Did You Know?

Hotels and tour operators face ‘total meltdown’

This year was supposed to be a bumper one for travel and tourism companies. Demand for holidays was booming, particularly from growing Asian middle classes, while global flight bookings were racing ahead of last year.

Some tourist boards were forecasting record levels of spending from overseas visitors, with the UK preparing to greet the highest ever number of tourists.
But hotels, tour operators and theme park owners across the world are now facing “total meltdown” after the World Health Organisation declared the coronavirus a global pandemic, several countries imposed lockdowns and the US banned the entry of citizens from 26 European countries.

Hilton and Accor, among the five largest global hotel companies, withdrew their forward guidance for the year on Thursday, as did hotel website Booking.com. Princess Cruises, Saga Cruises and the river boat specialists Viking suspended operations as the US and UK governments advised people over 70 or with underlying health issues to avoid cruise holidays.
Disneylands in Paris and California have closed until the end of the month. Even Mount Everest has been shut off.

“As a 100-year company that takes the long view, we are confident in our resilient business model,” said Hilton chief executive, Chris Nassetta, as the group announced it would increase its borrowing from $255m at year end to $1.75bn.
UK-based Saga, which provides financial services and holidays to the over 50s, warned on Friday that stopping its cruises until May this year would hit pre-tax profit by £10m-£15m.
“I have never seen anything like this. It’s total meltdown,” said Tom Jenkins, chief executive of the European Tour Operators Association, who started in the industry as a tour guide in 1986. “Not only weak companies will go to the wall but even perfectly viable companies will go out of business.”

Tui, the world’s largest tour operator, said it had stopped recruiting and had frozen deposits to hoteliers after shedding around two-thirds of its market value since the beginning of this year. Analysts at the investment bank Cowen lowered their earnings forecasts for Booking.com and Expedia by 50 per cent and 100 per cent. Few businesses have been able to take advantage of drops in the oil price as most fuel costs are hedged.
The World Travel and Tourism Council warned on Friday that up to 50m jobs were at risk in the travel industry and that the sector could shrink 25 per cent this year —equivalent in financial terms to a loss of three months’ global travel.
“This is unprecedented,” said Sonia Davies, chief executive of the luxury tour operator Scott Dunn. “It’s a situation that is just changing daily as governments in different countries change what they are doing.”

The number of flight cancellations overtook the number of bookings in the week to March 8, according to the latest data from ForwardKeys, with reservations from the US to Europe and Asia both falling more than 130 per cent compared with the same period last year.
With analysts estimating falls in hotel bookings of around 60-70 per cent until June at least, the question for many companies in the sector is how long can they last with coronavirus restrictions in place?
“When you talk about mitigations and managing costs there is only so much you can do when occupancy has dropped by 20, 30, 40 per cent,” said Gaurav Bhushan, chief development officer at Accor. “Everyone is panicked in hotels when business drops to such a significant effect.”

One employee at a UK-based group that sells short breaks to Europe said 45 per cent of its revenues came from Italy, which is now on a total lockdown because of the virus. After £275,000 worth of sales in February, the company made none in March and was cancelling all the bookings made previously.
Directors were having “standing” meetings as they were “too stressed to even sit down”, the person said, adding that if the virus outbreak went on much longer the company could go under. 

TravelSupermarket, the price comparison market for holidays, said some countries were still benefiting from the crisis. Searches for holidays to Santorini, a Greek island yet to report any cases of coronavirus, were up 165 per cent last week compared with the week before. Searches for holidays in Barbados were up 88 per cent and up 70 per cent in the Maldives, despite it reporting its first case last weekend.
Dana Dunne, chief executive of the online travel agency eDreams ODIGEO, said customers were still willing to book holidays, but with close departure dates.
Already some hotels were advertising steep discounts to entice customers for the summer. Melia, which runs more than 350 hotels, was this week offering up to 45 per cent off summer 2020 bookings in locations such as Alicante and the Costa del Sol.
H10, which owns the hotel quarantined in Tenerife because of the Global Economic Crisis, launched a “Tenerife special”, offering guests 30 per cent off and free cancellation for stays until the end of October.

Written by Alice Hancock in London MARCH 14 2020 and additional reporting by Leila Abboud and Nikou Asgari.

This article was publisched in the Financial Times https://www.ft.com/content/d5bf7094-6514-11ea-b3f3-fe4680ea68b5