OYO China, a leading hotel chain brand, will layoff a substantial amount of their staff, amidst a company reorganization. Sources have said that in the last two weeks, the development team and operations team would face cutbacks to staff worldwide amounting to nearly half of the employees in each team. For example, the development team has 2000 to 3000 employees, with 1000 of them to be fired.
In response to these layoffs, OYO is claiming that their company culture is entrepreneurial, emphasizing the need for innovation, agility and the ability to iterate quickly. The firm commented, “OYO’s corporate management culture is performance-oriented, data-driven, and excellent. It will never compromise with untrustworthy behavior, and will never tolerate continuous performance failure.” Established in India, OYO entered the Chinese market at the end of 2017 with its first location in Shenzhen. Following a $800 million round of investment form reputable funds including SoftBank, Sequoia Capital and Lightspeed Capital, it further expanded into the Chinese market, using $600 million of this investment.
This month, Indian media reported that OYO is planning a new round of financing of $1 billion. Bloomberg reported that OYO intends to replicate its business expansion in the Indian and Chinese markets to the US market by investing $300 million. OYO had recently seen its costs swell, largely due to increases in labor costs, with the number of OYO’s China teams increasing by about 75 times from May 2018 to May 2019. Thus the large-scale layoffs could be an attempt to reorganize and optimize the company’s capital structure before launching an expansion into a new market.
Featured Image Source: Nikkei Asian Review