Softbank Backed Oyo Rooms to Cancel Some Existing Agreements
Moving in line with its agenda to become Japan’s biggest hotel chain next year, Oyo Rooms has doubled its sale staff in the country. According to the firm, this will majorly boost the firms’ overall profitability.
Reports claim that SoftBank backed, Oyo Rooms has withdrawn from giving guarantees to hotel owners. They have convinced hotel owners to sign up to the Oyo platform. Sources have confirmed the cancellation of several agreements, due to the upcoming modifications.
The sales initiative introduced in Japan is named after Yukichi Fukuzawa, the 19th century scholar who appears on the largest denomination of Japan – 10,000 yen note. The project titled – “Project Yukichi” has been announced after the new idea of SoftBank about start-ups related to its Vision Fund recognised $9 billion of investment losses last week.
A credible source aware of the matter said, “Oyo’s profit model, which basically offers large incentives to hotel owners and seek returns afterward, has become a big internal debate. The company now says not to make contracts with hotels from which we can’t earn margins.”
As per latest reports that came out at the end of October, the joint venture between Oyo Rooms and SoftBank in Japan has signed only 5,200 rooms so far. Early in November, Masayoshi Son, CEO and Chairman of SoftBank announced “that the financials of our portfolio companies must be independent” after he revealed a group quarterly loss of $6.5 billion which is the worst result of SoftBank so far.
To encourage the sales push without having to make huge expenditure, the firm is assigning support staff in Japan, most of whom do not have any past experience in the sales industry.
The main goal of Oyo Rooms is to increase the number of existing sales staff (196) to a double. Under the “Project Yukichi”, the firm aims to sign 10,000 rooms per month starting December. If the firm is able to sign these many rooms, it would mean a significant rise in the sales that have lately averaged to less than 1,000 rooms per month.
Some employees of Oyo Rooms have expressed scepticism about the new-budget conscious approach. Also, tensions with some hotels are already high. Many hotel owners claim that Oyo Rooms has not been complying with the contractual obligations lately that necessitate payment of guaranteed revenues.
Expanding bandwidth in China and the United States, Oyo Rooms, recently bought the Hooters Casino Hotel in Las Vegas, claiming to offer more than 1.2 million plus rooms.
The hospitality service provider has also marked his entry into Thailand, wherein 8,000 rooms in 250 hotels in 13 cities will provide the best service to customers. Cities including Pattaya, Bangkok, Phuket and Hua Hin are viewed as the most popular travel destinations of South East Asia, giving the company ample opportunity to flourish in the market.
Prior to making its entry in Thailand, Oyo Rooms is already having a strong market leadership position in cities like Philippines, Indonesia, Malaysia and Vietnam.
Speaking on the move, the Chief Executive Officer of the South East Asian and Middle East region, Mandar Vaidya said that even though Thailand is a relatively new market for Oyo Rooms, it will play an important role in the growth of its business in South East Asia. As stated by him, “South East Asia and in particular Malaysia was OYO’s first foray outside of India.”
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