What’s happening with Oyo cannot be looked at separately from the modern Indian milieu that gave birth to it, and in which it operates. Oyo now needs to rise above that legacy and bring in the global business practices that ensure it survives and thrives in the future.
There’s a lot to cheer for in Oyo’s rise in the hospitality industry and on the global stage. I have been rooting for Oyo from the start, especially for its ambition to be the first global Indian travel brand in the internet era. As an Indian, I really want to see Oyo succeed on the global stage.
In what seems like a blink, the company has become ubiquitous — and highly visible — across the world’s most populous regions such as India and China, and with that comes a level of scrutiny that is surprising to no one except the company’s management and its major funder SoftBank.
With that scrutiny, also in a blink, it has become a pariah and a cautionary tale of SoftBank-funded excess, à la WeWork of the hospitality world.
While that is certainly one part of the explanation of what is happening with Oyo, it’s also a very simplistic, culturally devoid point of view. When The New York Times published a detailed story on Oyo on January 2, reporting on a series of questionable practices by the company and its staff — inflated room numbers, inflated fee to hotel franchisees, unlicensed hotels, blatant corruption from staff, illegal nexus with police — looking at these separate from the Indian social context would be missing the full story.
To really understand Oyo, the polarizing emotions it elicits from rivals and friends alike, its growth troubles and layoffs as reported by us at Skift the last few months and other media, you really have to understand the bewilderingly complex milieu that gave birth to Oyo, the modern, muscular, instantly modern India.
The story of Oyo is a story of new India: led by a charismatic leader, wanting to grow too fast, asserting itself on the global stage though its own house is not in order, cutting corners in everything, police complicit in business and politics, social mores changing too fast to comprehend, and everyone out for themselves, even their own employees.
Oyo’s Parallels With India’s Rise
Make no mistake, Oyo’s market fit in India, China, and other similar markets was and remains a genius-level idea for those markets. Let’s hone in on India: The lower end of the hotel market in India is fragmented, unorganized, shabby, and downright shady, to put it mildly. Oyo came along with a proposition to use tech, design, scale, and network economics to create and fulfill the demand among the newly mobile middle class in India, tens of millions of educated, digitally adept citizens now demanding clean, consistent, better experience out of their stays, at a great price value.
Over part of December and January, I was in India visiting my family and traveled extensively by road between towns and cities, seeing Oyo signs and hotels everywhere. The India that is changing in so many ways, good and bad, is out there for anyone to see.
So much of Oyo’s issues are local societal and cultural issues that are endemic to India. If you ask anyone in India, they will openly admit anything Oyo is accused of is the normal cost of doing a very local distributed business in India.
Almost everyone I talked to, if they knew I worked in travel media, either asked me about my opinion on Oyo (whether it was for real or a scam) or had an unsolicited and usually negative opinion of Oyo, never mind if they had ever stayed in one or not.
Among them, I met and talked to a very in-demand wedding photographer who travels all over India with his large team and equipment, and he told me the only way he was able to afford doing this was because of Oyo: ubiquity even in remote areas where resort weddings happen (a new rage among the affluent in India) , affordability, and consistency of experience most of the time, at least for his team.
There is a reason why its logo is red and could be mistaken for Coca-Cola from a distance. Oyo is an insta-iconic brand in India, it is a phenomenon. It helps that despite calling itself a tech company, it is a very in situ company. It has buildings after all, all over India, near residential neighborhoods and all along the roadsides between towns. That is possible because Oyo’s franchised hotels are mostly very small, mom-and-pop, previously unorganized-sector affairs, they exist not in the bubbles of upscale commercial districts but anywhere the overflowing mass of India lives.
For the same reason of ubiquity and affordability, Oyos in India have also developed a reputation for being “love hotels,” a rather insalubrious reputation in a culture that’s still conservative but clashing head-on with modernity. Renting them by the hour or two to unmarried couples is a taboo but everyone you talk to says this happens openly in Oyos around their neighborhoods.
Add to that the mass market proliferation of mobile phones and the adoption of smartphones usage in India, and Oyo is as on-demand as, say, ordering an Uber.
As Oyo’s star was ascendant in India, it was bound to get enmeshed with the murky world of real estate in India, a sector where the famed Indian corruption shows its full glory with local mafia, political patronage, and corrupt Indian police in cahoots with each other.
If Oyo’s local managers paid off local police to make sure they ignore the illegalities of unlicensed hotels, they weren’t doing anything out of the ordinary from the usual ways of doing business in India. If the Oyo management added on an unexpected extra fee to its franchisees and refused to pay the guarantees, with little recourse for the small hotel owner amid the giant mess of India legal system, that again is where the might-is-always-right culture of modern India is the normal way of operations. If the Oyo employees were fleecing the company, well, who can blame them when they see this free flow of money to the corporate parent, in an Indian context where everyone has been acculturated for decades and decades to fend for themselves in absence of a functioning economic and social safety system.
India is a country where “jugaad” — a flexible approach to problem-solving that uses limited resources in an innovative way — has been the way things work in daily life there. This approach served it well in its socialist fewer-resource era, but that hasn’t been the case in the hyper-capitalist India now for two decades now.
As this 2018 Mint story said well, taken the extreme, especially in a professional setting, jugaad is also a form of law-breaking and street smartness in the face of poverty and governmental incompetence, elevated into a management principle. So is Oyo a giant jugaad of a company, making it up as it’s going along?
If so, Oyo’s way of working in India and everywhere it has expanded has backfired on it — following global media scrutiny and choking on its own bad reviews and growing losses — as it tried to scale outside of India, into China, into Southeast Asia, then Europe and now the U.S. Had WeWork not imploded after its excesses, SoftBank wouldn’t have put the brakes on its portfolio of companies, including Oyo.
Now Oyo has professed its main aim is to scale back, grow responsibly, and cut its losses while still having the global footprint it has. It can start by hiring more experienced management, slowing down its growth, shrinking inventory drastically, bringing in global corporate governance practices, and focusing on the basics a hospitality brand should focus on: operations and training. And most importantly, not nickel and dime its most important constituency: the hotel owners.
I have a feeling it will retreat from its sprawling global operations. I am predicting the U.S. will be the first country it will fully retreat from — laying off one-third of U.S. staff is just the beginning — and instead it will focus on its home turf, where it has a long way to go to clean up its act. Oyo as a company will be all the better for reining in its ambition, for once, and moving away from vanity metrics and PR.
Keep your head down and get to it, Oyo. India will be better off, at home and on the global stage.
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Photo credit: An Oyo hotel property in Gurgaon, India. Oyo