Team Name – Untitled

Participant 1
Name - Harshit Pansari
College – Shaheed Bhagat Singh College
Phone Number – 9829800411
Email-id – harshitpansari345@gmail.com
Participant 2
Name – Ritesh Agarwal
College – Shaheed Bhagat Singh College
Phone Number – +977 9861001840
Email-id - riteshkumaragarwal1111@gmail.com
“THE RISE AND FALL OF BUSINESSES
DURING THE COVID-19 PANDEMIC”.
Introduction:
When we study Business Management related subjects, we learn to be prepared for unforeseen
circumstances like riots, government policies, natural disasters, legal disputes or what not, we
create different provisions for them or a plan B. But what if that unforeseen situation occurs once
in a century which no one has a clue about, for which no one is prepared and for which no
management institute has ever taught. Yeah, you guessed it right, the unforeseen situation here is
pandemic.

When coronavirus hit the market, it brought with it problems like lockdown, uncertainty,
unpreparedness and every problem possible. Almost every business was affected, stock market
crashed, and people were fired from jobs. However, there was one business which suffered the
most, that business was hospitality which has still not recovered. During lockdown period
hospitality business went to almost 0, as cross-country travel was stopped, domestic travel was
prohibited and people were restricted to their homes. This was the worst nightmare that any hotel
owner could have thought of and when we are a considering a hotel chain as big as Oyo, the loss
was as big too.

Oyo flushed investor money with an agenda to capture as many travelers as possible, offered
different incentives to customers like 30-70% discount, cashbacks, free breakfasts and many
other such incentives. So, while these incentives were sponsored by Indian & foreign investors,
Oyo gained larger share of market, customers were happy, business was blooming and Oyo was
second most valued startup. While everything was going fine, world faced pandemic and
lockdowns were imposed. Ritesh’s wonderful startup was haltered and there was very little he
could do about it.
Profit:
It is evident that the hospitality is one of the most hit sectors with it having nearly no revenue
midst lockdown in India. Oyo being one of the leading Hotel chains in the world faced
significant losses during covid-19 pandemic. In an interview with Ritesh Agarwal, Founder and
CEO of Oyo said that the global revenues of Oyo have fallen by nearly 50-60% during the
pandemic and even more so in india due to the coronavirus induced lockdown.

Prior to Covid-19 pandemic, Oyo used to guarantee a minimum amount of revenue, essentially
betting on its online booking system and its brand name and reputation to draw enough extra
business to bump up sales. Instead with the pandemic the company’s profits started plummeting
while still having to pay the hotels the guaranteed revenue. Ultimately the company was forced
to pull back from this claim/ guarantee.

Source:

https://www.ndtv.com/business/coronavirus-lockdown-covid-19-impact-to-remain-for-some-
time-says-oyo-founder-ceo-ritesh-agarwal-2237086

Investor’s Point of View:

In 2019, Ritesh Agarwal took a personal loan of $2 billion from financial institutions like
Mizuho Financial Group Inc. and used it buy back the shares of the company. This increased the
valuation of the company from $1 billion to $10 billion. This transaction was on the basis that
the shares would continue to increase in its valuation in the next 2 years. But due to the Covid
pandemic the company experienced huge losses this might eventually lead to fall in its valuation
from $10 billion to lower. The loan was personally guaranteed by Masayoshi Son, CEO of
Softbank (One of the biggest and earliest investors of OYO). This fall in the company may lead
to huge personal losses to both Ritesh and Son.

Considering the above situation various investors have said that its not a matter of ‘if the
company’s valuation will fall’ but its rather ‘how much’ fall will be seen.

Although as said by Ritesh Agarwal in an interview, OYO has about $1 billion in cash in its
bank which last them nearly a year and is looking for options that will help for at least 36 more
months. Various experts have said that OYO may need to raise another round of capital though it
did so a year ago. Softbank having around 48% of the stakes already, might have to come to the
rescue of OYO. But according to the article of association of OYO, Softbank is prohibited from
increasing it stakes in the company from more than 50% without Ritesh’s approval. But in order
to survive OYO may eventually need to give majority stake of the company to Softbank.

Source:

1) https://www.ndtv.com/business/impact-of-coronavirus-on-oyo-rooms-blow-for-investor-
softbank-as-covid-19-hit-business-2211024

2) https://www.livemint.com/companies/news/masayoshi-son-s-2-billion-guarantee-at-risk-as-
coronavirus-hits-star-entrepreneur-ritesh-agarwal-s-oyo-11586746195051.html

Valuation:
In November 2019, Oyo was valued at $10 billion as the founder, Ritesh Agarwal pumped $2
billion into the firm for 20%.

