Tour & activity industry wipeout – Tourmageddon

March 16th, 2020

Alex Bainbridge

This post is hard to write. I sure as hell hope in a couple of months time everyone can look back and say, Alex, you fool, what were you worried about. Thats the risk I take. But planning is about thinking through various scenarios……. so we do have to look at all scenarios.

The scenario I personally am working on is 50% supplier loss in the next 6 months (not by booking volume but by company number). If we avoid this, great, previous plans apply. If it is worse than this, plans are not going to help.

This potential (for planning purposes) outcome is based on projections of EU / US peek virus in 8-12 weeks, then tapering down afterwards. Which local tour operators can survive 4-6 months with no bookings followed by light recovery?

This industry is dominated by small companies, but trading volume is predominantly to the larger companies likely with more reserves, who will survive but heavily injured. i.e. 50% supplier loss is not the same as saying 50% industry wide transaction loss. It is also a number with no research behind it, although I know Arival is working on researching this as I write.

A planning number, not a prediction.

I am not saying this IS going to happen, I am saying this is the scenario I am planning on as a scenario and doesn’t seem too far fetched.

The shut down decision

One reason for the high number of likely shutdowns is that most local tour operators are assetless. In this situation it is easier to close the business, cut liabilities and reopen as a new business in 12 months when the market comes back.

If you have assets, harder decision, but are they the right assets? E.g. many bus tour companies have buses – or buses on finance – but are they the right buses? E.g. are they diesel when you want electric or autonomous? Are they too large for future light trading? Do they support 2 metre human separation within the vehicle? Do they create tour product that people may not want to book in the future if travel habits change?

If you have rights or relationships (e.g. rights to tour or operate in certain places that are hard to negotiate) thats REALLY tough call to close your biz, as you may not get those rights back again if you restart. See if you can transfer them to an individual OR perhaps go humanless trading – e.g. audio tours / Sahra the sightseeing robot – might be sufficient for rights retention during a prolonged tourism shutdown.

If you have land or buildings, I don’t know. Based on the individual situation.

What you want to avoid is deepening a debt and then in +2 years still having this debt, vs companies that are newly formed after this is over (and it will be over). You may think that by staying alive at all costs will lead to the best outcome, but it may not be when you look over a longer timeline.

One of the aspects of the tours & activities industry is it really doesn’t require too much investment to start a new business (unlike say flights or hotels) so shutting and restarting may be the best approach, especially if you are assetless.

This is not legal or business advice, please take independent advice relating to your own situation and trading legal environment.

Non-operator considerations

GetYourGuide: Were going to fire their suppliers over the next 3-4 years and now 12 weeks later they need help from these same suppliers for their own survival – Will GetYourGuide commit to cancel the GetYourGuide Originals programme in return for supplier help now? Or will GetYourGuide go headfirst into GetYourGuide Originals regardless of current supplier sentiment? One of these has to happen.

Whole market aggregator model seems to be a competitive advantage no more if the suppliers are not around in a wipeout scenario. All that effort to onboard suppliers, configure product, connect to long-tail reservation systems – could be lost, at least as a competitive advantage. Not a good time to be Tripadvisor / Viator as this was their positioning advantage.

The concept that “suppliers won’t churn between reservation systems significantly as friction too high” about to be fully tested, especially in a close and restart scenario at the long tail. Not good at all for long tail reservation system providers. OK for those who focus on the larger company end of the market and the larger attractions as they will bounce back eventually.

Opportunties

If we have to build a new cohort of local tour operators – should we rebuild the industry like it is today? Or do we rebuild it in a vertical manner? Vertical (like GetYourGuide Originals) means we can re-employ people quickly. Horizontal (like today) means we can have entrepreneurs at all industry layers. Entrepreneurs vs immediate reemployment – how the hell do we decide that?

If this is a wipeout and rebuild, what about AngelList for local tour operators, helping them get started and introducing entrepreneurs to investors? Anyone interested in building that? I might be.

Final thought

In business you want to win, but its not win at all costs, e.g. winning because of a global pandemic, that feels very dirty.

I am going to put this blog on hold for the moment. Will write again if I have something to say. (I do have a really good post lined up for what I was going to say at ITB Berlin, minus the announcements. Think may post it in a few weeks as good as a historical position, although all of it is obsolete now, 2 weeks later).

In the meantime I am working on tech to assist the recovery (see my previous blog post). I have also started, with Pete Syme and Chris Torres, a new resource: Tourmageddon

Tourmageddon is in 4 parts:

  • Links to news and statistics of the impact
  • Recovery plans – how do we get out of this mess?
  • Do you need help? List if you need help and not sure who to turn to
  • Can you offer help? Companies and individuals are offering help. Some are listed here.

Do visit and subscribe to the Tourmageddon update alerts. Our primary focus is helping each other out and recovery, rather than bad news.

Be safe all.

Alex

ps – in a few years time we can laugh about the domain name – especially when you look at when I registered it…..  In the meantime, we have recovery work to do

Image: Flickr: Bennilover

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