Indian hotel startup Oyo’s rapid growth reportedly fueled by questionable practices

Oyo Rooms (Oyo) is one of the fastest-growing Indian startups. Ritesh Agarwal founded the company in 2013 when he was just 19. Since then the hotel chain startup has skyrocketed in growth. Japan’s SoftBank invested $800 million in 2019. Agarwal also invested $700 million of his own money in the company. Everything seems to be going well for the 7-year old startup with a valuation of $10 billion. But a new report from NY Times is casting shadow over the company’s rapid growth and toxic culture. If any of the claims in the report is true, this may be the beginning of the end for a startup that aims to be the world’s biggest hotel chain.

According to NY Times, Oyo is said to have built up its domestic business by employing shady practices and questionable tactics that are casting doubts on the company’s health. NY Times claimed Oyo is able to bump up the number of listings on its website by including rooms from unavailable hotels, citing chief executive Ritesh Agarwal as well as current and former employees.

To make the matter worse for Oyo, many of those rooms listed are from unlicensed hotels and guesthouses. To avoid problems that authorities might cause them over this practice, the startup sometimes gives free accommodation to the police and other officials, according to the report. On top of it all, NY Times said Oyo also refused to pay hotels the full amounts of money they were allegedly owed, based on interviews with hotel owners and employees, emails, legal complaints, and other documents.

Founded in 2013 by Ritesh Agarwal, Oyo started mainly as a group of budget hotels. Oyo is now the world’s third-largest and fastest-growing hospitality chain of leased and franchised hotels, homes and living spaces. Over a span of six years, the startup expanded its footprint globally with thousands of hotels, vacation homes and millions of rooms in hundreds of cities in India, Malaysia, UAE, Nepal, China, Brazil, UK, Philippines, Japan, Saudi Arabia, Sri Lanka, Indonesia, Vietnam, the United States and more. Oyo backers include SoftBank Group, Greenoaks Capital, Sequoia India, Lightspeed India, Hero Enterprise, Airbnb and China Lodging Group. OYO has raised a total of $3.2 bilion in funding over 15 rounds. Its latest funding was raised on December 10, 2019 from a Series F round.