But due to lockdown, its valuation dropped to $8 billion according to the Hurun Global Unicorn
Report 2020. However, other major hotel chains like Indian Hotels Co, Lemon Tree and Chalet
Hotels to name a few have a sharper fall in their net worth compared to OYO, which even after
this drop is the third biggest startup in India after Paytm($16 billion) and Byju’s($10.5 billion
after its latest fundraiser).

Company Valuation/Market Cap Fall

 OYO $8 billion (Hurun valuation) 20%
Airbnb $18 billion (Valuation as of April 2020) 50%
Indian Hotels Co Rs 9187 crore 46%
Lemon Tree Rs 1845.93 crore 64%
EIH Rs 3800 crore 53.5%
Chalet Hotels Rs 2626.36 crore 63.3%
https://indianstartupnews.com/news/oyo-valuation-drops-by-2-billion-but-it-is-the-smallest-
drop-compared-to-other-hotels-chains/

Hurun Report India MD and Chief Researcher Anas Rahman Junaid said while reasoning about
the fall in the valuation, “We took into account the post COVID scenario and we have adjusted
the valuation of some of the businesses. Hospitality, it’s a no brainer is one of the highly
impacted sectors. AirBnB has downgraded its valuation and we have taken a conservative in-line
approach of reducing the valuation in terms of nearest comparable data”

Employees:
In respect to the conditions of employees of the company, Oyo had to cut off more than 5000
people midst lockdown and as per its founder they don’t intend to fire more people and he
assured to its 25000 strong workforce and also said that “Oyo will emerge stronger and more
resilient after this crisis.

The company had to opt for ‘leave with limited benefits’(LWLB) for some of its employees
while providing the rest with salary cuts, which started with Ritesh Agarwal foregoing its full
compensation for the year and the everyone else giving up some part of their salary.

Various senior executives of Oyo also quit during the lockdown. Some of them are Gaurav
Ajmera (global head of revenue and management), Burhanuddin Pithawala (global head of
marketing and growth), Chandan Agarwal (manager of Oyo’s cloud kitchen) and many more.

After the lockdown restrictions were reduced, the company said that the employees under leave
with limited benefits can opt for Voluntary Separation Programme (VSP) or continue with the
existing plan until February 28 2021.
Earlier in August 2020, the company communicated to its employees that it is restoring salaries
of all employees in India with a fixed compensation of Rs 8 Lakh and the restoration will
gradually extend to all the employees

In November, Oyo also said that for those employees opting for voluntary separation, it is
offering cash benefit equivalent to their notice pay based on their last drawn compensation in
March.

“This is beyond the 30% ex gratia pay that was enabled for the months of May and June,
respectively for some upfront liquidity” a blog post of Oyo said regarding the pay to employee.

In one of the news it was said that the company had also granted restricted stocks units (RSU) to
all employees and that employees who opt for the voluntary separation are given a choice to
cancel up to 25% of their unvested RSU’s and get additional cash benefit equal to 25% of their
March 2020 drawn salary.

Source:

1) https://www.ndtv.com/business/coronavirus-lockdown-covid-19-impact-to-remain-for-some-
time-says-oyo-founder-ceo-ritesh-agarwal-2237086

2) https://www.oyorooms.com/officialoyoblog/2020/09/04/oyo-india-offers-employees-on-lwlb-
the-choice-to-extend-the-leave-with-limited-benefits-or-opt-for-voluntary-separation-program

How Oyo handled pandemic:

With daily checks-ins between employees and managers in place, the Oyo team ensured that
productivity of Oyopreneurs is not impacted during the crisis. Managers and leaders shouldered
the responsibility of engaging their team one-on-one, on a daily basis.
Oyo reached out to state governments and health departments to leverage the network of Oyo
hotels across the country as temporary quarantine facilities for travellers as suspected Covid-19
cases who have to self-isolate themselves.

Oyo adopted new normal, it not only introduced no-touch check-ins and check-outs and social
distancing code in other services at all its member hotels, but also displayed the level of
sanitisation on the booking page to allow guests to make an informed choice about their stay.
Under the new norms adopted by Oyo member hotels, there is health screenings for guests as
well as staff. Also, the standard operating procedure (SOP) made it mandatory for staff to wear
safety gear at all times and keep sanitisers available at all customer contact points.

