SoftBank darling Oyo Hotels in triage mode

Hotel startup may be latest misstep for Masayoshi Son

Oyo CEO Ritesh Agarwal and Softbank CEO Masayoshi Son (Credit: Getty Images)
Oyo CEO Ritesh Agarwal and Softbank CEO Masayoshi Son (Credit: Getty Images)

Oyo Hotels & Homes could be the latest misstep for Masayoshi Son as the unicorn freezes operations and lays off workers across the globe in response to the coronavirus pandemic.

Oyo was valued at $10 billion last year and SoftBank had booked profits on its rising valuation, according to Bloomberg. Making matters worse, Oyo CEO Ritesh Agarwal borrowed $2 billion to buy shares in Oyo as its valuation rose, and Son personally guaranteed the loans.

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Agarwal told employees in a video last week that furloughing workers will help the company in the long term and make sure that jobs stay safe. The company has more than $1 billion of cash in the bank and is looking into how to stay viable for at least the next three years.

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The India-based startup, which provides a mobile app that allows guests to book hotels and charges the hotel owners a fee, had been expanding aggressively, but said in early March that would cut its workforce by 17 percent to 25,000.

Since then, the coronavirus has rapidly brought global travel to a virtual stop.

“Oyo’s problem is that they’re not just an aggregator; they have minimum guarantees to pay — or they have to tell owners they cannot make those payments,” Forrester Research senior forecast analyst Satish Meena told Bloomberg. “The pandemic is coming in waves, and that makes it even more difficult for them.”

If Oyo does not survive the pandemic, it would be another major blow to Son’s reputation as an investor in startups. Although he enjoyed major successes with Yahoo! and Alibaba, he is arguably now best known for his high-profile misstep with WeWork. Questions have also been raised about whether SoftBank-funded Katerra and Compass can reach profitability. [Bloomberg] — Eddie Small