Like most industry observers
I think Corona Virus has been massively overhyped and much of the current down
turn in sales is media induced, since for most people the heath impact of the
Virus will be minimal. However, the impact on travel business is real and
unlikely to go away.
Having worked in the industry
during 9:11, the gulf war and 2008 financial crisis, the current Corona Virus
worries me more as its impossible to predict the length of the impact, so in my
opinion its definatly time to baton down the hatch’s. All businesses are
different, but here are 10 actions I’d recommend people consider.
- Cut overheads by 20%-30% immediately.
Unfortunately, the easiest
cut is often staff. Every business I have ever worked with has a layer of “Fat”,
that is only dealt with in a down turn. Cutting staff forces a business to
become more efficient, by either using new technology or by stopping work that
has no real benefit. Once you have cut staff this drastically, every working
practice gets revisited and staff simple don’t have time to “do it the way it’s
always been done”. I know readers may not want to hear this, but business
survival is crucial for the 70% of staff left and bluntly some jobs are better
4 day week and homeworking.
It’s important to keep key
staff so you can expand again once the crisis recedes and to manage the
business through tough times. However, these people are often your most
Moving to a 4 days week and
giving key staff an extra day off a work a week, greatly softens the 20% wage
cut you need them to take. Maybe get them in a room as ask “which one of you do
you want me to get rid of, as if you don’t all agree to take the pain equally,
that’s my only choice.” Setting up full homeworking capabilities using Zoom or
Google hang outs video conferencing is also a must. We have to assume that
major cities will be shut down making homeworking capabilities a necessity for
virtually all businesses.
- Stop ALL
IT spend immediately.
Businesses need to worry
about today and not tomorrow in a crisis. If it works now, don’t try to fix it!
Expenditure on IT is often one of the major cost of a business and of course
some expenditure will be locked in contractually with third parties, but most
can be post postponed.
Cut back to the essentials
that drive 60% of your current traffic. Cancel any above the line TV, radio etc
and focus on immediate calls to action, which have the lowest cost. Google
advertising costs should fall as companies cut back, but I’m not convinced
google will allow this easily, so it needs to be driven by players cutting back
bid terms aggressively.
every lead and maximizes margins per booking
With less leads, its vital to
increase conversion. In a shop or online, its vital that every lead gets chased
down. Within shops this may involve implementing further data gathering and a
100% follow up procedure, either by phone or email. Similarly, in call centres
a target of 1-2 call backs per inbound call might be a sensible metric, whilst
online players may increase their remarketing targets using social media like
Facebook. Maximising margins by yielding higher and upselling Ancillaries is
probably also a good idea is a slow market.
reasons not to book.
Customers will clearly be
worried about booking at the moment, in case they need to cancel their holiday
because of an outbreak of Corona Virus in their holiday destination. Tour
operators and retailers dynamically packaging are acting as principals and will
be responsible for refunding customers, if FCO advice is changed to tell
customers can not travel to a destination, so why not make this 100% clear?
Offering Travel Insurance that also covers medical costs will provide
reassurance whilst also providing increased revenue per sale.
- Reduce the
Tour operators and retailers
dynamically packaging are acting as principals and will be responsible for
refunding customers if FCO advice is changed to say customers can not travel to
a destination. A dynamically packaging retailers should be booking all low cost
carrier flights via virtual cards, so that if a flight is cancelled they can
recharge all bookings via their virtual card provider for non-delivery of
product. All hotel accommodation needs to be booked on a payment on arrival
basis, with all use of non-cancellable or pre-paid rooms stopped. This will
reduce cancelation loses to lost margin, which is painful enough, but not as
deadly as a full agent funded refund.
- Cut the
number of Suppliers.
In times of reduced demand,
it’s important to cut the number of suppliers you have and work more closely
with a smaller number who you can negotiate better payment terms or over rides
with. The more fixed assets a level of the travel chain has, the more they will
be feeling the pain. For example, Hoteliers will be desperate to fill rooms and
will offer lower rates and/or higher commissions. Make sure your business
Revised forecasts for trading
15,30 or 50% down are required, with a realism level about cancellation. What
you thought was in the bag, may not be for long. Every business needs to ensure
that they stock pile cash as much as possible
For retailers this may
involve scraping low deposits and bringing final balance payment dates earlier,
however Trust funds often mean this consumer cash cannot be used, mitigating
any benefit. Similarly, low cost carriers are not going to allow booking
without full payment, but hotel partners may be forced to take later payment if
demand is switchable.
In times of crises, the 20
biggest expenses need to be reviewed and if at all possible “renegotiated”. For
example, will a high street landlord give a “rent holiday” rather than losing a
tenant, they are unlikely to be able to replace in the short term. The same
applies to office rents, equipment rental and all third party contracts. It may
even be time to negotiate a delay in payment of rates to the local councils.
Just remember having something is better than nothing to most suppliers, when they
are unlikely to be able to resale the assets your using.