Oyo turned this challenge into opportunity. Oyo worked a lot on its pricing algorithm which is
helping it in generating optimum revenue. Oyo did this to understand consumer elasticity and
offer the best prices to its guests while keeping occupancies high for all hotel partners. Several
partners in India, USA and SEAME used this analysis and achieved 15-20% jump in conversion
as compared to Oyo’s competition.

Oyo has developed an artificial intelligence system, which will help them in getting calculated
leads and assist managers in contracting a building into an Oyo hotel within 3 meetings. This is a
sharp upgradation from Traditional methods which needed months for signing a building. A real-
time 24*7 chat assistant named ‘Yo!Help’ has been introduced too. With its help Oyo can
resolve queries across India within an Average Handling Time (ATH) of 1 minutes as compared
to conventional methods of call center which have ATH of 8-10 minutes.

Oyo reduced their dependence on OTA by developing a self-onboard tool for potential partners,
which will help them in upscaling demand for Oyo. It enabled self-service tool for B2B
customers and automated manual processes. Oyo developed tools for remote working of
employees by optimizing use of infrastructure facilities and transportation. Oyo adopted cloud
first approach, which gave it agility required to scale its offerings.

So, we can firmly conclude Oyo made this pandemic threat an opportunity and outperformed
other hospitality businesses.
Future Prospects:
In a report by economic times on November 20, 2020 it was mentioned that Oyo has regained
85% gross margins of pre-covid levels and it will lay greater focus on five core countries namely
– India, Northern Europe, South-east Asia, China and US. Ritesh said that they wants to go
deeper not broader, that’s the very reason why they are focusing more on some specific
countries.

Ritesh seems hopeful about the future, despite of the challenges Oyo faced. He says that 2020
has been the CTO companies needed and they too have done a lot in this regard by upgrading
their technology. They launched an Oyo Wowcher an customer-centric incentive taken by Oyo
which enhances affordability by offering double the value and flexibility of redemption.

Oyo is helping out partners in figuring out way to solve their concerns and is providing them
much needed guidance and financial support through tie-ups with banks/NBFCs.

Though Oyo doesn’t own any hotels, but it is responsible for end-to-end customer experiences. It
claims that background check and audits of its hotels are done to ensure hygiene, sanitisation and
protective equipments.

These initiatives taken by Oyo will increase the trust of customers in Oyo. Customers will feel
secured while using Oyo and would prefer over any other hotel. A loyal and large customer base
is the best asset an organisation could ever have. This will not just increase Oyo’s revenue but
will also increase its valuation, which was devalued due to pandemic. Also, Ritesh Agarwal
under his strong leadership didn’t let Oyo rip apart and didn’t loose majority stake to Softbank
either. Though Oyo had to fire some employees, but it did its very best to retain as many as
possible by offering LwLB(leave with limited benefits) and requested the rest to take salary cuts.
Oyo’s employees co-ordinated with it too and respected every decision taken by their heads.
These are the qualities which a strong organisation possesses and keeps the organisation in
business even during tough times.

So, it will not be impractical to say that in a post-covid world, Oyo might be out of rooms and
Ritesh Agarwal might become king of hotel chains.

Questions:
1) What is the impact of pandemic on hospitality business?
2) Oyo has seen a huge fall in its valuation as per the reports under Hurun Global Unicorn
Report 2020. Comment on what things contributed to this fall.
3) Comment on Oyo retrenching its employees and the steps taken by it to ensure the
protection of its employees.
4) If you are in the place of the founder, CEO and investors what steps will you personally
take to help the business grow and survive during the business.
5) How did Ritesh manage to keep Oyo together during these tough times?
6) What are the policies taken by Oyo to recover from pandemic?

7) What are your personal views on working of Oyo?

Answer:
Ans 1)- Pandemic was an unprecedented crisis which affected each and every business.
However, the worst effected of all was Hospitality business. For safety of people government
imposed strict lockdown, but it left hospitality business without a leg to stand on. Foreign and
domestic travel was prohibited, and so was the main market of hotels too. At the time when
people were afraid or prevented from even leaving their homes, who would think of staying in a
hotel. Though organisations like Oyo, Airbnb and other such companiess suffered losses, but
they had some cash reserves to survive. The real trouble was for small independent hoteliers, as
they didn’t had the kind of reserves and resources to survive during the pandemic. However,
things are slowly going back to normal and hospitality industry is recovering. It is expected from
them to make substantial changes to their operations to ensure hygiene, sanitization and social
distancing. This Covid-19 era gave hospitality industry much needed time to work on their
technology and think of ways to reduce costs and increase efficiency in post-covid era. As, they
say “Converting threats into opportunity”, hospitality industry needs to do the same.

