A hotel startup valued at $10bn (£12.4bn) as recently as December is set to make most of its UK staff redundant, blaming slumping demand due to the COVID-19 pandemic.
Staff at Oyo Hotels were told on Friday that the company was starting a 30-day consultation period on redundancies at the company. Oyo employs roughly 300 staff in the UK and a spokesperson said 150 to 200 people would likely be laid off.
UK chief Rishabh Gupta blamed the lay-offs on the impact of COVID-19. He told staff on Friday the pandemic “has and will hit harder than all previous disruptions put together” and warned there was “still no clear signs or timelines for recovery.”
“Unfortunately, this means we will need to enter into a consultation period in order to align the costs with the revenue available,” Gupta wrote in an email sent to staff on Friday and reviewed by Yahoo Finance UK.
The job losses come just weeks after Oyo’s founder and chief executive Ritesh Agarwal assured staff there would be “no or negligible lay-offs” as a result of COVID-19, according to the Financial Times.
Gupta said the decision to pursue large scale redundancies was “extremely tough” and told staff he understood “this brings more uncertainty at an already very difficult time.”
“We have come to a point, given the market conditions, where we need to acknowledge that the market will not rebound soon enough to allow us to meet the levels set by our business plan,” he wrote.
Gupta said hotel occupancy across the UK had fallen by 80% since the start of the pandemic.
“We not only need a plan to survive the immediate COVID-19 pandemic, but also sustain the long term reductions in the customer demand along with the other economic shocks that this pandemic has caused,” he wrote.
India-headquartered Oyo was set up in 2013 as a way to book budget hotel rooms online. The company partners with hotels to provide booking and revenue management software, in exchange for a cut of earnings. The startup launched in the UK at the end of 2018 and has signed up around 200 hotels here.
Oyo has raised over $3bn since launch, much of it from Japanese tech giant SoftBank. SoftBank backed the business through its $100bn Vision investment fund and Oyo was valued at $10bn as recently as last October in a funding round led by SoftBank.
The UK redundancies mark the latest in a series of cutbacks at Oyo, which has had a troubled start to 2020. The company laid off around 100 UK staff in February as part of a global restructuring.
Last month, Yahoo Finance UK reported that the majority of Oyo’s UK staff had been furloughed under the government’s job retention scheme as demand slumped. The scheme sees the state cover 80% of staff pay up to £2,500 per month if companies agree to retain employees.
Many of those furloughed Oyo staff now look likely to lose their jobs when the ends in June, although a spokesperson said there was no “direct correlation” between those on furlough and planned redundancies.
“We cannot put a precise number on how many roles will be impacted,” a spokesperson for Oyo told Yahoo Finance UK.
“It could be in the region of 150-200, spread across our regional establishments, but it is all highly dependent on our internal consultation with employees; and how and when the UK/global lockdown is eased, which will in turn influence the path to recovery for the UK hospitality industry.
“Market changes and further Government announcements on re-opening dates and support measures available to businesses may result in an extension to our consultation period.”
Danny Blanchflower, a former policy setter at the Bank of England, told Yahoo Finance UK last month that many of the UK’s 4m furloughed workers “may not get their jobs back.”