BENGALURU : Hospitality unicorn Oyo Hotels and Homes said it has enough cash to run its business for at least three more years without raising capital and the company will not exit any of its markets, at present, despite the collapse in the hotel business globally amid coronavirus outbreak.
Oyo founder Ritesh Agarwal said that the company has more than $1 billion in cash.
“We have the necessary capital runway beyond 3-4 years, considering the cost restructuring and the minimal revenue estimates, that we expect. We do not anticipate to raise any more capital," Agarwal said.
In recent months, Oyo, which has a footprint in 80 countries, has been cutting costs to conserve cash. The company cut thousands of jobs, reduced salaries and put employees on furlough.
Agarwal said that a significant part of Oyo's capital allocation has gone into India, Europe and the South-East Asian markets and strategic investments have been made in US and China. Now, Oyo looks to invest heavily in the staycation and long-stay category.
Oyo, which generates most of its revenues from hotel stays and vacation homes, saw its revenue drop by more than 60% from March. However, the company said it is seeing some recovery in China and some European countries, which have started reopening their economies after flattening the curve of transmissions.
In China, its second-biggest market after India, Oyo was registering occupancy rates of 60-65%, pre-covid-19, which dipped to below 20% during the crisis and is now at about 50%.
While in Europe, Oyo claims to see some pockets return in bookings, with the European summer pushing the trend for staycations and intra-country travel. And in the US, two of its main markets of Florida and Texas continue to be open, while business is depressed in states like Washington and Portland due to covid-19.
The Indian market has been the worst-hit because of the strictest lockdown in the world. Most of Oyo’s 18,000 hotel suppliers are struggling to make ends meet. However, Agarwal said that he believes most of the hotels will survive the crisis and the company isn’t looking to reduce its hotel-base.
“Driving holiday, same city staycation, just outside city visits will see an increase, as people will be wary of taking flights. India which was a significant outbound travel country, that will change, and we will see an uptake in domestic travel, including road trips. […] But we don’t expect any shutdowns in the hotel-base in India," Agarwal said.
While Oyo has already enforced a substantial reduction in costs, if lockdowns persist across the country for weeks or months more, the company may have to further cut expenses.
“We will bring employees back hopefully sooner than expected, as demand comes back in bits. We believe that some (employees) will take a different career. And some we will have to decide on how the operations roll out in August. We have assumed a scenario of the economy opening up in June and July if we see that not happening then it is a different planning scenario," said Rohit Kapoor, CEO - India and South Asia, Oyo.
“We will see few points of improvement in 3-4 months, in India, strong increase starting October November and the later half of next year we will come back to pre-covid levels. Lockdown 4.0 has been an awaited sign of relief," predicts Agarwal.
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