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Oyo wasn't prepared for zero occupancy rate crisis: Ritesh Agarwal!

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The startup had laid off around 5,000 employees just before the lockdown and later furloughed employee's salaries to keep expenditures on the check and save cash in an uncertain environment.


Oyo was not prepared for a business crisis that saw its occupancy rates dropping to almost zero for a few months after the lockdown was enforced in March, said Ritesh Agarwal, founder, and chief executive of the hospitality unicorn.


Speaking at All India Management Association’s (AIMA’s) 47th National Convention on Tuesday, Agarwal said that the company’s hotel inventory has seen a 40-45% revival in terms of occupancy rates when compared to pre-COVID levels.


“We have always been prepared for crises as we have even designed the business for a 10% or even 20% drop in occupancy, by looking at the last four crises that the world economy has been through. But we were not really prepared for an almost 0% occupancy for few months…so for the first time we had to design our business for almost zero revenues, and to have significant long-term cash for survival," Agarwal said adding that, it is very early to provide estimates as to when the demand in the hospitality industry would return to the pre-COVID levels.


“It’s hard to estimate when demand would go back to pre-COVID level…it could 6 months to even 2 years, it really depends on various other circumstances," he added.

The startup had laid off around 5,000 employees just before the lockdown and later furloughed employees, cut salaries to keep expenditures on the check, and save cash in an uncertain environment.


Oyo has been laying off staff since late 2019, even before the COVID outbreak in the country. However, from August, it began reinstating the salaries of employees in a phased manner as demand for travel rebounded.


Agarwal’s comments come at a time when the company has been struggling to meet minimum business guarantee (MBG) payments to hotel owners. In recent months, Oyo has suspended contracts with over 250 hotel owners for its “Townhouse" properties across India and stopped making minimum payments to hotel partners. The startup invoked force majeure and served notices to property owners citing a negative impact on business.


Agarwal said that the startup expects it's budget and homestay categories to bounce back faster in terms of demand, when compared to the luxury and premium segment especially in markets including India, Europe, and Southeast Asia.


“Our sense is that as economic activity, and leisure travel will come back sooner because people do not have offices to go back on Monday morning, and hence they are looking at extended vacations…In the corporate travel segment, we small and medium businesses owners increasingly traveling across towns and states," Agarwal added.


News Courtesy: MINT


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Copyright © 2021, All rights reserved.