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Travel Company Leaders: Time for a Strategic Reroute

5/23/20 | Authored by George Roukas and Philip Wolf, Edited by Maggie Rauch |

As the spread of COVID19 accelerated through the beginning of the year, the travel industry suffered quickly and deeply. And now as cities and countries gingerly reopen their economies, travel businesses will be some of the last to revive. Hotels, cruise lines, and airlines face a storm of challenges. Their normal operations are a prime opportunity to spread disease. Travel cannot be done virtually. Human contact is a requirement and one of its best features in all but its most stripped-down forms.

Did you plan?

The speed and power of COVID19’s impact on travel have tempted some to label the pandemic a black swan event. While it is true that the consequences have been extreme, and caught leaders of industry and society unprepared, the “black swan” label does not fit. The definition of black swan events requires that they are not only extreme, but also unforeseen and unpredicted. Since the millennium, we have endured SARS, H1N1 flu, and MERS. We have seen a number of contagion movies including one called, in fact, “Contagion” with a plot that is eerily similar to the unfolding of COVID19; and we’ve had luminaries from Dr. Fauci to Bill Gates warn us, years ago, that it was just a matter of time. Gates, in particular, took the time to tell us exactly how woefully ill-equipped we were and the consequences of failing to prepare. Perhaps Angelo Calvello  of Institutional Investor said it best: “Managers can’t be faulted for not foreseeing the virus. They can be faulted for not considering the possibility.”

If you had no business plans for a pandemic, or your plans were inadequate, you’re not alone. Even among those with contingencies for a massive health crisis, it is likely that few anticipated the speed and power of the virus or its corresponding effect on travel. Now that it’s here, companies need to plan for what happens next. We’ve seen survey after survey about what’s to come and what’s clear is that there is no agreement about when business will return in any meaningful way: enough of it to operate our businesses profitably. The safest way to proceed is to have separate plans for how to manage if that time comes in 1, 2, 3, or 4 quarters, or after that. Why those timeframes? Here are some reasonable considerations:

  • We are likely to see some resurgence in infections as regions and cities begin reopening business and, in the US, in the wake of the recent protests
  • We are likely to see a natural second wave of infections in the fall, and some are predicting it will be worse than the original wave
  • On the other hand, vaccines are being developed faster than ever before, and we may see some pass the test phase before the end of the year or shortly thereafter; just remember that they have to be produced in mass quantities, distributed, and administered, and that takes time, too

We must recognize that the above will have serious impacts on infection levels, but we can’t know exactly when any of them will occur, or how long they’ll persist. Planning for the next four quarters will give you enough granularity to respond to changes in the environment with enough runway to cover the most likely possibilities.

Plan for what will come, not what was

It was a common refrain in the early, surreal days of the pandemic. “We’ll be back – better than before.” People said it to reassure themselves and their teams but to many, no doubt, it sounded hollow. What will be better about contending with new fears and frictions, about rebuilding businesses with smaller teams in the wake of layoffs? 

Many leaders of companies big and small are using a pause in business to reexamine their operations. But there is more going on here that will force us to “Rebuild better.” Not least of all, this experience will imprint the concern that even after the immediate risk of catching this virus is gone, we will live in a world where pandemics become a more regular hazard of life on earth. Yes, the Spanish Flu was 100 years ago. But climate change and widespread global travel are among the modern realities that could lead to recurrences. The average time between pandemics is decreasing. Who knows how much time we’ll have until the next, and different, infection hits? Will we be any better prepared for the next one?

Speculation that office work, travel, and concerts will all go the way of the steam engine is likely an overreaction, but we will make fundamental changes to our way of life to blunt the impact of the next pandemic. Yet there’s something else at work in the way we’re changing to meet the challenge of this virus, something that’s breaking the natural tendency to snap back to the way things were. We’re not just doing things differently; we’re doing things the way we would likely have done them in a few years’ time. Many of these changes were needed and envisioned and are now on an accelerated track. Satya Nadella, the CEO of Microsoft described it as “two years of digital transformation in only two months.” The virus is acting as a digital catalyst; it’s not just pushing us on another, temporary path, from which we’d likely just snap back--it’s pulling us along a future path at a significantly faster rate. We’re heading to where we would have been several years from now, but without the luxury of that intervening time to acclimate to the change. Some are hoping to go back to their old ways as the virus ebbs, but the winners in our post-COVID world will be those who realize that, while it looks like the world of travel is at a standstill, change is accelerating. And a return to 2019 revenue volume will not mean a return to the 2019 way of doing things. Zoom video conferencing went from 10 million daily meeting participants to 300 million in just a few months. Do you really think it will go back to that 10 million when the virus is under control?

The salient point here is that there will likely be no comfort in operating your business as you did before because, even when the immediate threat and attendant challenges pass, the environment will have changed significantly and irreversibly. Responding to COVID19 will be less about providing better disinfection and more flexible cancellation policies (those will be table stakes) and more about redefining what travelers will want to do with your products and services in the new environment and how you will deliver on new demands. What to do now?  Here are some suggestions to get you thinking:

  • In the past, have you thrown bodies at processes you could now automate to reduce future costs and improve service?
  • Are you running systems that desperately need to be replaced that you didn’t have time to focus on previously?
  • Could you try something new that you wouldn’t normally do with a full complement of customers? Is now a better time to experiment?
  • Does the new environment argue for a different prioritization of your path forward? Is it time to adjust your future direction to align with new customer needs?
  • Maybe your business was facing disruptive challengers even before the virus—is now the time to pivot to something really new? There will likely be no better time to do it.
  • Do you have a wish list of “If I only had the time” items you have lacked the bandwidth to approach? With business at low ebb, now might be the ideal time.

Leaders will be tested and made based on their ability to see beyond this crisis and head in new directions that offer customers greater value in the future. Have you found it challenging to decide whether and when to cancel events and table new projects? To institute layoffs, pay cuts, and furloughs? Charting the way back up and out will be significantly more challenging, because it will require tearing up your maps and creating new ones. 

Your business – yes, yours – needs to change to survive. Understanding what to change, and taking the steps to do so, will define the next era of leaders. In upcoming posts we’ll pick apart some of the more salient changes we see on the horizon for business and leisure travel as well as for key parts of the travel distribution ecosystem.