Danny Hood has seen it all during a career spanning four decades. In 1993 he joined WorldTravel Partners, which became WorldTravel BTI in 2001 and BCD Travel in 2006. He served the company as president of the Americas until 2010. Over the years, corporate travel boomed and busted a few times, and Hood was involved in several mergers and acquisitions. Here he discusses what worked during the tough times and how the industry can recover again.
The global pandemic is by far the most complex challenge the travel industry has ever experienced. We are just now somewhere in the middle of a sound recovery in travel, with a long way to go. While no two crises are alike, there are some lessons I’ve learned during my many years in this industry that I’d like to share as we look toward a hopeful 2022.
Virtually no travel supplier or distribution company had the vision to build up cash reserves to account for these unprecedented times. Nearly every travel company is experiencing negative cash flow and buying time with debt financing, selling or parking assets and/or selling or restructuring equity.
Most industry insiders measure a return to normal using 2019 as a pre-pandemic travel volume benchmark. This was a time of normality; in many cases, corporate travel suppliers were thriving. But in today’s travel environment, there are still many questions to answer before any full-recovery prognostication makes logical sense.
What percentage of internal meetings will never return to “in person”? Are travelers still fearful of the threat of quarantines? What will international travel’s new normal volume be? Will airlines and suppliers forecast demand accurately and adjust supply accordingly? Will furloughed pilots and staff be available and ready?
Many companies project solid black ink and earnings to return in the third quarter of 2022. Accurate projections will remain a complex management challenge.
Is it true that the past can predict the future? Even if they are just blueprints, we should all learn from the successful comeback strategies from years past.
The consequences of 9/11 spring to mind immediately. The skies were empty for days after one of the most tragic events in our country’s history. Our transaction volume plummeted and we had three options to return to profitability:
- Right-size costs
- Right-size revenue
- Forrest Gump’s approach (a little of both)
We went with Forrest. Executives elected to take a pay cut. You must lead by example even if you have an employment contract. The cost-cutting initiatives went across the board and were very painful; 70 percent of our costs were our prized employees. We carried out our financial recovery plan with three major positive thoughts in mind:
- We must eliminate 500 jobs now to protect 5,000 families’ source of income.
- We will enhance our severance policy to be as warm as possible.
- As transactions return, we will hire back as many of the 500 as possible.
We decided to right-size revenue partially with a strategic acquisition. Even though valuations can be difficult during downturns, all companies tend to be equally devalued. This makes it strategically smart to use some cash, some equity and definitely earn-out incentives.
This strategy ended up paying dividends in the long run both for our employees and shareholders. We expanded our business through the acquisition of new clients and an assembled and trained workforce.
We have found proprietary technology becomes a bonus in many acquisitions. You either adopt it for improved efficiency or “sunset” the software as a cost savings synergy. Capital One’s purchase of Lola was one recent example of acquiring a turnkey operation and team. U.S. Bank acquiring TravelBank was another. Both banks have played in the travel space and have new strategies.
Meanwhile, American Express Global Business Travel acquired Egencia and Ovation Travel, CTM bought Travel and Transport, and TripActions acquired Reed & Mackay. Even so, in my opinion, there have not been enough acquisitions and mergers during the pandemic.
I remember speaking at an industry event as air travel started to slowly return a few days after 9/11. I forecasted that governments and suppliers would lock down airport and aircraft security permanently as a result. Homeland Security and TSA’s lock-down approach worked and proved to be part of a solution that led to a full recovery and trust in corporate travel safety. It reminded me of the way we locked down our medications with “adult proof” packaging after off-the-shelf products were tampered with in 1982. Today, we are seeing that same lock-down strategy with vaccination and testing proof.
Many of us also remember the dot-com crash in March 2000. The recession that ensued is comparable to the prolonged pain we are experiencing in travel and tourism today. It started in Europe and lasted approximately two years. Technology companies in Silicon Valley were hit hard, with the downturn lasting as long as four years. Many went out of business. But many others, such as Amazon, Priceline, and eBay, recognized an opportunity to develop new technology and embrace fresh ideas.
This comparison to the prolonged recession for technology is how I think of the travel industry today, and why I’m optimistic about the future. Many industries have already recovered. We have a record stock market. Leisure travel is returning in full force and we are poised for recovery in business travel.
We must stay patient during this recovery, as did the tech companies that not only survived, but thrived after the recession 20 years ago. The travel industry is experiencing new entrants, new technology and new business models that will drive the future. We must embrace this.
It looks easy from the outside looking in but once you are immersed in the travel industry, you see a highly complex ecosystem that drives the economy and attracts innovation.
Over 100 years ago, the Spanish Flu circled the globe and killed 50 million people. I don’t know what Thomas Cook (founded in 1841), American Express (1850) or Rosenbluth Travel (1892) thought behind closed doors or how they dealt with that global pandemic, but they figured out a way to protect their clients and their businesses for steamship and passenger train travel. All three companies made it through and prospered. We will too.
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