OYO suspends payments to partner hotels as business dwindles: Report

OYO suspends payments to partner hotels as business dwindles: Report
Photo Credit: VCCircle
3 Apr, 2020

Budget hospitality chain OYO has invoked the ‘force majeure’ clause in its contracts and suspended payments to hotels as business dwindles amid the Covid-19 lockdown, according to a report. 

However, partner hotels opposed the move, claiming that the clause was not part of their original agreements, a report in The Economic Times said.

A force majeure clause excuses a party from fulfilling a contract in case of an uncontrollable and unanticipated event. 

Earlier, the Gurugram-based company followed the benchmark revenue arrangement, or the minimum guarantee model, in which hotel owners earned a minimum amount from OYO, regardless of the business generated. 

However, since hotels have begun to face losses due to the Covid-19 pandemic, with little hope of improvement in the coming months, OYO said it would follow a revenue-share model from April. With this, the platform will deduct 10% of the net revenue generated by hotels through accommodation, apart from sales and marketing charges, channel charges and customer acquisition expenses, the report said.

Read: OYO writes to vendors, says payment disrupted due to Covid-19

In a separate statement, Ritesh Agarwal, founder and group CEO of the SoftBank-backed company, said he will forgo his salary for the rest of the year, starting April. 

Additionally, the executive leadership team of the company will take a voluntary pay cut of at least 25%, with some going up to 50%, it said. 

Its employees in India will be paid full salaries during the 21-day lockdown, the statement said. 

Read: Coronavirus India live updates

“Given the current business situation, which is unprecedented for our industry globally, I am foregoing 100% of my salary for the rest of the year. I am grateful to my leadership team, which has also taken pay cuts and supported the company during these tough times,” Agarwal said. 

Last month, the company reached out to state governments with a proposal to convert its hotel spaces into pay-per-use self-quarantine facilities. Earlier this week, it partnered with Apollo Hospitals to provide sanitised beds to some hotels around Apollo Hospitals for quarantine purposes, the company said in a statement. The partnership will be active in Mumbai, New Delhi, Hyderabad, Chennai, Bengaluru and Kolkata, it added.