Oyo threatens legal action against hotels over bookings boycott

Oyo, which is facing threats of boycotts from certain hotel owners, has hit back with a warning of its own, saying it will take legal action against those who breach their contract.

The budget hotel chain, one of the most watched unicorns in India that up until recent days was the country’s second most valuable startup, says the boycott threats were made by “small groups of people, most of whom have no property associated with Oyo”.

Oyo Rooms facing booking boycott threats

Oyo Hotels & Homes’ head of supply, Ayush Mathur, remarked: “Some individuals have been threatening to ignore the agreements and not accept online bookings, which will be a default of the contractual arrangements, and will lead to legal liabilities on these individuals as we cannot and will not let anyone hamper the customer experience. We will take strict legal action, and drag such people to the court.

“We have not received any formal communication from any of our asset owners… Most of the boycott claims are being made by small vested interest groups with no property franchised with or leased to Oyo Hotels. As franchisors, we continue to engage with our franchisee hotel owners on a one-to-one basis to resolve issues and in case, we don’t reach a mutually acceptable solution, part ways amicably.”

According to a local media report, the Budget Hotel Association of Mumbai formed a pan-India collective, the Hotel Association Confederation of India (HACI), to stop partnering the startup.

Quoting Ashraf Ali, joint convenor at HACI, The Economic Times report wrote that starting January 15, about 50-60 Oyo-listed partners in Jaipur will stop accepting bookings, and the boycott will extend to other cities including Mysore, Shirdi and Mumbai.

Among the allegations against Oyo are “deep discounting, mismanagement of operations, and arbitrary contract changes”, in addition to payments being held up and hidden additional charges.

Oyo has hit back at boycotters in a statement, saying they are using anti-competitive means to “artificially jack up prices against market dynamics and charge customers exorbitant prices”.

In the same statement, Oyo countered allegations that it charges 40 per cent franchise fees, saying that its franchise fees do not go over 25 per cent.

Ayush further refuted claims that it was charging high commission. “This is absolutely incorrect. We have on the contrary, invested over thousands of crores in capex, appointed hundreds of general managers to oversee operations and customer experience, and introduced technology driven innovations in the hospitality sector that has greatly transformed the standard of service delivered by a once unbranded hotel, now part of the Oyo chain.”

Responding to those saying it is offering deep discounts, Ayush pointed out: “Oyo Hotels and Homes is a chain of franchised and leased hotels, homes and living spaces – not an aggregator or an OTA. As per our agreement with our hotel owners, like many of our peers as well other brands operating franchising model, prices are determined by Oyo. We have 100 per cent inventory, and determine price using dynamic pricing mechanism… Since the room rates are decided by us so the question of discounts doesn’t arise.”

In December, the Federation of Hotels and Restaurant Association of India (FHRAI) reportedly complaint against certain online hotel booking portals to the Commission of India and Ministry of Tourism. After taking action against MakeMyTrip and GoIbibo in November, the FHRAI had warned Oyo that protests may ensue if the latter refused to negotiate with the hotel owners’ body.

Commenting on FHRAI developments, Ayush added: “We have been engaging with the FHRAI, the apex body that represents all hoteliers and its respected executives, and are open to creating a platform for potential discussions, and invite all other hotel chains in the country who operate leased or franchised assets to participate in the same.”

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