Oyo because their business is suffering due to deep discounting, high commissions and arbitrary contract changes being sought by the platform, according to them. Similar ire is directed against Go-MMT–which has already been served an ultimatum by the Hotel and Restaurant Association of Gujarat–and other online travel companies, they said.
The hoteliers are banding together and considering legal action against Oyo, the room aggregator in which Softbank is an investor and had a valuation of $5 billion in the last round of funding. Individually, they can’t compete with the might of the funds-flush unicorn, which is expanding into China and elsewhere around the world, said the hotels.
The Budget Hotel Association of Mumbai, a grouping of 250 properties, has won support from similar alliances in Delhi, Mysore, Bengaluru, Kolkata and Hyderabad and they are in the process of forming a nationwide lobby.
“Oyo has disrupted the entire market drastically,” said Budget Hotel Association of Mumbai president Ashraf Ali. “Rooms that we used to sell for Rs 2,000-2,500 are now being sold for Rs 800-900. 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.”
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.
“We have always stood for fairness, whether it is to offer quality living spaces at affordable prices to our customers or the operational capabilities to help asset owners scale to newer heights by leasing or franchising their asset with OYO. It will be business as usual for us in Mumbai and guest experience will continue to be a priority for us and our asset owners,” said an Oyo spokesperson. Go-MMT did not respond to an email seeking comments till the time of going to press.
The Hotel and Restaurant Association of Gujarat, which represents 400 properties, said hotels in Ahmedabad will not accept any discounting from December 1 and that commissions won’t exceed 18%. It had put forth these demands at a meeting with Go-MMT last month.
“Cancellation policy, early check-in and late check-out policy will be strictly of the hotel. Go-MMT will not have any condition and rigidness on the same,” said a letter sent to association members which ET has seen. “If they come directly to individual hotels, we request you not to entertain them… In case we do not unite together now we will be nowhere in sometime.”
Hotel and Restaurant Association of Gujarat president Narendra Somani said commissions are too high.
“The first step we have taken is towards Go-MMT. The next step will be towards OYO,” he said. “Go-MMT had started charging 25-40% from some smaller hotels which is not feasible for businesses.”
The Hotel and Restaurant Association of Western India (HRAWI) said it supported the decision taken by the Gujarat grouping to boycott certain online booking portals, citing biased and unilateral business decisions taken by them.
Budget hotels have been hit as online platforms have gained scale, said Federation of Hotel and Restaurant Association of India (FHRAI) member and honorary secretary Dilip Datwani
“After the funding, they become more stronger financially and try to arm twist the smaller hotels,” he said. “People have thought enough is enough now and they are getting together. We hope this happens nationwide as every hotelier is getting affected.”
The Hotel and Banquet Hall Association of Bareilly is actively warning owners that registering under Oyo will hurt their margins.
“The customer recognises Oyo and not your hotel. You are just a service provider. Oyo charges about 25-30% as commission and the remaining funds need to be utilised for staff salaries, electricity etc. and your profit will be almost zero,” read a notice issued by the association. “A real business partner cares about the partner also but Oyo is just concerned about itself at the expense of its partners. They play one up against the other. Bewareo as giving your hotel to Oyo will lead to a total loss of goodwill.”
Aman Gupta, who runs the Vaishali hotel in Bareilly and is a member of the grouping, said some members have ended their association with Oyo.
“The hotels registered under Oyo were not benefitting from listing with the company as they were not making money to offset their other expenditures,” he said. “The hotel and banquet hall association of our city has asked hotel owners to desist from partnering with Oyo. About 15-18 hotels have done so so far.”
A member of the hotel and restaurant association of Chandigarh, Mohali, Panchkula and Zirakpur said the hotel industry is going through a challenging phase. Oyo had signed up hotels by giving minimum guarantees and buying a certain percentage of rooms, he said. They also gave advances and persuaded hotels to spend heavily on upgradation promising good returns.
“Once they got control of a fair share of inventory and customer base across major cities, they started offering deep discounting and undercut rates and coaxed the hotels to forego the earlier signed minimum guarantee agreements and entered into a ‘dynamic model’ which later changed to ‘smart buy’ where they control the whole inventory, rates and OTA (online travel agency) listings besides applying whimsical charges like run sale charges, platform charges, rate change charges and rank visibility charges,” the person said.
“The accounting process started becoming more and more opaque with arbitrary payment deductions and penalties leaving almost nothing with hoteliers. The staff and hotel owners have been humiliated and harassed in an extremely regretful manner, and have been pressurised to unreasonable ways and limits creating high stress.We urge the government and the Competition Commission of India to look into this.”