After CCI and NCLAT, FHRAI approaches NITI Aayog over Oyo's 'unethical' practises

FHRAI has submitted a representation to CEO of NITI Aayog, highlighting the plight of the hospitality business due to Oyo’s business model, which has caused irreparable damage to the hospitality ecosystem of the country.

After CCI and NCLAT, FHRAI approaches NITI Aayog over Oyo's 'unethical' practises

Federation of Hotel & Restaurant Association of India (FHRAI), India’s apex hospitality association, has submitted an illustration to Amitabh Kant, CEO of NITI Aayog, highlighting the plight of the hospitality business due to Oyo’s business model, which has caused irreparable damage to the nation’s hospitality ecosystem. It has further pointed out certain activities conducted by Oyo to earn goodwill, which is coming at the expense of partner hotels.

It stated that any humanitarian operations organised by the foreign-funded company are only a cover-up for its unfair, anti-competitive, and criminal actions. The FHRAI has submitted copies of FIRs filed by hotel owners throughout the country with the NITI Aayog and details of the Insolvency and Bankruptcy Code proceedings in the NCLAT the probe against Oyo by CCI.

Gurbaxish Singh Kohli, Vice President, FHRAI, said, “Oyo does its operations through a labyrinth of over a dozen subsidiary companies. Independent hotels, usually in the budget category, have partnerships with these particular companies. Hundreds of such hotels have alleged payment failures and other unethical business practices by Oyo. The systematic depreciation of the budget hotel segment and its market as a method of achieving a notional billion-dollar value for OTAs is a significant source of concern for our country's hospitality industry. In the interest of the hotel industry, we would like to draw your attention to Oyo's unethical business methods, which have destroyed livelihoods, investments, and entrepreneurial ventures of thousands of mid and lower segment hoteliers.

FHRAI has submitted several cases reported from around the nation concerning Oyo's arbitrary cancellation or breach of contract, resulting in severe mental and financial hardship for hotel owners due to non-payment of dues.

Pradeep Shetty, Jt. Hon. Sec., FHRAI, said, “Oyo, with its massive investment, primarily from foreign PE firms, has taken over small budget hotels. They influence pricing by artificially creating demand and supply on their site. They vitiate and degrade the hotel sector with significant discounts and aggressive pricing. The firm presents itself as a ‘Great Indian Success Story’ based on a fictitious and exaggerated value to obtain further investment. Its business plan follows a clear pattern: first, they brand the hotel, then they manufacture a dispute to avoid paying the hotel owners. Several hotel owners around the nation submitted FIRs with similar accusations, revealing a trend. So far, Oyo has been able to dismiss these accusations by claiming that they are ‘civil disputes’.

Oyo has not released its financial statements for the fiscal years 2019-20 and 2020-21, nor has it filed its annual reports as required by law. The firm now has $300 million in loans and is in the process of raising Rs.4400 crores in loans from overseas investors. According to Oyo's financial statement for the period April 2018 to March 2019, the company lost Rs.36.72 crores in the fiscal year ending March 2018 and Rs.102.97 crores in the fiscal year ending March 2019.

OYO has received a first-time B 3 rating from Moody's, which is not good, but their money mobilisation strategy is built on an inflated asset offer to manage their bad debts. Oyo and MakeMyTrip have also been accused of cartelization by the FHRAI, which has filed a complaint with the Competition Commission of India (CCI). The CCI has opened an inquiry into them for allegedly violating competition regulations, and it is now looking into the allegation. In this case, Oyo attempted to establish a monopoly by excluding competitors from the MakeMyTrip platform. We would like to bring these facts about Oyo to the notice of the NITI Aayog and request a meeting with Shri Amitabh Kant to devise a method or policy to protect vulnerable hotel and lodge owners from all across India,” Kohli added.

Source: BW Hotelier