The hospitality sector is one of the most affected by the ongoing coronavirus pandemic. With travel of any kind coming to a halt and governments imposing lockdowns, companies in the sector are bracing for severe impact.
Recently, there has been multiple reports about layoffs and furloughs in the industry by the companies to save cost. But seems like that is not a sufficient measure for corporations working in the sector.
According to a recent report by Reuters, Indian hospitality unicorn OYO Hotels and Homes is planning to offload properties around the world as the pandemic forces the company to step aside its plans for rapid expansion.
As per the sources mentioned in the report, OYO is reportedly not planning to completely exit any market, it will either terminate or not renew contracts with loss-making hotels.
It was also mentioned in the report that this is not the first time the company is resorting to this measure. As part of its broader restructuring process that began last year, the company has already ditched a number of loss-making properties.
It is also being expected that the company may furlough an additional number of staff in countries where travel restrictions are imposed to prevent community transmission of the virus. The lockdowns have been making it difficult for hotels to operate and the company has already opened its properties for frontline workers who can’t go home due to their work.
The recent development by the Softbank-backed startup comes just a year after a heady expansion beyond India and China into Europe, Southeast Asia, and the United States. Although it widened the company’s losses to $335 million last year, OYO is currently one of the world’s biggest hospitality brands by room count.
It was not immediately clear how many hotels contracts OYO plans to end nor in which countries, said the sources, who asked not to be named as the discussions were still private. However, there has not been any official confirmation from the company.
The company has $1 billion of cash and the measures, along with other cost-cutting initiatives and furloughs outlined in early April, are aimed at reducing monthly expenses to about $25 million by June from $40 million, the report added.
Other large hotel operators like Marriott International have also abandoned their financial outlooks and furloughed staff to conserve cash.
On April 8, OYO’s founder Ritesh Agarwal said that the pandemic had resulted in a 50%-60% drop in revenues and occupancy levels, putting “severe stress” on the company’s balance sheet.
Recently, Ritesh had also announced that he will forgo his entire year’s salary and senior leadership will also take a pay cut to help the company save costs in a longer fight with the virus.
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