Will COVID Crisis make OYO to become a Failure?


Will COVID Crisis make OYO to become a Failure?

OYO, leading hospitality service provider is losing up to 60 per cent of its turnover due to the COVID-19 pandemic. It is more likely turning out to be another failure in the making for Japanese SoftBank Group. Earlier WeWork stood as a fiasco for the same brand.

WeWork last week said that it has filed a lawsuit against SoftBank Group Corp after the latter withdrew its $3 billion tender offer for additional WeWork shares as agreed last year.

In a statement, The We Company, the parent company of WeWork, said that SoftBank has breached its obligations under the Master Transaction Agreement (MTA) by failing to complete the tender offer contemplated by it.

As the travel and hospitality industry goes through a near-standstill scenario amid the coronavirus crisis, hospitality major OYO last week announced furloughs or temporary leaves of 60-90 days for its employees in the US and select other markets, while keeping its staff in India untouched from the move.

Ritesh Agarwal, Founder, OYO said, "A significant number of 'OYOpreneurs', across the world are being placed on temporary leaves or furloughs of a minimum of 60 to 90 days and the details of these will be made available from HR teams of your respective countries."

"Even before the pandemic caused ructions in OYO's major markets, analysts were questioning that valuation figure, which is at the heart of the debate about whether OYO is another WeWork — an absurdly overvalued start-up," said the report.

Japan-based SoftBank last October announced the infusion of $5 billion into the struggling co-sharing workspace company. It had said that it would provide up to $3 billion for the existing shareholders of WeWork.

Agarwal's 26-27 per cent stake in OYO gives him a net worth of more than $2.5 billion, which he may need to sell if situation does not improves.

The revenues of OYO and the occupancies have dropped by over 50-60 per cent. The CEO, however, said that the global leading hotel chains have all dropped their revenues by over 75 per cent and continue to get worse.

The company said that it is also hopeful that as the situation begins to improve globally, they will be able to bring as many of its employees as possible, back to full-time work at OYO.