Oyo’s FY19 losses increase sevenfold to $335 million

BENGALURU: Softbank Groupbacked Oyo Hotels and Homes will continue its expansion into international markets such as Latin America, China and the UK, senior company executives said, even as its losses surged sevenfold last fiscal.

The hospitality startup will also focus on turning profitable in its home market India, where its margins improved 4.1% in FY19, Oyo board member Aditya Ghosh said in a conference call with reporters to discuss the audited financial results for FY19.

Ghosh did not say when Oyo could start making profits.

Oyo’s consolidated loss ballooned to around $335 million in FY19 from $44 million in FY18. The company, one of the world’s largest hotel chains, currently has 18,000 hotel partners and an inventory of 270,000 rooms across India.

The Bengaluru-based startup attributed the increase in losses to inherent cost of establishing new markets, including those related to talent, entry into new markets and operational expenses. Consolidated revenue jumped to $951 million in FY19 from $211 million in the previous year. It included $604 million in revenue from India operations.

Around $348 million was contributed by overseas operations, primarily China.

Oyo operates on a franchise model where it takes over a hotel asset, renovates the space and sells individual rooms under the Oyo branding. It claims to have hosted more than 180 million users between January and December 2019.

The startup said it has around 43,000 hotel partners and a million rooms on its inventory, including 99,000 rooms across 300 cities in South Asia, 17,000 rooms in West Asia, 12,000 in Japan and 16,000 in Latin America.

Oyo said China and other international markets, which were in “development and investment mode”, accounted for 75% ($252 million) of losses during the year.

Net loss as a percentage of revenue grew to 35% in FY19 from 25% a year ago. However, in its oldest market India, the startup narrowed its losses to 14% from 24% of revenue in FY19.

In addition, the startup said gross margin in India improved to 14.7% in FY19 from 10.6% a year ago, although it did not detail the margin figures for international operations. The announcement of the audited financial performance comes at a time when Oyo has been laying off employees across India and other geographies to keep costs in check.