Travel: Staying power
The hotel and travel sectors were among the worst hit by the pandemic. As the world begins to stir, Rachel Ingram hears how four CAs are preparing for life after lockdown and why things may look a little different when we all start moving again.
When planes were grounded and countries locked down early in 2020, the hotel and travel industries came to a grinding halt. Air passenger arrivals to the UK were down by 98% in April compared with February, while May’s takings in the travel and accommodation sectors were just 9.3% of the UK’s last pre-lockdown month. It’s expected that revenues won’t make a full recovery before 2023, assuming the success of vaccines and the return of customer confidence. In response, we’ve seen firms roll out new business models and more varied investment strategies as they attempt to turn challenge into opportunity.
As the UK prepares to ease lockdown for – we hope – the final time, April is an opportune moment to re-examine our relationship with travel. We speak to four CAs working across various sectors to explore how the industry has reacted to the pandemic and debate what the future of travel may look like when the world starts moving again.
Craig Beattie CA, CFO, Mandarin Hotel Oriental Hotel Group
Mandarin Oriental Hotel Group, headquartered in Hong Kong, is no stranger to managing crises. Having learnt lessons from the 2003 Sars epidemic, which devastated the city, the luxury hotel group acted quickly when Covid-19 hit. “Sars only lasted four months but it was apparent Covid was going to be a lot bigger,” says Craig Beattie CA, group CFO. “Our revenues globally collapsed overnight so, in very quick order, we had to assemble a crisis management team to go around the world, hotel to hotel, deciding what we needed to do.”
With 33 hotels in 24 countries, this was no easy endeavour. “It was complicated because every country has different labour laws and different government support measures,” he says. “We had to think about the local impact. We have cut costs in every single way you can imagine, from furloughing employees, reduced hours and reduced pay, to redundancies, depending on requirements around the world.”
A saving grace is that the group was also prepared financially. “As a company, we’ve always had a very conservative view on the way we’re financed,” Beattie says. “We’ve always understood the hotel industry is very volatile, and we don’t have a lot of debt, so I didn’t have to spend too much time on the banking side of things. Instead, my focus was on people, cost management and trying to do the right thing.”
There’s a number of opportunities coming out of this crisis
The group quickly rolled out a global health and safety protocol programme called We Care. It also turned attention inwards to the wellbeing of its staff. “One of the benefits of our brand is that we’ve got an experienced wellness and spa team,” says Beattie. “We turned their focus, which had been around the customer, internally and ran webinars for colleagues on mental health, resilience, stress management and meditation skills.” The spa team developed a programme called Inner Strength – Outer Strength, which they now plan to roll out to guests.
“There’s a number of opportunities coming out of this crisis,” Beattie says, citing other examples of brand growth such as tapping into the local market. “With borders closed, the only customer base we’ve had are the ones down the road, so we’ve had to think about how we market to our locals.” From online shops to food delivery, the group has launched various initiatives to cater to a different customer base – including a sizeable investment in Stay One Degree, the UK-based specialists in luxury private home rentals.
As for the future, Beattie says the group’s long-term strategy hasn’t changed much because of Covid. Rather, he says that trends Mandarin Oriental was already working towards have been amplified. They include a reduction in business travel – “reduced corporate travel budgets impact the number of employees able to stay in a Mandarin Oriental on business” – and an increased focus on leisure: “We are developing our portfolio of resorts and beachfront hotels.”
He adds: “The big change has been the speed and agility. We’ve just had to get on with things instead of rolling them out over time.”
Angela Vickers CA, CEO, Apex Hotels
As an independent group with 10 hotels across the UK, Apex didn’t have the safety net of a global brand to fall back on during the pandemic. Its hotels, located in tourist hotspots London, Bath, Dundee, Edinburgh and Glasgow, were forced to close for a number of months and “the constant uncertainty of changing rules and guidelines” meant it was difficult to plan too far in advance. But from the crisis came a chance to restrategise, says Angela Vickers CA.
When the Covid-19 crisis hit, cashflow forecasting was top of the agenda for the hotel operator’s finance department. “We took advantage of [government loan scheme] CBILS funding to prop up finances – with hotels closed and very little revenue coming in, bills still had to be paid,” Vickers says. Furlough schemes were utilised, and staff cuts were made, as the group battened down the hatches to stay afloat in the short term. The long-term strategy, meanwhile, shifted to diversification and future-proofing.
“We need to operate a sustainable financial model that is capable of being passed on to the next generation,” she says of the family-owned independent. “We quickly saw the need to diversify our product offering to ensure there is always an opportunity for revenue should we find ourselves in this situation again.”
Once the world is ‘back to normal’, this will certainly be the way meetings will look in the future
Among the new initiatives was Be Go Do, an online booking tool that connects guests with unique experiences, and health and safety programme Apex Assured. Looking forward, the company is preparing to tap into the business market by rolling out its Work at Apex programme which enables customers to book hot desks in co-working areas, private rooms, training spaces and more. In addition, it has invested heavily in hybrid events. “Once the world is ‘back to normal’, this will certainly be the way meetings will look in the future,” Vickers says.
