India’s top hotel company OYO, one of the biggest startups in SoftBank’s portfolio, is slashing jobs and warns that more layoffs could be on the way as it scrambles to turn a profit.
“One of the implications of the new strategic objectives for 2020, is that … we will reorganize more teams across businesses and functions,” OYO CEO Ritesh Agarwal said in a letter to employees Monday, which a company spokesperson shared with CNN Business. “This means that, unfortunately, some roles at OYO will become redundant as we further drive tech-enabled synergy, enhanced efficiency and remove duplication of effort across businesses or geographies,” he added.
“This has not been an easy decision for us,” Agarwal said, in regard to the layoffs. “We are doing everything we can to ensure that our outgoing colleagues receive as much assistance and support as possible through this transition.”
OYO, which Agarwal founded six years ago when he was 19, started as a platform to aggregate budget hotels across India but has since branched into leasing and franchising its own properties like a traditional hotel chain. It now has more than 35,000 hotels around the world including in India — where it has more hotels than any other company — China and Europe.
It is also looking to expand aggressively in the United States, with over 200 properties around the country already. That includes the former Hooters Casino Hotel in Las Vegas, which OYO bought in August.
The company’s rapid growth has been bankrolled by some big names, with prominent investors such as Airbnb and SoftBank (SFTBF). But that growth has also drawn criticism about the company’s business policies and lapses in quality control, such as inconsistency in cleanliness and hotel staff not promptly responding to customer complaints.
Agarwal addressed allegations of questionable practices in his Monday letter, appearing to refer to an investigation earlier this month by the New York Times.
“We take all the allegations very seriously and are looking into each and every one,” he said, adding that the company continues to undergo regular external audits and is investing in compliance, training and governance.
“We are — and will always be — committed to growing OYO the right way,” he said.
OYO is one of several companies under the SoftBank umbrella that has come under increased pressure after the failed initial public offering of US co-working startup WeWork. The Japanese conglomerate bailed out WeWork, bringing its valuation down to $8 billion from a peak of $47 billion, and resulting in mass layoffs.
Other SoftBank investments have run into similar trouble. Latin American delivery app Rappi reportedly laid off 6% of its workforce earlier this month, while dog-walking startup Wag parted ways with SoftBank in December after multiple rounds of layoffs.
SoftBank did not immediately respond to a request for comment.
Agarwal said OYO will focus on sustainable growth, profitability, training and governance.
“Change can be hard,” he said. “It requires tough choices and it demands bold actions.”
- CNN Business’ Parija Kavilanz and Sherisse Pham contributed to this report