It is no hidden truth, that the impact of ongoing COVID 19 outbreak on the economy, is nothing short of catastrophic. For startups, irrespective of their size, the impact has been much bigger. That is because the capacity to absorb the financial impact due to such an event, is fairly less for startups, as compared with seasoned, traditional corporates.
While fund raising for most startups remains severely impacted, business disruptions are now coming as a much bigger thorn. And OYO, which was already having trouble finding the right profitability formula, is seeping deeper into troubles. The hotel aggregator has now sent a letter to its partnering hotels, stating that payment cycles will be disrupted, amid the slowdown caused by the coronavirus, reported ET.
In its letter, OYO addressed the issue stating the impact of the COVID 19 outbreak on the restaurant and travel industry. It mentioned that coronavirus has impacted the company’s revenues, operations and cash flows ‘significantly’. The hotel industry, which is dependent directly on the movement of people and travelling, is expected to be the most affected. As a result, hotels might experience delays in payment cycles, said OYO.
The letter was penned by Ankit Agarwal, head of OYO’s procurement and supply chain, and read,“In the current unprecedented situation and challenging circumstances there may be possible disruption in our payment cycles and we need your understanding and support to sail through this situation.”
“Oyo does see challenges in the hospitality and travel industry in the near term. We, therefore, continue to over-communicate during this time with full transparency and have accounted for any possible anomalies that may arise. It is in this respect that we have reached out to our large vendors and partners as a matter of abundant precaution and notified that there may be possible disruptions in the payment cycle,” an Oyo spokesperson said, adding that the company strives to resolve said anomalies, should they occur, “at the earliest.”
However, the announcement did not sit well with owners of OYO’s partnering hotels, who state that they had already been facing disruption in payment cycles and deemed this letter a mere publicity stunt.
Moreover, the company has reportedly also backed down from its ‘minimum guarantee’ in some cases, which is the minimum amount the company has agreed upon to offer partnering hotels. Several owners continue to report that Oyo has expressed inability to pay the minimum monthly guarantee and has instead offered to shift the hotel to a commission basis. All of this comes amid increased pressure to turn profitable from Softbank, as the Japanese tech conglomerate wouldn’t want a WeWork like debacle, happening again.