Indian hotel operator OYO faces hurdles in China

In June 2019, OYO China, the subsidiary of the fast-growing Indian operator of leased and franchised hotels, announced the launch of its 2.0 strategy. The main feature of this new approach was the guaranteed income that hotel owners would receive in return for working with OYO. However, the response to the new directive has been hostile, as recently thousands of hoteliers across the country have sought to terminate their agreements with the company.

OYO, which does not own their hotels but rents them out to their owners, previously operated under the 1.0 model of “light franchise”, where individual hotels could use the OYO brand, while the Indian company provided them with renovation grants. unified and other services, while charging a franchise fee of between 3% and 8%. Model 2.0 emphasizes “strong control” over owners who are now required to use OYO’s Property Management System (PMS). In return for increased control over properties, OYO has promised to provide homeowners with guaranteed income.

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Recently, people working with OYO revealed to Chinese media that the company’s offices in China are continually under siege by hundreds of contract owners who have organized themselves via the internet to defend their rights. Their complaints are almost identical, regarding the non-payment by OYO of the dividends promised to owners under the 2.0 model.

Previously, OYO had revised the contracts signed with the owners by changing the amount of the guaranteed minimum payment without consulting the other parties and informing them only by email. To object to the change, recipients had to respond “disagree” within 24 hours, otherwise they would automatically agree to the new terms.

OYO was founded in India in 2013 by 18-year-old Ritesh Agarwal. The company entered China in 2017 and quickly expanded its network to 10,000 hotels and more than 500,000 rooms in China by 2019. However, due to the hasty expansion of OYO, which mainly focused on the emphasis on quantity over quality, many local experts speculated that the company may be in a precarious position in China.

The Indian company has also faced challenges in its territory where small hotels in several cities have staged protests against OYO. According to Reuters, more than 300 hotels abandoned the Indian OYO network in 2019.

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Christina A. Kroll