Oyo Hotels, one of the largest startups in SoftBank Group Corp.’s portfolio, is dramatically shrinking its footprint and head count in Japan as bookings in the country plunge due to travel restrictions.
The Indian startup slashed its regional presence by closing offices in Sapporo, Sendai, Nagano, Hiroshima and Omiya, Saitama Prefecture, at the end of June, Chief Business Officer Ryota Tanozaki said in an interview.
Oyo is also looking to downsize its Tokyo headquarters, which occupies two floors in an office building that’s walking distance from the Imperial Palace, he added. The moves extend the company’s ongoing effort to downsize internationally as it adapts to a tourism industry made much smaller by the coronavirus outbreak.
Oyo is encouraging its employees to quit, offering up to four months severance pay, according to a person who asked not to be named because the details are private.
“The hotel industry overall is facing a tough situation because of the virus, and we will connect employees who wish to find a new job with a recruitment agency,” Tanozaki said, declining to comment on details of any job cuts.
The changes in Japan are part of a global retrenchment by the startup 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 pandemic, slashing staff in China by about half and reducing its global workforce by about 5,000 people.
Oyo furloughed thousands further as the virus spread and is now offering them stakes in the company at a steep discount to make up for a drop in pay.
Japan has been a market of particular import to the hotel-booking startup, whose founder and Chief Executive Officer Ritesh Agarwal earned SoftBank supremo Masayoshi Son’s favor and benefited from SoftBank’s brand association and promotion. The head count in its Japanese 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 labor 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 was hampered by technical problems and a public backlash from hotels, leaving it far short of its targets.
Visitors to Japan came to 1,700 in May, marking a 99.9 percent plunge from a year earlier, according to the Japan Tourism Agency. Domestic tourism also came to a standstill during the nearly two-month-long state of emergency from April to May. The delay of the Olympics until next year and fears of a second wave of infections are only likely to extend the pain for the hospitality industry.
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