Oyo slashing footprint, headcount in virus-hit Japan

Bloomberg | Updated on July 06, 2020

Oyo Hotels, one of the largest start-ups in SoftBank Group Corp’s portfolio, is dramatically shrinking its footprint and headcount in Japan as bookings in the country plunge due to travel restrictions.

The Indian start-up slashed its regional presence by closing offices in provincial centres Sapporo, Sendai, Nagano, Hiroshima and Omiya at the end of June, Chief Business Officer Ryota Tanozaki said in an interview. Oyo is also looking to downsize its Tokyo headquarters, which occupy two floors in an office building walking distance from the Imperial Palace, he added. The moves extend the company’s ongoing effort to downsize internationally as it adapts to a much smaller tourism industry in the wake of the coronavirus outbreak.

Oyo is encouraging its employees to quit, offering up to a four-month severance package, according to a person asking not to be named because the details are private.

“The hotel industry overall is facing a tough situation because of the virus, and we will connect employees who wish to find a new job with a recruitment agency,” Tanozaki said, declining to comment on details of any job cuts.

The changes in Japan are part of a global retrenchment by the start-up that just a few months ago looked set to become the world’s largest hotel operator by room count. But the company’s expansion proved overly aggressive and it was scaling back even before the coronavirus outbreak, slashing staff in China by about half and reducing its global workforce by about 5,000 people.

Oyo furloughed further thousands of employees as the virus spread and is now offering them stakes in the company at a steep discount to make up for a drop in pay.

Japan has been a market of particular import to the hotel-booking start-up, whose founder and Chief Executive Officer Ritesh Agarwal earned SoftBank supremo Masayoshi Son’s favour and benefited from SoftBank’s brand association and promotion. The headcount in its Japanese hotel operations has shrunk to 150 from about 600 in October through furloughs and job re-assignment to SoftBank, according to a document distributed by its labour union and obtained by Bloomberg News.

Oyo has struggled in Japan even with the full endorsement of SoftBank. Son’s ubiquitous brand is on one of the country’s largest wireless carriers, the leading web portal and the Fukuoka SoftBank Hawks, which have won five of the last six baseball championships. Oyo’s push for rapid growth in the country was hampered by technical problems and a public backlash from hotels, leaving it far short of its targets.

Overseas visitors to Japan totalled 1,700 in May, marking a 99.9 per cent decline from a year earlier, according to the country’s tourism agency. Domestic tourism has also been at a standstill during a state of emergency that spanned April and May. The delay of the Tokyo 2020 Summer Olympics into next year and fears of a second wave of infections are likely to extend the pain for the hospitality industry in the country.

Published on July 06, 2020

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