How Startups Like OYO Will Continue To Lose Its Business & End In Tragic Death Even After Lockdown

How Startups Like OYO Will Continue To Lose Its Business & End In Tragic Death Even After Lockdown

Coronavirus has brought the SME and Startup sector of India to its knees. Indian startup Ecosystem which is the third-largest in the world has not been spared from the attack of the pandemic. Startups like Uber, Ola, Zomato, Swiggy, Oyo, and many more are being hit hard by the lockdown. In other words, the deadly virus corona, which has been changing the Consumer behavior towards the adoption and usage of different services has been pushing businesses to revise their growth strategies has also challenged the online startups like oyo chain, zomato, swiggy and the cab-booking businesses to address hygiene concerns on a war footing.

In such a terrible situation, several startup employees have been rendered jobless, while others have been asked to go on temporary leave or furlough. Food delivery executives are also facing challenges due to local authorities and policemen while delivering orders.

The cab-hailing companies like softbank-backed ola and uber have born huge losses in the Lockdown because its services were totally stopped due to the deadly virus. After the relaxation in lockdown, these services have started again their businesses in metro cities like Bangalore but their services which have been resumed in certain cities under green and orange zones amid the Covid-19 pandemic are likely to have their operations hit significantly even after the lockdown.

The shared mobility services provided by ola-uber cabs may get pushed out for six-nine months post-Covid as consumers will hesitate to book the rides. The number of trips may get curtailed. So there will be a challenge for these firms to operate the business with bearing huge losses.

 Besides this, food delivery platforms such as Zomato and Swiggy– that are by itself functioning having an online business, have also big hit by a coronavirus. While food delivery services have been termed as essential, local authorities in many parts of the country have misinterpreted the order.

Orders on Zomato and Swiggy have dropped 60 percent in the pandemic because people are scared to get infected with this virus. Since this virus has changed the behavior and taste of people which results might be lead to continuing decline demand for their service after the Lockdown. Ceo Deepinder Goyal told that” they are currently working with the authorities to sort out the matter”.

Other than these start-ups, one of the popular hospitality chains OYO has been devasted due to coronavirus because this start-up has many chains in Malaysia, Nepal, India, UAE, China, Brazil, Mexico, UK, Philippines, Japan, Saudi Arabia, Sri Lanka, Indonesia, Vietnam, the United States, and many more countries.

The company has gone international making acquisition and heavy capital investments in real estate, far and beyond its original business ideas but this virus has failed all its plans. Another barrier to oyo’s growing business is not getting investment by Chinese investors because China’s FDI has stopped by the Indian government which results will be unaffordable loss of the company because oyo revenues are still pending and Oyo’s loss in India was 14% of revenue, down from 24% the year before. Even some efforts to expand its chain in various countries like China, Japan have flopped due to lockdown and pandemic.

This shows that how badly oyo chains international businesses have shaken. In March 2020, it was reported that oyo China will downsize and lay off up to 72% of its staff.

In April, Oyo had announced a 25% pay cut for all employees.Now the outbreak has also made it more difficult for oyo to revive its flailing China business, where its famed execution ability has been found wanting.In June 2020, it was reported that oyo will shut down its operations in Sri Lanka due to the losses incurred in these markets. Oyo had 260 active properties and 65 employees working for the company in Sri Lanka.

 An Unprecedented drop in Oyochain hotel’s revenue as a result of the Covid-19.

In a video message which Ritesh Agarwal sent to his employees, admitted that its revenues had plunged by “over 50-60%”. He said the runway has come under severe stress”.His statement indicates that oyo might not be able to give a huge discount to its guests as it gave before the pandemic.

His reason behind taking actions like minimizing expenses might be bearing huge losses due to coronavirus. Oyo chain runs only on a discount basis so oyo is not in such condition to provide a huge discount as it before. It’s a challenging situation for oyo to runs its business and earns profit in the bad condition of the hospitality industry.

On June 1, in the email sent to employees, he said that they had tried to cut down expenses by reducing general administrative expenses by 43% and marketing costs by 88% and so on. He also said oyo has also allotted ESOPs (employee stock ownership plan) worth Rs. 130 crore to his furloughed employees. He has also allowed his furloughed employees to shift their job to other companies if they want to do so.

The company knows that there will be drastic changes in customer needs in a post-lockdown world because people will not feel secure to travel and stay at any hotel. Still, knowing the reality oyo is trying its best to assure customers about their safety. “As a responsible hospitality chain, we at oyo, are working towards warmly welcoming guests to assure them their safety, post-lockdown and maintaining health, hygiene, and well-being as our topmost priorities for all our stakeholders including our partners, guests, and OYOpreneurs,” Oyo India & South Asia CEO Rohit Kapoor said.

Oyo recently appointed Dr. W. Steve Albrecht as a non-executive director on the appointment said, “The travel and hospitality industry has been significantly impacted worldwide, but OYO’s offerings are relevant, affordable and safe.

Ritesh Agarwal, Group CEO and Founder, OYO Hotels & Homes on the appointment said, “We are delighted to welcome Steve to OYO’s board of directors. Steve is an expert and thought leader who will help us deliver on sustainable growth, operational and service excellence, and help us continue building a strong culture of corporate governance and accountability.”

“The coronavirus crisis is gripping all of China, it will impact the business in the short term. We can’t say how much,” said Ghosh. Oyo will need another large round of capital if it is to survive the next 12-18 months or further. It might be left to one of its former investors, Softbank, to bail the firm out. The company’s Ceo for India and South Asia, Rohit Kapoor said “Softbank-backed oyo expects to see some revival in business starting next quarter.”

Coronavirus has almost shut down these startup businesses. Worldwide, all companies especially the travel and hospitality industry has been demolished, and this is not a short-term thing; it’s going to take a long time for the industry to recover.

Tough times are coming for oyo. How will they survive on their discount model now when there is no revenue?