NEWS | After Cci And Nclat, Fhrai Approaches Niti Aayog On Oyo’s Unethical Business Practices

New Delhi, July 2021: India 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 Hospitality industry’s plight with reference to Oyo’s business

the model that has caused irreparable damages to the hospitality ecosystem 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 organized by the foreign-funded entity are 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 a 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 are 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 with the statutory filing of the annual returns. The company has existing loans of around $300 million and is 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 an 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 a 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. About Federation of Hotel and 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 FHRAI is the third-largest Hospitality association in the world and has diligently built on its rich legacy. The Association is today privileged to serve as the leading voice of the hotel and restaurant industry and plays a seminal role in supporting the growth trajectory of India and #39;s hospitality and tourism sector. FHRAI provides a vibrant interface between the industry, government, regulatory bodies, academia, international organizations, civil society, and the media.