SoftBank-backed Indian start-up Oyo furloughs thousands of employees to survive coronavirus pandemic

Oyo Hotels & Homes, the Indian budget lodgings service backed by SoftBank Group, is placing thousands of its employees globally on indefinite furlough as it tries to survive through the coronavirus pandemic, according to people familiar with the matter.

Oyo said in a statement it’s furloughing employees in countries excluding India without specifying numbers, adding that it’s not considering job cuts at this time. The start-up, one of the largest in SoftBank’s portfolio, has more than US$1 billion of cash in the bank and is exploring options to remain viable over at least the next 36 months, one of the people said. It has not yet determined the precise number of workers to be furloughed because it is sorting through local labour laws in various countries, said the person, who did not want to be named disclosing internal discussions.

Founder Ritesh Agarwal told employees in a video message and a note that tough decisions are necessary for the health of the business, and assured workers Oyo would not make any job cuts anywhere in the globe “despite significant economic pressures.”

Oyo’s move – tantamount to going into hibernation – is the latest setback for Masayoshi Son’s SoftBank, whose portfolio has been buffeted by WeWork’s implosion and volatile share prices at once high-flying Slack Technologies and Uber Technologies. The billionaire has called for greater financial discipline among the founders in his portfolio, spurring job cuts at outfits such as Zume Pizza and shutdowns of start-ups including Brandless.

Son has been a keen supporter of founder Agarwal, helping fund the hotel company’s international expansion. Oyo had been growing at a rapid clip, but, as with other travel businesses, the outbreak of Covid-19 has sideswiped the company. Its reputation also suffered due to customer complaints about bad experiences along with grievances about poor or unfair treatment from several of the more than 20,000 hotel owners in its chain.

Furloughing employees is just one of a series of actions to be taken by Oyo, which include management pay cuts and a freeze on marketing spending. Agarwal will forego his entire salary for 2020. In January, even before coronavirus reached pandemic proportions, Oyo had already fired thousands of employees and cut minimum guarantee agreements with hotel partners in an effort to stanch cash bleed.