SoftBank-controlled Yahoo Japan has pulled out of a Japanese apartment rental venture with Oyo Hotels and Homes, in the latest setback for the loss-making Indian start-up.
Yahoo Japan said it exited the venture Oyo Life, in which it had a 33.9 per cent stake, to focus on other initiatives. The internet firm has led a wave of consolidation in Japan this year, buying online fashion retailer Zozo Inc and scooping up messaging app operator Line Corp.
Oyo, also backed by SoftBank Group, on Thursday said it has bought the Oyo Life shares held by Yahoo Japan, now known as Z Holdings, for an undisclosed amount.
Oyo expanded rapidly in India and abroad by promising to drive up hotel occupancy through its online booking system, but has faced pushback from hoteliers who say they have been blindsided by hidden fees.
The start-up has been forced to relax expansion targets in Japan, where it also launched a platform for hotel reservations this year and faced complaints over its booking system and unmet promises of payment for room renovations.
SoftBank, however, remains invested in Oyo’s Japan hotel business, which has expanded by offering hotels minimum revenue guarantees, with Vision Fund and wireless unit SoftBank Corp retaining stakes.
But with pricing dictated by Oyo’s algorithm, which frequently slashes room fees, hotels have complained of weak revenue growth despite higher occupancy rates. Apartment rental service Oyo Life was launched to simplify Japan’s complicated room rental process by allowing users to rent through its one-stop website.
With Oyo often using intermediaries and then subleasing properties, costs must be clawed back through monthly rental and maintenance fees.
Yahoo Japan’s exit from the venture comes amid widening losses in India for Oyo and projections it may not make a profit there and in China until 2022.
Helmed by 26-year old founder Ritesh Agarwal, Oyo is a SoftBank-backed start-up where the tech conglomerate’s cash injection has fuelled rapid growth but that is under pressure to demonstrate a path to profitability.