The New York Times is reporting that OYO, a quickly growing hotel startup that aims to be the largest hotel chain in the world by 2023, has inflated its numbers and has a toxic work culture fueled by tireless expansion.
While OYO is one of the biggest companies in the world, its business practices are potentially untenable and could spell eventual loss in value for the company, per the report.
It is alleged that OYO advertises hotel rooms that are unavailable, in some cases at hotels it used to work with, in order to look better to investors. Those “available” rooms number in the thousands. OYO has offered free rooms to police and regulators to keep the company out of trouble, the Times reported. It is said that the company has also charged extra fees to hotels and then refused to pay the full amount owed.
OYO’s business model is to bring smaller mom-and-pop hotels under its own brand umbrella, lead customers to its own website and then charge a fee.
Some hotels have filed charges against the company in court.
“It’s a bubble that will burst,” said Saurabh Mukhopadhyay, a former OYO operations manager in northern India.
OYO is backed by one of the best-known investing groups in the world, Japan’s SoftBank.
Masayoshi Son, SoftBank’s chief executive, said OYO is the jewel of SoftBank’s $100 billion Vision Fund. That same organization had to write off billions on another startup investment called WeWork.
“(OYO) is the only company that went global at this scale from India,” said Satish Meena, a senior forecaster for the research firm Forrester. “But as of now, there are serious doubts about the business model.”
When asked, OYO CEO Ritesh Agarwal admitted that some of the listings included hotels that were no longer affiliated with OYO. He said those listings were marked as “sold out” while the company tried to get them back under the OYO umbrella.