Ans 2)- Previously in 2019 with the injection of $2 billion in the company, its valuation was
estimated at $10 billion dollars. But due to the extensive lockdown in major tourist places the
company faced huge losses. Despite the efforts of the investors and the founder and CEO the
company faced a loss of more than 50% in revenue and in some major places like India the fall
was even more. This eventually caused a lot of pressure on the company’s finances. Despite the
claims from its founder about them having enough funds to run for at least a year without
problem, they were eventually valued at $8 billion as per the unicorn reports. OYO was viewed
as one of the fastest growing hotel chains in a sense that it grew from around $400 million
initially to $10 billion with the help of its major investor Softbank.

The company is looking forward to make sure that this fall does not affect the future of the
business. Despite this drop, the company is aiming to reach even higher price valuation. Some
experts claim that if the company withstands the covid pandemic then it will receive a significant
push as more and more people will start to continue with travelling and tourist activities.

Ans 3)- Initially Oyo had to cutoff more than 5000 employees worldwide. But as the effects of
pandemic increased and many more countries adopted extensive lockdown measures the jobs of
various employees were at risk. But in order to protect the interests of its employees the
company offered ‘leave with limited benefit’(LWLB) to them. And for the others they had to
face a cutoff of around 25% of the total salary. And the CEO himself cutoff his full salary for a
year to reserve the funds for other purposes. Due to the initial retrenching of employees, there
was a lot of tension on the employment provided by the company.
With the reduction of the lockdown restrictions, the company decided to provide an option of
voluntary separation to the employees. Under this a specified sum of money was given as
compensation and were given an option to leave the firm voluntarily. This option was to be
sustained for up to 28 feb 2021 until further notice. The retrenching of employees also caused
various high-level executives of the company to leave their jobs. In order to stabilize such
changes in employment various executives were promoted and were given specified time to
improve or at least stabilize the condition of the business.

Ans 4)- Firstly we have to consider that no steps could be taken midst the lockdown as it was out
of the control of anyone. Thus, no matter what they would have down they would still face the
losses they did. But during the lockdown they could still do some steps to ensure a proper foot
holding in the market. These steps could include:

1)They could use the time to analyze their marketing assets and check for any flaws in their
system. They could try and improve the whole framework of the organization and make a critical
bird’s eye view over the organisation.

2)Prior to the lockdown their was no need to go to the online platform any more than was
required for the business to grow. But as everything was put at a hault, this time could be utilized
to set up a strong online presence. Albeit the organization already has a good online platform but
still more videos and contents could be made to attract more people. For example during the
lockdown if contents related to travelling and tourism is provided to the people they would start
to preplan for what they might do after the relaxation in the lockdown.

3)This time could be utilized by them to have a one-on-one interaction with the employees and
the customers. This can be quite fruitful as it would provide a chance for the organization to get
proper feedback from them. And as the organization is at a near standstill the time can also be
utilized to implement the changes.

4)As already mostly done by the founder and CEO Mr. Ritesh Agarwal, constant videos related
to the progress in the organization can be made along with answering to ‘Frequently Asked
Questions’(FAQ) to again improve the interaction with the customers.

5)Online reviews are very crucial for any business and the same goes for OYO. So the company
could spend this time to analyze the various reviews posted in the web. This could help them in
knowing what they might have been wrong or if any secret malpractices were being conducted
that went unnoticed.

6)Digital Marketing could be emphasized on. Mainly because of the inexpensive and more
effective nature of such marketing. Social media campaigns and email blasts can be used to
further increase the reach. While considering this, this strategy might be more effective in
countries in which OYO already has a lot of competition unlike in India in which OYO is most
likely the sole hotel chain which is quite successful.

7)Updating the websites. This might seem to be quite a trivial process but it actually could mean
a lot of difference. If the consumers are provided with a user-friendly website which is easily
usable and provides all the necessary information, it could mean a huge difference.

Lastly, although the company already worked on such extensive models it still could have
worked more to improve a base which they can go by after the situation goes back to normal.

