OYO to penalise partner hotels denying bookings

SEEING RED: OYO's deep discounting approach is a key reason for not honouring room bookings, say hotel owners

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OYO to penalise partner hotels denying bookings
Aditya Ghosh


OYO partner hotels denying rooms booked by VIP/ regular customers are set to be at the receiving end. OYO, which operates South Asia's largest chain of branded hotels and homes, will be penalising member hotels who do not honour bookings it sends them directly (via OYO platform) or other demand channels including online travel agencies (OTAs).

A communication to this effect was sent recently to partner hotel owners, industry sources told DNA Money. "In order to ensure that these (VIP) customers are provided with the highest level of customer experience, going forward we are going to impose a 2X penalty on these bookings as compared to other bookings," OYO said in its communication.

Interestingly, there is no set calculation by OYO for levying the penalty and the entire process is quite complicated. Responding to DNA Money queries, an OYO spokesperson said, "There is no monetary consideration implied with any penalty. OYO imposes a penalty on member hotels for denying bookings which is calculated in terms of reducing access to the suite of advantages and benefits that come with being a part of the OYO chain of hotels and homes."

However, sources said that the penalty is linked to average room rate (ARR) of the defaulting hotel. And if that was not all, OYO also plans to de-prioritise and delist from its platforms all the hotel asset partners who do not honour any booking of VIP customers. This will be in addition to other penalties.

"When the check-in difficulty is faced by a VIP guest (loyal customer), one instance is treated as equivalent to two instances and therefore the deterrence to prevent delisting of a property is multi-fold. There are no financial considerations or 'amounts' imposed on the asset owner. The penalties by way of a record that affects the 3C level and can finally lead to the delisting of the hotel is essentially a deterrent," said the OYO spokesperson, adding that the policy is uniform and applies to both franchised and leased hotels.

Hotel asset owners are miffed by OYO's decision to levy 2X penalty at a time when business is already suffering owing to its deep discounting practices. According to hoteliers DNA Money spoke to, OYO is not following the floor prices being agreed upon between them. And if the rooms are being sold at unviable rates then they are bound to be denied.

"It's a one-sided enforcement tactic especially when the company (OYO) is itself at fault. If they (OYO) are sending bookings at rates commitment to the hotel owner and it gets denied then this action (of levying 2X penalty) is valid. However, if OYO is sending bookings that are not in tune with the floor price agreement with the hotel owner it will get denied. And OYO penalising such hotels is then a big problem," said a hotelier requesting not to be identified.

According to hoteliers, OYO adopts the deep discounting practice citing poor demand scenario. As a result, room rates have dropped to Rs 600 and in some case even lower depending on the hotel's location/ geography. In such a scenario, the hotel owner is forced to deny entry to such customers and risk default. Eventually, the hotel has no option but face penalty, get blocked and or delisted.

"One of my hotels faced this situation wherein the minimum floor price was agreed at Rs 1,800. After some time, OYO started sending bookings priced in the range of Rs 500 to Rs 700 for double and triple occupancy. When we denied such bookings they blocked my property," said another hotelier.

Hoteliers being delisted, blocked or have discontinued their agreement with OYO are facing another big challenge. There is significant delays in handing over the ownership of their hotel's listings on various demand channels and OTAs.

"This creates further problems for us. That's because, post discontinuing with OYO, walk-in guests or those calling to book rooms in our hotels start quoting deep-discounted OYO rates that continue to show up in online searches. Having already suffered partnering with OYO, this significantly impacts our revival plans of coming back to pre-OYO rates," said a hotel owner who was earlier on OYO network.

In response, the OYO spokesperson said hotels that do not meet company standards are purged from the OYO chain of hotels and homes. "The hotels churned out are handed back to the asset owners. Once the contract ends, the OTAs are informed. As the listing of the hotel on online travel aggregator platforms is controlled by the OTAs, the turnaround time to completely remove the OYO mentions in the listings depends on the working cycle followed by the said aggregator. At our end, however, we stop accepting bookings for the said hotel," said the spokesperson.

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