Citing adaptability, flexibility, teamwork and communication as the qualities that got the company through the crisis, Vickers praises her colleagues for rising to the challenge and handling the ever-changing situation, while keeping an eye on the future. “The goalposts have been constantly moving, so our teams have had to be dynamic in how they react to the new rules and regulations,” she says. “It was tempting to get sucked into the here and now and short-term decision making. But it was important to bring it back to the bigger picture and remember it was a temporary setback from which we have to emerge stronger.”
Vickers predicts that Apex Hotels will be back to pre-Covid profits by the end of the 22/23 financial year, although she suspects the demographic of guests may skew slightly: “The biggest demographic change short term will be in the domestic market. Normally we’d have a 50/50 split of overseas and domestic customers, but this summer we expect to see very strong demand for staycations.”
Nadeem Boghani CA, owner, Splendid Hospitality Group
As well as steering Splendid Hospitality Group through the Covid-19 crisis, Nadeem Boghani CA, as the head of a family-run business, has the extra pressure of protecting his kinfolk’s legacy. “The ambition is to hand over the business to the next generation in a stronger position than we’re in now,” Boghani says. “We had to get very strategic. We had to balance the long-term horizon for a family-owned business with specific short-term decisions that were necessary for us.”
His immediate focus was on cash management and preservation. In the early months of the pandemic, the group utilised the UK government’s furlough scheme, topping staff wages up to 100%. “We wanted to give staff enough time to adjust to reality and get their finances in order,” Boghani says.
At the same time, owners and senior managers took a pay cut, and the company raised a hardship fund to help staff in need. “We’re a family-run enterprise with family values at the heart of our organisation so doing what is right for our staff is essential,” he says. “You can’t depart from your values when the chips are down.”
There’s a lot to be said for doing networking and team-building in person and I think that aspect will come back and give hoteliers a boost
The group’s long-term strategy also shifted gears. “One area we did progress on was working on our planning applications, extension possibilities and rebranding,” he says. It also explored other opportunities, for instance working with organisations to make some of its 21 properties available to homeless charities and asylum seekers. “We might keep that going for as long as it’s available as it’s part of our corporate social responsibility,” Boghani says.
The group is also considering investing in long-stay hotel apartments, which Boghani believes will be a big future trend, and working with hotel partners – major brands such as IHG, Accor and Hilton – to ensure that existing spaces are safe in anticipation of a strong return to corporate events. “There’s a lot to be said for doing networking and team-building in person and I think that aspect will come back and give hoteliers a boost,” he says.
In the meantime, Boghani is confident that the staycation business will boom. “The financial crash of 2008 taught us that if people’s pockets are that little bit lighter, holidays are still a priority,” he says.
Staycations at the group’s properties were already on the rise after the first UK lockdown. “Our hotels in cities such as Oxford, Edinburgh and York traded really robustly last summer,” he says, “although London really suffered. I hope that when we open up, the staycation business throughout the UK is strong and that London bounces back as well.”
Attitude is key to the family-run company’s success. “Faith eliminates fear,” Boghani says. “But to trade your way out of it, when you’ve taken on extra bank borrowings and you’ve had huge losses, is not going to quite cut it. If you develop and asset manage your way out of it as well, you can rebuild faster.”
Back to business
Kanishka De Livera CA, Corporate Strategy Director, American Express Global Business Travel
The Covid-19 pandemic hit just one year into Kanishka de Livera CA’s new role with American Express Global Business Travel (GBT). “It has been a challenging induction,” he admits. “Pre-Covid, we were fortunate that we’d just completed a five-year plan and were in the process of developing the next long-term strategy. When Covid hit, we had to reassess. But fundamentally, we believe many of the long-term themes expressed by our customers continue to be relevant.”
During the crisis, the business travel management company identified three priorities: protecting customers, protecting employees and protecting the business. This included repatriating 100,000 travellers back home in a matter of weeks, making offices Covid-secure and making use of government support schemes.
While de Livera admits to changes to why, where and how customers are now travelling, he believes much of this will be temporary. “Looking at previous crises, what tends to happen is long-term structural trends accelerate, while trends that have their roots in that crisis have less continuity,” he says. “Because people are simply accommodating a new set of circumstances, not changing behaviour for the long term.”
Collaboration is a key component of a company’s culture and travel has a big role to play in bringing that culture together
One such trend is virtual meetings. Video-conferencing has existed for decades, and while it is now the norm, de Livera believes when travel returns, many companies will go back to face-to-face meetings to stay competitive and for team-building. “Today everybody has to meet virtually, but when that level playing field ends and people can meet clients again, the vast majority will likely revert back,” he says. “Think about those sales meetings where being there in person has made the difference. Collaboration is a key component of a company’s culture and travel has a big role to play in bringing that culture together. As a business travel community, we have an opportunity to create that forum.”
Once travel resumes, it will be vital to ensure journeys are safe. “Travel is going to be complex for a while but helping our customers navigate complexity is fundamentally why GBT exists,” de Livera says. “We provide safety, duty of care and comfort within the limitations of protocols.”
GBT’s leadership have been advocates for the entire travel industry and would like government and NGOs to do something similar. “The biggest problem isn’t confidence so much as restrictions,” he says. “When you lift the restrictions, the demand is there, but governments are working in a fragmented way. We are working with the World Travel and Tourism Council and other global bodies to encourage governments to have interoperable systems which can start to get people safely moving again.”