Indian entrepreneur and founder of Oyo Rooms Ritesh Agarwal. Photo: AFP / Chandan Khanna

India’s hospitality startup unicorn Oyo Hotel and Homes is now facing the heat of coronavirus-induced global travel curbs and the ongoing countrywide lockdown.

The SoftBank-backed startup has now asked all its employees to take a 25% pay cut between April and July, and some have been told to take leave with limited benefits or go on furlough from May to August.

The decision was communicated to employees by OYO chief executive officer for India Rohit Kapoor through an email and company-wide town hall on Wednesday, the Business Standard reported. The number of employees being asked to take this furlough is likely to be more than 3,500, the daily added, quoting sources.

The travel curbs has taken a heavy toll on the company, which has a presence in many countries including China, Indonesia, Malaysia, Nepal, the UK and the US. Last year, Oyo was valued at US$10 billion, one of the highest in the SoftBank portfolio. But now it is turning out to be another problem startup after WeWork.

India’s travel and hospitality industry is in the doldrums as people stay indoors due to the lockdown to avoid falling prey to the pandemic. According to an estimate, the sector is staring at a revenue loss of 5 trillion rupees (US$65 billion) over the next year, while 35-40 million jobs, both direct and indirect, are in jeopardy.

Industry body the Hotel Association of India recently wrote to Finance Minister Nirmala Sitharaman seeking a bailout package to recoup from the current crisis.

It includes an extension of the moratorium on loans pegged at three months by the Reserve Bank of India to 12 months. They want to be spared from payment of all working capital, principal, interest payments, loans and overdrafts for a year. Another demand is that of collateral and interest-free loans of up to five years for small and medium enterprises (SMEs) in the tourism sector.

As for taxes, they have demanded deferment of the goods and services tax, advance tax payments and a waiver of fees for all forthcoming licenses and permits. They want the services tax to be slashed for at least two to three years. Now, large hotels attract 12-18% tax based on room rates charged and they want it to be pruned to 5-6% with immediate effect.

Other key demands are bringing Aviation Turbine Fuel under the ambit of the goods and services tax to offer long-term relief to airlines, apart from offering rebates on landing, parking and housing charges.

Oyo’s smaller rival Treebo Hotels recently offered a paid voluntary resignation scheme to 400 of its employees. Those taking the offer were told that once things return to normal some may be taken back as the company does not want to recruit all over again while resuming operations. The company claimed that as all its hotels had been shut due to the lockdown, leading to zero revenue, they are running out of cash reserves.

Many other hotel owners are looking at steep salary cuts at the top and senior management levels amid the lockdown. Industry experts say that even after the lockdown is lifted the occupancy will continue to be low as people may avoid travel and hotel stays for fear of contracting Covid-19. This could lead to many hotels shutting down totally or running limited operations.

Online travel booking firm MakeMyTrip recently announced salary cuts and this will also be applicable to its subsidiaries – Goibibo and Redbus. The company might also lay off about 400 employees who are not on its payroll and provide backend and support services.

According to the World Tourism Organization, a United Nations body, millions of jobs in the global tourism industry could be lost due to the Covid-19 pandemic, as 96% of all worldwide destinations are facing restrictions in response to the outbreak.

It noted that the pandemic had impacted travel and tourism like no other event in history. Governments have put public health first and introduced full or partial restrictions on travel. The job losses could even roll back the progress made in the fields of equality and sustainable economic growth, said Zurab Pololikashvili, the Secretary-General of the UN body.