A hotel of OYO in Changzhou, East China's Jiangsu Province in May Photo: VCG

The China unit of Indian budget hotel operator OYO Rooms has reportedly to lay off nearly half of its frontline employees, and more than 1,000 jobs might be cut just from the business development team, according to media reports.

The layoff order came directly from Anuj Tejpal, chief business development officer from India, who is managing the business in China, Shanghai-based news site jiemian.com reported on Monday, citing OYO insiders.

"Given the current adequate competition status of the budget-hotel sector in China and OYO's capital-driven business model, these layoffs are inevitable," Fu Gangye, head of Beijing BHC& Company Limited Corporation, told the Global Times on Tuesday.

It is reasonable for OYO China to cut frontline positions after the initial high-speed expansion phase, since pure expansion is no longer driving further growth, and only promoting the quality of services could comprehensively strengthen its competitiveness in the market, Fu said.

Monthly operating costs of the company had reached 150 million yuan ($21.8 million), with personnel costs accounting for a large proportion, since its staff had expanded about 75 times within the past 12 months, said jiemian.com.

Layoffs could also be driven by pressure from the capital side, he noted. 

OYO China later responded to the media that the company "will never compromise on dishonest behavior" and "would not put up with constantly substandard performance."

It further noted that because of its recently announced "OYO Hotel 2.0" strategy, the company will continue to strengthen its organizational capabilities and attract talent from all sources. It expects to hire over 10,000 people by 2020.

Founded in India, OYO opened its first outlet in Shenzhen, South China's Guangdong Province at the end of 2017. It officially entered the Chinese market the following year. It received $800 million in investment from SoftBank, Lightspeed Venture Partners and others in 2018, of which $600 million was appropriated to be used in the Chinese market.