Ans 5)- Every hospitality business was affected by covid-19 and so was Oyo, but there was very
little it could do about it. But unlike, others Oyo’s size was too big to let it be on itself. Oyo was
facing several problems from beginning of 2020, as Corona’s fear reduced tourism and investors
were willing to withdraw. Besides these problems, Oyo stood strong. What was the reason for it?
How was Oyo able to stand these problems? There is an simple answer to that and the answer is
Oyo has strong leadership of Ritesh Agarwal, who didn’t let the organization fall apart and kept
it together. He kept his hotel partners together, guided and financially supported their concerns
by tie-ups with financial institutions. He worked on areas of improvement with his team, lead
them to upgrade their IT and developed a better user-friendly interface. He assured his investors
about good returns post covid, kept his Oyopreneurs aligned and didn’t loose majority stake to
Masayoshi Son, CEO of Softbank. Apart from this, Oyo has a very strong team carefully hired
by Ritesh, which not only took only a part of their salary during crisis, but also stood strong to
convert covid challenge into an opportunity. Though Oyo had to retrench their employees during
lockdowns, but it tried every step possible to retain as many as possible by providing them
LwLB and other such incentives. All these measures are the reason why Ritesh was able to keep
Oyo together during tough times.

Ans 6)- Wearing mask, social distancing and sanitization was the new normal and every
organization have to adhere to them to keep themselves in business. As, these things became the
new normal and people were willing to pay more for a safe place which follows all SOP. Oyo
did a lot of research regarding it and trained its hotel partners and workforce to follow SOPs,
made sanitisers available at all customer touch points. It enabled no-touch check-ins and check-
outs and displayed the level of sanitization on its websites, because of which customers were
able to make informed choice about their stay and it boosted Oyo’s trust in their mind. Oyo
reached out to government to make Oyo’s network temporary quarantine facility to help a person
self-isolate. Oyo’s managers and leaders shouldered the responsibility of engaging with their
employees one-on-one. Oyo developed a price algorithm, which helps in generating optimum
revenue and analysing customer preferences. ‘Yo!Help’ has been introduced which has ATH of
just 1 minute. Oyo developed an AI system which helps in contracting building within 3
meeting, which normally took months and hence it will save a lot of time. Oyo also developed a
system for self-onboarding system which will help in upscaling demand for Oyo.
Through these measures Oyo upscaled demand and are on 85% of gross margins of pre-covid
levels.

Ans 7)- Oyo initially named as Oravel Stays received a grant of $100,000 as Ritesh was part of
thiel fellowship, because of the interesting concept it had and vision possessed by Ritesh for it.
Oyo was founded 8 years ago and in no time it became India’s second most valued start-up. The
reason for its success is the strong foundation it has and the principle it works on. Though there
have been many controversies regarding Oyo’s policies and services like: Sharing of customer
data with the government, use of predatory pricing, sending of unsolicited emails, unsafe rooms
for women, and other such issues. But there is no such organization which doesn’t have
discrepancies, controversies or allegations and the controversies regarding Oyo are due to some
specific hotels. Oyo is so big that it is almost impractical to think that such discrepancies will not
occur in some of its hotels. However, that doesn’t mean Oyo has no responsibility for it. In fact,
Oyo took responsibility for it and is now regularly doing background check of its hotels,
developed a new price algorithm to analyse customer preferences and working on all other
complaints ever lodged against Oyo. Besides that it has launched ‘Yo!Help’ which will help in
answering grievances of customers and provides them with a smooth experience.
Oyo has made its website very smooth and user-friendly not just for looking into hotels, but also
for information. Only because of this our team was able to extract this much information. If our
team wanted to invest money in a company and Oyo was a public company, then our team would
have definitely for Oyo. Though it is undervalued today, but when things will be back to normal
Oyo will rebound to greater heights and set a new benchmark.

Source:
http://bwhotelier.businessworld.in/article/Impact-of-Covid-19-on-Independent-Budget-Hotel-Industry-in-
India/25-04-2020-190282/
https://www.outlookindia.com/newsscroll/amp/oyo-prepares-for-new-normal-post-covid19-outbreak/1839394
https://cio.economictimes.indiatimes.com/amp/news/strategy-and-management/this-is-how-oyo-converted-
covids-challenge-into-opportunity/80101549
https://m.economictimes.com/small-biz/startups/oyo-to-focus-on-five-core-markets-amid-coronavirus-crisis-
says-group-ceo-ritesh-agarwal/amp_articleshow/79324216.cms
https://www.outlookindia.com/website/story/india-news-likely-to-see-slow-but-sure-recovery-oyo-hotels-ceo-
ritesh-agarwal-hospitality-post-covid/354246