Case Study | OYO Rooms: The challenges that prevail

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Ritesh Agarwal, CEO and founder of OYO

Years ago, in 2013, a college dropout noticed the opportunity of organizing India’s budget hotels if traveling through the country.

Ritesh Agarwal is the young entrepreneur behind OYO Rooms’ thriving success, and it is easy to guess why it is spoken about these days. Today, the company has marked its presence beyond India to Malaysia, Nepal, China, and the UK, all while successfully raising a mind-blowing $4.1 billion as of 11th August 2021.

Despite the shell of success and shine, OYO’s reputation has been doubtful just after its founding. OYO’s work environment generates dubiousness regarding the professionalism of its business.

According to the firm’s chief executive and nine current and ex-employees, OYO provides rooms from unavailable hotels. These hotels have halted their services, by the way. What is the motive? It simply hoists the number of rooms displayed on OYO’s site. Executives of OYO have admitted that numerous rooms are from unlicensed hotels.

Yes, that is correct. To escape from the authorities’ legal actions over illegal rooms, OYO often provides free stays to officials and police officers, according to internal WhatsApp messages read by the NY Times.

A former employee said that workers cleaned and resold the rooms for money to other guests, which is a scheme involving the workers conspiring with OYO to keep the guests checked in after they exited.

Additionally, OYO had a heap of complaints regarding unpaid dues. To charge extra on hotels is one thing, but to refuse to pay the hotels in full is a whole different topic. These are statements by the hotel owners and employees (former and current), legal documents regarding complaints, and emails read by The NY Times.

Some hotel executives filed criminal complaints against OYO, which stated it regained payments. OYO’s head of India operations rejected the argument as “noise.”

Small-scaled hotel owners are surfacing up independent protests in mid-tier cities like Kota, Pune, Manali, Jaipur, and Ahmedabad, even Delhi and Bengaluru. They assert that OYO has been evading them of promises regarding returns and minimum guarantees by enforcing a pile of charges. Most of these charges in the contract between the owner and OYO are not stated.

Although the hurdles still prevail, OYO has expanded its kingdom well beyond the nation. OYO has been one of India’s blessed start-ups, witnessing its valuation jump to $10 billion in 2019. However, being part of the hotel and hospitality industry, OYO also has to carry the burden of the pandemic. That is the primary reason why it witnessed a drop in valuation in 2020.

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