Tour Operators Struggle with a Trying Present, But Plan for a Better Future
by Richard D'Ambrosio /
While the coronavirus outbreak is still causing billions in travel industry losses, some travel entrepreneurs are already thinking about how they can prepare their companies for a return to normal booking patterns.
Speaking during a global webinar hosted by Arival, a tour industry event producer and research company, these business owners said they are looking at trends in the reporting of new coronavirus cases, as well as historical travel booking patterns during other major, global crises, to help them plan for a return to more normal times.
“We ought to be looking at China. It’s the only place we can look,” said Tom Jenkins, CEO of the European Tourism Association (ETA). The first few cases of COVID-19 started appearing there in late 2019, with media coverage and a rapid increase in identified cases taking off in late January.
Speaking during the webinar, attended by more than 500 viewers, Jenkins said that following the U.S. decision to restrict European nationals’ travel to America, he is forecasting a near-term 85% decrease in new bookings for Europe and 80% cancellations for existing trips to Europe. “That is what we can imagine for the next five to six weeks.”
“How we recover from that is anyone’s guess. What is the nature of that recovery is anyone’s guess,” he added, though he foresees “the fear will ease off” in eight to nine weeks’ time, as “the immediate medical crisis and the stories associated with it might start easing off at that time.”
Yaron Burgin, CEO at Abraham Hostels & Tours, Be’er Sheva, Israel, is trying to base booking assumptions month to month by closely following the upward curve of new coronavirus cases reported in places like China and Italy, and then following how travel bookings from those regions respond.
“We’re trying to see what the signs are happening there, and compare them to here. Our tour business is currently at zero. Where we normally had 10,000 travelers a month, next month, we have zero.” As each week and month passes, his company will reassess their forecasts. “Otherwise, everyone is nervous and doing nothing.”
Burgin is monitoring reliable graphic portrayals showing the number of new people infected with the virus. “When they flatten, that would be the moment to start having some optimism,” he said.
“Everyone has different models,” said Stephen Oddo, CEO and founder at Boston-based Walks. His tour company is planning for “a significant cash flow crunch over the next few months,” and “a significant travel depression” through the end of the year.
But, “the travel industry is resilient,” Oddo said. “All of the data indicates once we are out of this, people will want to travel, perhaps more than ever. We always see a bounce back that is very quick.”
These business owners urged their peers to maintain open communication lines with their clients, to stay top of mind for the moment when consumers start feeling comfortable about traveling again.
“The best thing you can do is have a plan to communicate to your guests who have booked, prioritizing upcoming bookings first. Try to convert that sale to a future booking voucher of some kind,” said Oddo. “You should be looking for opportunities to reach back out to those customers after things have settled down. If you treat them well now, they hopefully will come back to you when people are traveling again.”
Still, these owners were dour about the industry’s current condition, especially the recent decision by the U.S. government to restrict the travel of European nationals to America.
“I was definitely surprised” by the Mar. 11 announcement by President Donald Trump during an oval office speech, said Claudio Bellinzona, COO of Musement, a tour operator based in Milan. “Clearly this is a decision that puts in danger an important part of our industry, small and medium players in our value chain.”
The communication of the policy “is already increasing the impact it has on future demand,” said Oddo. “I don’t think this is a particularly helpful approach. It was unlikely that was the most important thing to do.”
“What we need at the moment is global cooperation and this is not global cooperation,” said the ETA’s Jenkins.
Difficult decisions, but lessons learned
The repeated blows to travel booking demand, from suppliers shutting down venues, and whole industries like the cruise lines canceling sailings, is causing companies to face perhaps their worst financial crunch in the history of travel. Making sound decisions to navigate these difficult times isn’t easy for anyone, said the ETA’s Jenkins.
Decisions like offering clients credits and full refunds are individual to each business. “Some intermediaries are in a position to issue full refunds. Others are going to find it extremely difficult. It depends on how suppliers are handling it. You are seeing a situation where some people are fighting for survival,” he said, so it is a “delicate matter between businesses and their customers, and businesses and their suppliers.”
One important lesson for travel business owners to take away from the crisis is the necessity of sound cash flow management. Managing income during good times should include creating a reserve fund for potential crises like the coronavirus.
“A piggybank is the first lesson,” said Burgin in Israel. “If after two days you are falling apart, that means there is something wrong with your business.”
He urged his peers to be better aware of their financial position, and make all of your staff aware as well so they can contribute to creating ideas that can help your business survive.
“We need to think how to do things differently,” he said, and this will require the full brain power of your organization. “Don’t cling to old habits and old operations. Cut permanent fix costs. Delay payments if you can. Try to create [new] revenues from different places.”
Look to your peers to cope
Jenkins believes that most governments are rightly concerned “about the number of people carrying the disease. They’re trying to avoid too many people showing up in intensive care units, to flatten the peak out” of the rise in new COVID-19 cases.
This means that governments and other institutions will be focused on how their healthcare industries are holding up, so they will be slow to institute measures like small business grants or low-interest bridge loans.
How governments “respond to the economic emergency is going to be a lot slower than the health one. They are now being hit with an unprecedented slowdown in the entire domestic tourism economy. This is placing a huge stress on everyone,” Jenkins said.
As a result, the industry will need to rely on itself for the foreseeable future, webinar participants agreed. “I’ve had a lot of conversations with a lot of operators. I’m glad to see their willingness to communicate, to share ideas,” said Oddo. “Many people across the industry are offering support. People do care about one another.”
“The real topic here for us as an industry, is cooperation, to find some ways to stay together and react,” Bellinzona said.