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Covid-19 - this too shall pass
IT'S been more than three months since the world became aware of Covid-19. Since then, it has spread to 182 countries and areas, and infected some 250,000 people as at March 20.
This is an unmitigated disaster for the travel trade. We have seen massive cancellations from China while bookings from India and other markets have also vanished as globally, country after country goes into lockdown as governments act to contain the outbreak. It feels like Marvel super-villain Thanos just snapped his fingers, except here, much more than 50 per cent of the tourists vanished.
Financial markets are also in turmoil. Global major indices are down more than 20 per cent year-to-date with daily gyrations of 5-10 per cent. Volatility is at an all-time high and even oil prices hit a low of US$22.50 per barrel (a 60 per cent decline year-to-date). The US Federal Reserve announced two rate cuts, something which has not happened since Lehman Brothers' collapse which triggered the global financial crisis in 2008. Globally, governments are pumping billions of dollars in stimulus programmes to alleviate the economic fallout, the most recent being the European Central Bank with its US$820 billion stimulus programme.
This is a crisis for the travel industry. It is NOT business as usual. As an entrepreneur, I am faced with tough questions: should we be prudent and start actively to "cost manage" - which is the most natural conclusion since we do not know how long the crisis will last, and to what extent our business will be impacted. Or should we take a contrarian view and continue to invest for the future?
It is likely to get worse but history (severe acute respiratory syndrome and the H1N1 epidemic) suggests that like any crisis, it will pass.
Based on the 2003 Sars experience, Chart 1 shows international visitors plunging to record lows in the immediate two to three months after Sars broke out in early March 2003. In fact, in May 2003, Singapore recorded the lowest monthly visitors of about 178,000. In the same month, the World Health Organization declared Singapore clear of the Sars virus and in six months - by November 2003 - our visitorship was on par with that of a year ago (Chart 2).
While Sars took five to six months to normalise, the current Covid-19 situation suggests that today's crisis might be more prolonged and severe. This time, the travel industry is very much more affected because of outright travel restrictions imposed by all governments, which did not happen during Sars.
Airlines have announced massive flight cancellations, including Jetstar which has grounded all its flights for three weeks, while Qantas grounded all its international flights. This time round, we are experiencing a sharper drop in bookings from all markets. All travel-related business has slammed on its emergency brakes and came to a complete stop.
The travel trade is facing a double whammy of Sars coupled with global financial crisis - at the same time. Thanos' finger snap sounds mild: the travel industry is dealing with survival issues.
But as they say in Chinese, crisis comprises two words: wei ji. Simply translated, wei represents "danger" and ji represents "opportunity". It is very dire times that we live in now, but that doesn't mean we should be like deer caught in the headlights. We can and would be able to survive if we take care of three things.
The first order of business is to determine our "runway" - the time we have before we run short of money. We looked at our cost structure closely and took steps to manage our cash flow to ensure we have sufficient resources to weather this storm. We are fortunate that our investors are alongside with us on this journey. In addition, we are also looking at tapping the temporary bridging loan (announced in this year's government Budget) to help our tourism enterprises.
Crisis creates a unique opportunity to explore, to challenge time-tested mindsets and potentially create markets. I am heartened that the Singapore Tourism Board has formed the Tourism Recovery Action Task Force to rally all stakeholders together. Likewise, we have initiated discussions with like-minded partners to develop new products to be launched once we see the first signs of market recovery.
Investing in the team: The success of our company is down to its core group of passionate and committed team members. The current challenges and cost pressures are real, but instead of reducing headcount, we are redeploying our staff through training or taking on new projects with a view to streamlining our workflow or re-designing our products.
Investing in technology: Technology is a non-stop commitment and should be viewed as an enabler to increase sales. We are engaging our stakeholders, including Enterprise Singapore to continuously innovate our technology stack and potentially develop a superior product to help our partners to tap into increasingly mobile-first and on-demand consumers, something which the tourism operators had not targeted in the past.
Covid-19 has hit us hard, but it is not the end of the world. We are likely to see the coronavirus outbreak situation getting worse before becoming better. Just like every storm that runs out of rain and every dark night turns into day, recovery will come. I believe maintaining a razor-sharp focus on financial discipline, while making opportunistic investments, will position us (or any company) for the recovery.
Only time will tell if we made the right decision or hubris did. Crossing my fingers, I hope we are right.
- The writer is chief operating officer and co-founder of GlobalTix Pte Ltd, a technology solutions provider to the travel trade and one of the largest B2B marketplaces for tours and activities in Asia. He is also an ex-investment professional who has lived through the Asian Financial Crisis, dot-com bubble and Global Financial Crisis.