Photo/Shetuwang

June 25 (NBD) -- The China unit of Indian hotel chain OYO Hotels & Homes (OYO) is undergoing mass layoffs, news outlet Jiemian reported Monday. 

The layoff has started for two weeks and the decision was announced by Anuj Tejpal, one of OYO's senior executives in China, Jiemian cited an informed source. "The business development team, which has around 2,000-3,000 employees nationwide, will axe 1,000 positions while the operations team will slash half its staff."

A hotel owner has confirmed the job cuts, saying the OYO operations team he/she worked with received the notification Monday and would have one or two employees left after the adjustment. Though cost reduction is critical to a company's benign development, the large-scale layoffs will definitely deal a blow to the business in the short term, the owner commented. 

In response, OYO said that the personnel changes are a result of the structural adjustment and the company follows a performance-oriented and data-driven culture. But to ensure business development, the company will continue hiring employees, expecting to have a total workforce of more than 10,000 employees next year. 

National Business Daily noticed that after opening its first store in Shenzhen in late 2017, OYO began beefing up efforts to expand its presence in China in 2018. 

In the latest financing round, the hospitality company raised 800 million U.S. dollars from investors led by Softbank's Vision Fund, Lightspeed Venture Partners, Sequoia Capital and Greenoaks Capital, of which 600 million U.S. dollars was earmarked for expansion in the Chinese market. 

A source with OYO said the sudden mass layoffs are probably due to the pressure of investors or are part of the company's efforts to restructure the business model. 

It was learned that OYO consumes up to 150 million yuan every month, the bulk of which is labor costs. The workforce of OYO China saw a 75-fold increase from May 2018 to May 2019. 

The "OYO hotel 2.0" strategy launched in May this year is also eating into money. Under the strategy, OYO agrees to give minimum guarantee fees to hotel partners. According to the above-mentioned hotel owner, only higher-than-revenue minimum guarantees can intrigue hotels. 

A recent report by The Times of India said OYO is looking to raise 1 billion U.S. dollars in a fresh round of funding from new and existing investors.

Email: lansuying@nbd.com.cn