Oyo appears to be taking its once-explosive global expansion strategy down a few notches, and that could be a good thing for the young company in the face of still-uncertain impacts from the coronavirus and the reputational damage it recently suffered. These losses aren’t pretty.

Losses for Oyo Hotels & Homes surged to $335 million in the fiscal year 2019 compared to $50 million in red ink the year before, as the fast-growing budget hotel chain has been forced to pull back on its sweeping global growth strategy.

Overall, the India-based hospitality startup posted consolidated revenue of $951 million in the fiscal year 2019, a year-on-year growth 4.5 times higher than the reported revenue of $211 million in the previous year. 

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China — where Oyo had aggressively expanded into during the last fiscal year — and other international markets that were in development and investment mode contributed to 75 percent of the FY2019 losses of $252 million, despite constituting for just 36.5 percent of its global revenues.

“In FY2019, Oyo had a primary presence in China and India. The inherent costs of establishing new markets, including those related to talent, market-entry, operational expenses, among others, resulted in an increase in Oyo’s net loss percentage in the near term, which grew from 25 percent in FY2018 to 35 percent of revenue in FY2019 to $335 million,” Abhishek Gupta, global chief financial officer of Oyo Hotels & Homes, said in a press statement.

What’s more, it is still premature to quantify the impacts of the “ever-developing” coronavirus situation on its revenue or expansion projections in China and the region, Aditya Ghosh, a member of the board of directors at Oyo, said in a media conference call Monday. 

“There could be some impacts in the short term although it’s too early to say what,” he added. “China is building up as a strong market for us, and we expect losses to decline in China (as) we push on the path to profitability.”

On the other hand, Oyo executives said the company is seeing marked improvement in its business operations in India, deemed a mature market.

India contributed to nearly 63.5 percent or $604 million of Oyo’s consolidated revenue in the fiscal year 2019. In the same fiscal year, net loss in India is reduced from 24 percent to 14 percent of revenue to $83 million on the back of better-operating efficiency, the company reported. 

Meanwhile, the fiscal year 2019 was deemed “a good year” for Southeast Asia, where Oyo is seeing “improved gross margins” across its nearly 100,000 rooms across 300 cities, spanning Indonesia, Malaysia, Vietnam, the Philippines, and Thailand, added Ghosh. 

Source: Skift

Tags: hotel, oyo, startup, corona

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