Bevy of hotels suffers losses due to OYO Rooms; decides to go the legal way against the company

OYO, which has seen a spurt of growth in its revenue and became the latest unicorn hotel-room aggregator, have surrounded itself with some soon-to-become legal trouble. The budget hoteliers are fuming over the Gurugram-based company for its extremely cheap room services and deep discounting.

Moreover, the hotels have come together and unanimously complained that arbitrary contract changes have been sought by the platform, according to them.

Ashraf Ali, President of Budget Hotel Association, Mumbai said to Economic Times, “Oyo has disrupted the entire market drastically.” The rooms that the hoteliers used to sell for Rs 2,000-2,500 are being sold at a price range of Rs 800-900.

The hotels have synced their voice to soon take a legal course of action against the company. The startup, valued as a $1 billion company in the month of September, received an $800 million from Softbank Corp that propelled the 5-year-old company into Unicorn club. The funding reportedly valued OYO at about $5 billion, a major jump from its earlier valuations of about $900 million a year ago.

The budget hotels, who don't have huge funds, are not able to compete with OYO on those grounds.

“Because of funding they are able to sell rooms at much lower rates. The minimum guarantee fee is also not coming, so we are not left with a choice,” said Ali to ET.

Ali said Oyo has not honoured contracts and is demanding changes in terms that have already been agreed, threatening to withhold payment if hotels desist. Of the 250 hotels in the association, 80-85 are registered with Oyo.

“Members from Kolkata, Ahmedabad, Mysore, Bengaluru, Hyderabad and New Delhi have joined us and in a few days we will declare the formation of the pan-India association in Mumbai,” Ali said.

“Oyo is not keeping up with the agreements. In some cases, they are telling our members to change the agreements, else they will not pay them and are asking for new clauses," Ali said and added that the company has a big legal team and it is tough for individual hotel owners to litigate and get the money; ET reported.