Oyo's earnings spiked in 2019 fiscal year, but so did expenses
Economy-class lodging firm OYO published a report on Monday stating that the startup suffered losses of US$335 million and gained US$951 million in revenue across its worldwide operations for the fiscal year, which ended on March 31st, 2019. The firm vowed to curtail its expenses as the India-based firm grows wary of its dangerously rapid unchecked growth.
OYO, originally founded in 2013, has experienced a significant boost in revenue, which was up from US$211 million in FY18. This spike in revenue was expected and concurrent with the organization's aspirations to be sustainably profitable this year, said Abhishek Gupta, Global CFO of OYO Hotels and Homes, in a statement.
However, the company’s revenue wasn’t the only thing to spike in FY19, if their report is to be believed. OYO’s total losses are reported at US$335 million in FY19, which rose more than sixfold fr om the US$52 million loss in FY18. In India, wh ere OYO gained more than US$604 million of its revenue in FY19 (up almost threefold from FY18), the firm was managed to drop its loss to 14% (from 24%) of revenue in FY19 to US$83 million.
Indian legislature mandates that all companies registered in the nation must publish their annual financial figures. The majority of the companies did so in October of 2019.
OYO, which today manages in excess of 43 thousand properties with over a million rooms in 800 urban communities spanning 80 countries, said it that entering the market in China and other countries across the world added to the spike in the company’s losses. OYO came into the Chinese market in 2018, and claims that world's most populated country has recently gained the status of being its second biggest market across the globe.
“These markets constituted 36.5% of the global revenues. While consistently improving operating economics in mature markets like India where it’s already seeing an improvement in gross margins, the company is determined to bring in the same fiscal discipline in emerging markets in the coming financial year,” the startup said in a statement.
Aditya Ghosh, who held the position of CEO in the company and is presently a board member, said in a call with journalists that since OYO entered various markets in 2019, it was in the development stage and that required sizable investments. Talking particularly regarding China, Ghosh said the organization, just as many others, is closely following the events of the COVID-19 epidemic, the developments of which had caused the temporary closings of several properties.
He additionally noted that OYO isn't seeking to expand any new markets in the near future.
It is presently working tirelessly at improving its gross margin, which in India, has grown from 10.6% as of FY18 to 14.7% in FY19.
OYO has received some harsh criticism from industry specialists in the last few months due to its rapid and unchecked expansion, which according to some analysts, was handled in a way that is not sustainable. The firm, whose business model consists of rebranding and redesigning independent economy-class hotels, has utilized some questionable practices in recruiting new properties, as stated by the New York Times in January. A few hotel owners have asserted that OYO didn't follow through with signed agreements, including financial obligations.
More recently, OYO management has recognized that the startup’s growth had been too rapid to handle and is currently going up against various challenges in relation to that. OYO has let go of some 3,000 workers, for the most part in India, in the past few months. Ghosh said the company is currently seeking new talent, however only in key sectors such as IT.
“The company’s increased focus on corporate governance and building a high-performing and employee-first work culture will also drive this next phase of sustainable growth for us,” said Gupta.