By Aradhana Khowala
While the far-reaching impact of coronavirus on the travel, tourism, and hospitality sector is not fully clear, the pause on travel and the disruption on the movement of billions of people, their associated expenditure and its sudden displacement has had massive ramifications on national, regional and local economies and employment across the world.
If the listed stocks are indicators, Airline stocks are down 40%; hotel stocks are down 30% and OTAs are facing a massive hit to revenues with global booking decline of 10%. The Aviation sector is in a crisis zone as plummeting demand has meant cancelled or reduced routes, voluntary unpaid leave to staff, hiring freeze and delayed or canceled aircraft orders, and now weaker carriers going out of business. The situation is no different for hotels and extended value chains in the sector and the base case assumption is that businesses would be impacted for the whole year and beyond.
What was not a problem two weeks ago because it was not my problem is today everyone’s problem. Businesses across the value chain are moving to survival mode which means preserving cash reserves, stepping up emergency cost-saving measures, reducing costs, negotiating and seeking extensions or capital cost reductions and the banal task of trying to survive and remain in business till the crisis unfolds so when demand and consumer confidence returns you are in a position to take advantage of it.
A WORLD OF UNKNOWNS
What we know from recent events, market and consumer behavior over the last two weeks is we are dealing with a potentially proliferating, multidimensional risk landscape with long term consequences and more questions than answers. The biggest anxiety is being confined into any space – cruises, airlines, hotels, and worse being quarantined. Even the most rational amongst us tend to experience a complete lack of ability to shut the panic button off. It is a frustrating situation that is exacerbated in the case of Coronavirus as we are wading in a world of unknowns including if business interruption with COVID-19 can be covered under the “Force majeure” clause.
- Market sell-off
- Wealth shrinkage
- Drop in demand and consumption
- Drop in consumer confidence
- Price war, SME bankruptcy
- Panic and uncertainty
- Fatality rate vs contagion rate – 3.4% is the WHO quoted rates but while the positive tests, hospitalisation and deaths are visible, there might be millions of mild, asymptomatic, invisible cases which is underestimating the damage.
- Incubation – People with COVID-19 generally develop signs and symptoms on an average of 5-6 days after infection (range 1-14 days). But this is not beyond question.
- Immunity – Does the virus provide immunity or can it recur? This gives us information about the longevity of this disease and can help focus the efforts accordingly.
- Containment – The origin was China but cases are now all over the world and it is spreading to countries with low travel linkages with China. Is containment really working and if the entire world is likely to be exposed, are we better off getting on with business as usual?
- Seasonality – The common cold is seasonal. Will April be the end of this and warmer weather means this goes away like influenza? There is no definitive commentary only assumptions at this point.
- Vaccine – There is a lot of research being undertaken to develop the vaccine and the healthcare machinery is fully behind it. What is not clear is if a vaccine is two months or a year away.
HOW PREPARED ARE YOU WITH A CONTINGENCY PLAN?
We in the travel, tourism and hospitality sector need to plan and be ready to implement contingency plans based on what we know. Then we need to think about how we will make adjustments for the whole year because when it does, travel rebounds really quickly once the headlines change. And we are all hoping and praying for those headlines to change in the next 30 days. History shows outbreaks tend to have a noticeable effect on consumption and recovery can be slow and painful but below are a few easy to implement steps both operational and strategic which organisations might find useful to brace through the hard times.
• Look after the team – boost morale, provide and plan for flexible working hours and options, welcome voluntary holidays, ensure healthcare provision to staff and their families.
• Establish an emergency taskforce and communicate with government, medical authorities with daily monitoring of outbreak trends and regular macro-trend updates
• Internal alignment which sends a clear signal to the customer that you are in control as an organisation – it includes basics like making available hand gels, masks, front office team being able to do a quick temperature tests, daily briefings, updates etc.
• Travel policy modifications and considerations based on outbreak trends.
• Adjust financial targets and KPIs as relevant for management and team
• Focus on growing lesser affected markets and local markets. Empower management to take decisions like temporary/part closure depending on local market dynamics
• Cash is King – preserve cash including raising levels of authorization for payments
• Avoid price drop – there are no winners in a price war and it can take months or even years to return to pre-crisis rates. Focus on pragmatic, customer-centric service instead.
• Keep a close watch on segments and plan for buffers – local events, local F&B, proactively respond to changes in consumption scenarios.
• Allow for increased marketing investment when business rebounds and strengthen strategic partnerships.
• Use the opportunity to enhance the internal capability of the company and tackle back up tasks procrastinated during peak performance.
Beyond this, learn from the experience and build contingency plans to prepare for future crisis. There will be others! Ask yourself how prepared are you if an employee tests positive in your organisation? What if a guest turns symptomatic or if your hotel needs to be quarantined? As we stare into the crystal ball for answers, prepare for the worst while hoping for the best, wash your hands and sing happy birthday while at it!
Aradhana Khowala, CEO & Founder, Aptamind Partners