Specifically, it's a question of romanization style. I personally prefer the style that uses "youkai" because it leaves the number of characters equal to the original - yo-u-ka-i = よ‐う‐か‐い. But on places like Wikipedia, they always use ō instead of ou.
Cutting out the u from Japanese words is actually pretty standard for English, though. Look at various loanwords we have from Japanese, like dojo, shogun, sumo, (Zen) koan, even Sudoku - in Japanese, these all have an additional う/u: doujou, shougun, sumou, kouan, suudoku