-working spaces spanning 65,000 square feet in Hyderabad, as well as others in Gurugram, Bengaluru, and Mumbai.
Under Oyo Life, the SoftBank Group Corp.-backed economic hospitality chain has permanently shut down more than 4,000 beds in all locations in the previous three or three quarters and transferred more than 1,700 beds into Oyo rooms.
Responding to ET inquiries, Ankit Gupta, CEO of Frontier, Oyo India, and South Asia, said the company had “improved” its supply network and abandoned properties that were either not profitable or were significantly affected by the change in demand. However, Gupta said the numbers cited on Oyo Live were “inaccurate” and denied that part of the stock had been diverted to Oyo rooms.
In the co-working sector, Gupta stressed that the company has given up some assets that have been affected by the Covid-19 epidemic and become unviable in the long term. “Having said that, we have also added some centers in Noida and Bangalore in recent months to grow this business sustainably. The co-working industry has been severely affected by the prolonged impact of Covid-19. OYO’s initiatives are not exempt from working together.”
Gupta also confirmed that the Ritesh Agarwal-owned startup has given up some unprofitable co-working spaces in Hyderabad as demand trends in specific small markets have changed due to the virus outbreak.
A senior Oyo executive told ET, on the condition of anonymity, that the company was reorganizing its business and closing down on losing properties.
“We are still defining more properties because the focus is on profitability,” he said.
Another person familiar with the developments added that the message was aimed at disposing of all bleeding assets and property to be sustainable.
Gupta said Oyo has implemented a “strategic” plan to improve supply partnerships, not only for hotels but also for other companies. “This is an improvement exercise rather than an exercise that cuts or closes repairs. Given the impact of Covid-19, we have evaluated our offerings in terms of quality, scalability, cost-effectiveness, and profitability, and have made decisions to forgo real estate where we cannot create value for our partners.”
Another industry source said Oyo was “cleaning up the mess” in the hotel business. “He doesn’t want to expend much into the other categories. 2020 was a watershed year for the industry as people stayed at home. Both hotels and co-existence businesses in Oyo have suffered damage due to work-from-home arrangements.”
The epidemic affected many coexistence and co-existence operators, who had to reorganize their businesses. Another person said Oyo is one of them. “They have had to close many properties in all markets,” he added.
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