Over the last couple of years, Oyo Rooms has grown at a pace that has astonished observers — it claims to be the largest hotel chain in China, it claims to have more rooms in China than it does in its home market of India, and says it now has 1.2 million rooms in 80 countries. But some of these numbers might not exactly be what they seem.
Oyo created fake hotel listings on its site to impress investors, a New York Times report has claimed. The report interviewed multiple Oyo employees, some of whom said that they were under so much pressure to add new rooms that their managers asked them to insert unavailable properties in Oyo’s listings, and even added fake photographs. This was done to meet targets and impress investors. Oyo also listed rooms from unavailable hotels, including those which had left its platform. This had the effect of inflating the number of rooms on Oyo’s site.
Oyo CEO Ritesh Agarwal has acknowledged that some of his company’s room listings included hotels that it no longer worked with. He said Oyo left those listings up but marked them as “sold out”, as it tried to woo the hotels back.
Oyo’s tactics could explain why the internet is littered with complaints around people who book their rooms through Oyo, but ultimately discover that hotels don’t honour their bookings. A harassed Oyo customer had recently gone to the extent of creating a website called Oyo-ruined-my-anniversary.com because he’d been left stranded in the Andamans after his hotel refused to accept the booking made on Oyo.
The New York Times report also says that Oyo executives have also acknowledged that thousands of rooms on its platform are from unlicensed guesthouses, which might not have had the necessary permits to run operations. To prevent trouble from authorities, Oyo allegedly gave away free rooms to police officials as bribes. Oyo has denied these charges. “We do not encourage or involve ourselves in any kind of bribery or graft,” said Oyo board member Aditya Ghosh.
More worryingly, Oyo employees allege that the company sometimes deliberately withheld payments from their hotel partners. In some cases, this was done because Oyo wanted to squeeze the hotel owners into renegotiating contacts that it deemed unprofitable. In other cases, Oyo wanted to save money and figured that most owners wouldn’t press for full payment. “If 1,000 people shout, we will pay 200,” an Oyo employee quoted his managers as saying.
In the past, hotel owners have filed cases against Oyo for not paying their dues. A cheating case had been filed against Oyo CEO Ritesh Agarwal and six others by the owner of Roxel Inn in Domlur, Bangalore, alleging that Oyo duped him of payments of Rs. 35 lakh. The hotel alleged that Oyo had agreed to pay it Rs. 7 lakh per month, but hadn’t paid it for 5 months. Oyo had ended up suing the hotel back.
The New York Times report’s allegations come at a time when Oyo is also struggling in some international markets. In Japan, Oyo had to rescind on the employment contracts of some of its workers, after it had been unable to meet growth targets, and this led to a “nasty labour dispute.” Yahoo has also exited its joint venture with Oyo in Japan, just 10 months after it had been formed. It had also been reported that Oyo had laid off 1000 employees in China. In India, it has been reported that Oyo will be firing 2000 employees by the end of this month. Oyo had incurred a loss of Rs. 2385 crore last year.