January 14, 2022

Oyo, backed by SoftBank, to merge hotel and residential units in Japan

TOKYO – India’s Oyo Hotels & Homes to merge short-term hotel and residential activities in Japan as of this month, as pressure from the novel coronavirus outbreak pushes SoftBank-backed startup to restructure a bit more than a year after its launching in the country.

The move is the latest in Oyo’s race for profitability across the globe, as the pandemic has added pressure to a company whose cash-burning strategy, backed by SoftBank, was already under review. After spreading to 80 countries, it laid off thousands of employees and put thousands more on leave after the outbreak hit demand for travel.

The combined entity “will provide a single platform covering all availability, from hotel rooms to residences for rent to vacation rentals,” Oyo Hotels Japan operating partner Prasun Choudhary told Nikkei Asian on Monday. Review in an interview.

He added that SoftBank, whose mobile unit is a joint venture partner in the hospitality industry, was “supported” by the merger.

By combining Oyo Hotels and the Oyo Life residential brand, Oyo aims to reduce sales and marketing costs. Choudhary also said that a single Oyo brand would improve consumer awareness. Japan is the only market where Oyo houses separate business lines under different companies.

“It’s a very difficult process, but we know there are so many synergies for both of us. We have very strong leaderships in both sides of life and hotels, and we all thought it was. the right time for us to start the process, ”Choudhary said.

According to an internal email seen by the Nikkei Asian Review, the merger – in which Oyo Hotels will absorb the other unit – is expected to take place on July 31, and Oyo Hotels will be called Oyo Japan. The two units announced the merger in an official government newspaper.

Oyo Life was launched in March 2019 to make it easy to rent apartments through a mobile app, but its model of subletting its portfolio of properties to their owners has forced it to pay for homes, whether they are or not occupied. While he had aimed to offer 1 million rooms, he had only signed contracts for about 6,300 rooms and managed to occupy 3,400 rooms at the end of June, according to sources.

The Nikkei Asian Review revealed that Z Holdings, formerly Yahoo Japan, sold all of its roughly one-third stake in Oyo Life to Oyo for 1 yen per share, or a total of 339 yen ($ 3), after bought the stake for 8.3 billion yen.

A person familiar with the deal said the financial impact of the merger on SoftBank would be minimal. As part of the deal, the two sides agreed to scale back Oyo Life’s no-cost growth strategy and focus on profitability, the person added.

“We’re probably the only tech company that offers all types of living spaces in Japan. Providing the single platform will be much easier in terms of branding, ”said Ryoma Yamamoto, Country Director of Oyo Technology & Hospitality Japan. “Given COVID-19 Situation, Completing Online Processes Will Be More Important Than Ever [to minimize infection risks]”, he added, remaining optimistic about the expansion of Oyo in Japan.

Oyo Hotels initially had a goal of 75,000 rooms nationwide by March, sources said, but has held back its rate of expansion. In another internal email sent to employees in March, Choudhary said the company plans to cut personnel costs by more than half.

The unit said it had 5,857 Japanese-style hotel and hostel rooms under management as of March, and Choudhary said the current number was “somewhat close to that”.

Choudhary said that Oyo Hotels’ AI-based management system, which sets room prices based on occupancy, has helped maintain an overall occupancy rate of just over 40 percent by July, 10 to 15 points above the industry average.

Choudhary believes the Japanese government’s travel subsidy program, the Go-To Travel Campaign, which is due to start on July 22 with a budget of nearly 1.1 trillion yen ($ 10.2 billion), “will help us very significantly “.

“Japan has always been an important business for us. It’s not just because it’s the ninth largest hotel industry in the world, but the fact that SoftBank is here makes it a very strategic market for Oyo,” said declared Choudhary.

“The [have] challenges since we landed in Japan, but in terms of opportunities, it’s still huge for us. “

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