FHRAI warns action against room aggregator Oyo for large-scale breach of contracts

Mumbai, 10 Dec: Post issuing a notice to Online Travel Aggregators (OTAs) – MakeMyTrip and GoIbibo, the Federation of Hotel & Restaurant Associations of India (FHRAI), has warned of action against room aggregator Oyo for large-scale breach of contracts, jeopardizing the safety of consumers and violation of laws.

Mr. Gurbaxish Singh Kohli, Vice President – FHRAI & President

In a letter dated Dec 10, 2018, FHRAI has pointed out to the aggregator that it is endorsing illegal and unlicensed Bed & Breakfast apartments, flats in residential and commercial buildings, rooms in chawls and such other independent structures as Hotels. “Such positioning of hotels is tantamount to misleading the guests. When a guest books in a hotel they expect to stay in a hotel and not in an apartment or a residential premise. This not only harms the reputation of hotels in India but also constitutes potential safety hazard for the guest,” says Mr. Gurbaxish Singh Kohli, Vice President – FHRAI & President – Hotel and Restaurant Association of Western India (HRAWI).

“It is a matter of fact that Oyo rooms entered into contracts with a number of Hotels for the sake of loading inventory or for an exhibition of numbers. Unfortunately, it is reported that you have been reneging on all your obligations and in fact adopting exploitative and coercive methods against Hotels who have protested. Unfair and arbitrary revisions of commission rates, threatening legal notices, levying of convenience charges, obtaining Hotel client database and approaching them directly, unfair levy of Audit denial charges, stopping of Minimum Guarantee amounts or abysmal drop of room rates in such cases, issues with Oyo money, lack of  transparency and internal resolution mechanism to deal with all issues of Hotels, inconsistent and variable rates of commissions across the board and unfair levy of Room Deviation Charges, among others, are some of the problem areas that are required to be addressed. Although these pertain to breach of contracts between parties, the sheer number of such grievances from Hotels is a matter of concern,” quotes the letter.

Keeping in mind the interests of all stakeholders involved, the FHRAI has called Oyo for a dialogue before the issue snowballs into a nationwide protest.

Mr. Pradeep Shetty Jt Hon Secy  FHRAI.

“The hospitality industry’s fundamental tenet is a seamless experience for guests. Any internal dispute between the stakeholders of the industry will affect the customer. The current rift between hotels and aggregators is moving in this direction, and it is the Federation ’s intention to avoid this eventuality. So we have decided to open up a bilateral talk with Oyo and hope that we arrive at a win‐win situation for all,” says Mr. Pradeep Shetty Jt Hon Secy  FHRAI. 

Hotel players are alleging that OYO Rooms had initially approached them offering a strategic partnership by sharing room inventories. However with time, as the room aggregator became stronger with deeper pockets, it started twisting the arm that they had once extended for partnering.

“A number of FHRAI’s members, especially the budget and mid‐market hotels, have blamed Oyo for distorting the market dynamics of the hotel industry. They have alleged that predatory pricing, deep discounting, exorbitant commissions and constant tweaking of contracts have become common practice while dealing with the room aggregator,” adds Mr.  S K Jaiswal, Vice President, FHRAI. 

“We wish to further express our desire to explore possibilities of amicably resolving the issues. However at the same time, knowing well that our members are being pushed to the edge, we are obliged to safeguard their interest and will declare a nationwide protest against the room aggregator if things don’t look up soon,” concludes Mr. Kohli.  

About Federation of Hotel & Restaurant Associations of India (FHRAI): 

The Federation of Hotel & Restaurant Associations of India (FHRAI) is the apex body of the Indian Hospitality industry. Founded in 1955, the association has diligently built on its rich legacy and is today privileged to serve as the leading voice of our industry and plays a seminal role in supporting the growth trajectory of India’s hospitality and tourism sector. FHRAI provides a vibrant interface between the industry, government, regulatory bodies, academia, international organizations, civil society, and the media.

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