Oyo Hotels is slashing footprint and headcount in virus-hit Japan

Oyo Hotels, one of the largest start-ups in SoftBank Group’s portfolio, is dramatically shrinking its footprint and headcount in Japan as bookings in the country plunge due to travel restrictions.

The Indian start-up slashed its regional presence by closing offices in provincial centers Sapporo, Sendai, Nagano, Hiroshima and Omiya at the end of June, Chief Business Officer Ryota Tanozaki said. 

Oyo is also looking to downsize its Tokyo headquarters, which occupy two floors in an office building walking distance from the Imperial Palace, he said. The moves extend the company’s ongoing effort to downsize internationally as it adapts to a much smaller tourism industry in the wake of the coronavirus outbreak.

Oyo is encouraging its employees to quit, offering up to a four-month severance, according to a person asking not to be named. “The hotel industry is facing a tough situation, and we will connect employees who wish to find a new job with a recruitment agency,” Tanozaki said.

The changes in Japan are part of a global retrenchment by the start-up that just a few months ago looked set to become the world’s largest hotel operator by room count. But the company’s expansion proved overly aggressive and it was scaling back even before the coronavirus outbreak, slashing staff in China by about half and reducing its global workforce by about 5,000 people.

Oyo furloughed further thousands as the virus spread and is now offering them stakes in the firm at a steep discount to make up for a drop in pay.

Japan has been a market of particular import to the hotel-booking start-up, whose founder and Chief Executive Ritesh Agarwal earned SoftBank supremo Masayoshi Son’s favour and benefited from SoftBank’s brand association and promotion. 

The headcount in its Japanese hotel operations has shrunk to 150 from about 600 in October through furloughs and job re-assignment to SoftBank, according to a document distributed by its labour union and obtained by Bloomberg News.

Oyo has struggled in Japan even with the full endorsement of SoftBank. Son’s ubiquitous brand is on one of the country’s largest wireless carriers, the leading web portal and the Fukuoka SoftBank Hawks, which have won five of the last six baseball championships. Oyo’s push for rapid growth in the country was hampered by technical problems and a public backlash from hotels, leaving it far short of its targets.