Indian hotels backfire at OYO's success in the region

OYO Hotels & Homes has seen great success since its inception thanks to its promise of a "hassle-free" online booking, transparent pricing and accommodation quality.

But as the Softbank-backed startup pushes toward profitability, an increasing number of Indian hotel operators who have partnered with it are complaining about being blindsided by fee increases.

The backlash against Oyo - while limited to a small share of the more than 10,000 hotel owners in India who work with it - comes at a crucial time for an emerging-market unicorn valued at $10 billion and its major investor.

Softbank, which has invested nearly $1 billion in Oyo, through its Vision Fund, is struggling to raise funding for a second investment fund in the wake of the failed offering of office-rental company WeWork and amid questions about the path to profitability of other marquee investments like Uber. Oyo has not yet turned a profit.

In the background of the discontent is the disruption Oyo has brought to India’s lodging market – often to the delight of India’s middle-class travelers and to the dismay of hotel owners who have seen room rates driven down at a time when economic growth has slowed.

Oyo charges hotels a roughly 20% franchise fee on room revenues when hotels join its network, but some Indian hotel operators say the startup often ends up taking half or more of revenues through fees that were not initially disclosed.

A group representing hotel operators in Bengaluru called for a criminal probe into Oyo last month, saying the company was withholding money because of unfair fee increases.

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