FHRAI slaps warning notice to Oyo for illegal and exploitative malpractices

Day by day threats faced by Oyo is increasing as the hotel owners and overseeing bodies start to speak up against malpractices by the Softbank-backed budget hotel chain.

As per a warning letter by Federation of Hotel and Restaurant Association of India (FHRAI) head Gurbaxish Singh Kohli to Oyo, to scale up its inventory (or GMV) for raising follow-on funds, the Ritesh Agarwal led company has been indulging in exploitation, contract breaches, and illegal activities.

The company has been illegally endorsing residential apartments, commercial buildings, unlicensed bed and breakfast apartments, even rooms in chawls as hotels.

The authorities are concerned about the safety of customers who expect to stay in a hotel but instead get a room in a house.

Apart from the safety and security of customers, the organisation has also conveyed the rising voice of hotels against large-scale breach of contracts - use of coercion against protesting hotels, unfair revision of commission rates, convenience charges, legal notices, using hotel client database directly, levying of Audit denial and Room Deviation charges, lack of transparency while dealing with issues raised by hotels, issues with Oyo Money etc.

Recently, hotel owners had threatened the company with a plan to take legal action against the heavy discounting.

Both parties have given time to the company to enter into a dialogue and work on making amends. If Oyo doesn't respond to these complaints in the favour of hotels and customers, FHRAI has threatened nationwide protest and hotel owners plan on issuing legal notices.

Update: To counter the warning letter by FHRAI, Oyo has released a press statement saying that the regulator body has been misguided by certain bodies with vested interest, and not necessarily the franchise owners. 

It further clarifies that until and unless it has invested in capital expenditure, the company does not charge commission over 25 per cent. As far as the demand for price increase and stabilization is concerned, the company believes that it will have adverse effects on customers and asset owners in the longer run.

Oyo advocates that dynamic pricing creates a level playing ground for even small investors.