After CCI & NCLAT, FHRAI Approaches NITI Aayog On Oyo’s Unethical Business Practices


New Delhi, July: India’s apex Hospitality Association – Federation of Hotel & Restaurant Associations of India (FHRAI) has submitted a representation to the CEO of NITI Aayog – Shri Amitabh Kant highlighting the Hospitality industry’s plight with reference to Oyo’s business model that has caused irreparable damages to the hospitality eco-system in the country. The Association has specifically pointed out that certain recent activities conducted by Oyo to earn goodwill have actually come at the expense of partner hotels. It has stated that any such humanitarian activities organised by the foreign-funded entity is just an image repairing exercise to cover up its unfair, anti-competitive and criminal activities. The FHRAI has shared with the NITI Aayog copies of FIRs filed by hotel owners across the country along with details of the Insolvency and Bankruptcy Code proceedings in the NCLAT and the investigation against Oyo by the CCI.

“OYO operates its business under maze of more than a dozen subsidiary entities. These individual entities have agreements with independent hotels, mostly in the budget segment. FHRAI has the data of hundreds of such hotels that have reported payment defaults and other unethical business practices by Oyo. The systemic depredation of the budget segment hotel business and its market as a means to achieve notional billion-dollar valuation for OTAs is a serious cause of concern for the hospitality ecosystem of our country. In the interest of the hospitality sector we want to bring to your attention Oyo’s unscrupulous business practices that have annihilated the livelihood, investments and entrepreneurial initiatives of thousands of hoteliers from the mid and lower segment,” says Mr Gurbaxish Singh Kohli, Vice President, FHRAI.

The FHRAI has submitted several cases reported from across the country about arbitrary cancellation or breach of contract by Oyo causing immense mental and financial trouble on account of non-payment of dues to hotel owners.

“Oyo, with its humongous funding, mainly from international PE funds takes over small hotels in the budget segment. They artificially create demand and supply on their portal and manipulate prices. With deep discounts and predatory pricing, they vitiate and degrade the hospitality market. Based on artificial and inflated valuation, the company promotes itself as a ‘Great Indian Success Story’ on the back of which it tries to get more funding. There is a clear pattern to its business model, first get the hotel under their branding and later create a dispute to avoid paying the hotel owners. This pattern came to light when several hotels owners across the country filed FIRs with similar complaints. Oyo has managed to fend these complaints so far by pleading them as ‘civil disputes’,” says Mr Pradeep Shetty, Jt. Hon. Sec., FHRAI.

Oyo has not disclosed its balance sheets for 2019-20 and 2020-21 and has not complied to the statutory filing of the annual returns. The company has existing loans of around $300 million and are in the process of raising loans of Rs.4400 crores from international investors.  As per Oyo’s financial statement for the period April 2018 to March 2019, it has registered a net loss of Rs.36.72 crores for the year ending March 2018 and a net loss of Rs.102.97 crores for the year ending March 2019.

“Moody’s has assigned a first time B 3 rating to OYO which is not good at all but their fund mobilization drive is based on an overvalued asset proposition so that they are able to manage their bad debts through this. The FHRAI has also filed a complaint before the Competition Commission of India (CCI) against Oyo and MakeMyTrip for cartelization. The CCI has directed investigation against them for alleged violation of the provisions of competitive laws and it is presently investigating the complaint. Here, Oyo had tried to establish monopoly by way of delisting their competitors from the MakeMyTrip platform. We wish to bring to the attention of the NITI Aayog these facts pertaining to Oyo and request a meeting with Shri Amitabh Kant for devising a system or policy to safeguard vulnerable hotel and lodge owners from all parts of India,” concludes Mr Kohli.