With so much bad news in travel I thought I’d tune into the Singapore Fintech Festival Global Launch event this week for a different perspective, and the most promising news came at the end from Mike Milken, chairman of the Milken Institute.
Saying things look promising and he wouldn’t be surprised if a vaccine could be available by year end, he said, “The world should feel optimistic. Every day a new vaccine is being discovered. Whether it’s anti-viral, antibodies, there are so many things at work right now.”
And he added, “The cooperation between profit and non-profit, and sharing of data, has never been greater now than in the last 50 years.”
If you go to his website, you will see that there are 315 treatments in consideration and 199 vaccines in development. According to him, 18 or more vaccines have gone into human beings and one is at phase 3. Governments have stepped up efforts, and are building manufacturing centres “to make products before we know they work”, he said. “Hundreds of millions of doses will be available.”
Given the pandemic’s cost to the US economy is US$1 trillion a month, he said investing $5-$10b is a small amount. “We will be judged by what we do at this time”, he said.
Red ink everywhere as travel groups release results
Well, the travel industry surely needs a vaccine to save it. This week, as company after company released their financial results, it was hard to know where to look. The percentages may vary, but it’s red ink everywhere. And the job losses mount.
Amadeus, that beacon of light in travel IT, saw revenues for first half contract by 54.7% to €1,281.2 million. Its EBITDA decreased by 83.6% to €194.1 million, and adjusted profits declined 113.4% to a loss of €89.2 million. Travel agency bookings fell by 78.6% to 65.9 million.
Accor posted half-year net losses of €1.5 billion against a profit of €141 million during the same period last year. Turnover plunged to €917 million. This is down 52.4% compared with the first half of 2019. The company says it will be cutting 1,000 jobs and plans to cut costs by €200 million by 2022.
Booking Holdings announced plans to lay off 25% of its global workforce, which amounts to roughly 4,000 employees.
Expedia Group saw a near elimination of revenue and bookings in the beginning of the second quarter of 2020. Overall for the three months ending June 30, gross bookings were down 90% compared to the same period in 2019, and revenue was down 82%, to $566 million from $3.2 billion last year.
Its vacation rental brand Vrbo was “a great driver and the strongest part of our story”, said Peter Kern, CEO. An analyst report, commenting on the second quarter earnings, said, “Recovery has begun but still a long way to go”, and added that it remained constructive on the long-term hotels and alternative accommodation penetration story.
Meanwhile, Korean Air became the only airline in the world to post a profit during Covid times when at close of market on August 6, it reported Q2 profit of $125m, thanks to healthy cargo rates and loads. The airline’s overall revenue however dropped by 44 percent compared to the same time last year, but its efforts to streamline its business and focus on cargo seem to have paid off.
The resourcefulness of entrepreneurs as they fought to save their business
Longterm is probably the only way to look at this sorry state of affairs because recovery is patchy at best, and limited, and it’s really the resourcefulness of entrepreneurs that are shining through in this crisis.
This week, we kept our eye on three companies. In India, Ixigo has reinstated salaries and sold its B2B business, Travenues, to SpiceJet so that it can focus on its consumer facing business. It also used this time to wean itself off Google by getting even more creative with its videos and other content marketing.
Whether this is wishful thinking or not, I don’t know, but it seems this is as good a time as any for travel brands to seek other means of acquiring customers instead of spending as they did on Google during the good old days. It will be interesting to see what kind of advertising and marketing landscape forms out of the ashes of Covid.
In Vietnam, we caught up with chairman of Thien Minh Group, Tran Trong Kien, who is taking the stumble in his country in his stride and remains optimistic. If Vietnam can get the infections under control, then this Asian tiger should get back on its feet fairly quickly as it proved it could the past two months when business at TMG properties climbed back to pre-Covid levels, even minus inbound business. It’s also interesting to learn how Ivuvu.com pivoted to domestic business and how it’s driving traffic, using influencers and live streaming.
In South Korea, MyRealTrip defied the odds to raise US$36m which will get it through the next hump. It’s done well to pivot to domestic business and when South Koreans can travel again, it will be well placed to catch that tide.
But it’s hard to ignore the realities – travellers will remain cautious and corporate travel, in particular, is changed. Accor CEO Sebastien Bazin said he expected that in the long term corporate numbers will likely sit around 10% less than they were pre-Covid. Short term, until mid-2021, he estimates business travel will be down 25% to 30%.
Joseph Tsai, executive vice chairman of Alibaba Group, who also spoke at the SFF event, is typical of a corporate road warrior who’s thinking differently of how he travels. At the SFF event, he said, “I am in Hong Kong, working from home, and I am getting used to remote work. It’s a big convenience. I just realised I was wasting a lot of time on the road. Being in one place, with video calls, makes you closer to the people you work with.”
He does concede though that “remote work is an elite white collar concept. There’s a big part of the economy who can’t work from home.”
Tsai said the first half of 2020 had seen massive digitisation of every aspect of life; the next three years has been fast forwarded. Going to shops – shopping online, restaurants – food delivery; entertainment – Netflix, video gaming. And there’s also digitisation of the person with contact tracing technology.
Finance, which once chained the world, was being liberated. In emerging, developing markets, the bank is your mobile device, Milken said. All those barriers in providing micro-loans will be eliminated in the digital world and give massive opportunities to tech entrepreneurs, said the financier who said his mission was to democratize capital and make it available to small businesses.
He said Covid-19 had reminded society of the workers we had taken for granted – the essential workers, the service workers – and he predicted that the service economy is the future and that a whole slew of service-related jobs would be created.
Milken is most excited about the digitisation of education and learning. “Software is moving the world of knowledge. The first half of 2020 accelerated and challenged this. The transfer of knowledge in agriculture, for example, will transform parts of the world. Education is freedom.”
We can’t wait too for the freedom to travel to return but for now, we in travel need to hunker down and be as resourceful and creative as possible to stay alive till a vaccine is found.
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