For tour operators the Coronavirus presented the worst crisis since 9/11, and in many ways could be more damaging, though some signs are pointing toward a return to normalcy in the future.
Just last December at its annual conference the U.S. Tour Operators Association reported that 82 percent of its members were anticipating growth in 2020 and 45 percent were expecting a “boom year,” defined as growth of 7-10 percent or more. As always, the projections were accompanied by the caveat, “as long as nothing happens…”
Then in late January the Coronavirus began its global rampage in earnest.
“It’s really a perfect storm,” Steve Perillo, president of Perillo Tours, told Travel Market Report.
For a tour operator known for three generations as “synonymous with Italy,” the Coronavirus strike was devastating.
“We had the best year in probably 25 years this year,” said Perillo, “2020 was fantastic. Then in two weeks we lost March and April because the CDC and the State Department put out the warnings.”
The first warnings were only for the northern part of Italy.
“At first we thought we would leave out Milan and Venice and stay in the south,” said Perillo, “but people didn’t want to go, so we canceled March and April.”
Perillo allowed customers the option to cancel for a full refund, if they wanted, or to postpone to a later date with a $200-per person discount. For the tour operator, the second option was preferable.
“Most people are very understanding,” said Perillo. “They want to go. Most are rebooking in the fall or postponing till next year.”
Perillo’s experience was soon replicated by other tour operators in rapid succession as one destination after another shut down, like dominoes. In the space of a few weeks, tour operators saw their dreams of a banner year evaporate.
With its successful 75-year history Perillo is well positioned to withstand the shutdown and the strain on cash flow. Not all tour operators are.
Up against the wall
In the past when business went down over some incident or disaster in one part of the world, it usually continued in other parts. Often those who canceled trips to one place just rebooked to another destination. Tour operators were challenged to exercise their agility in redirecting guests.
Most tour operators learned that they if they wanted to survive in a turbulent world they would have to diversify and set up operations in more than one destination. That way when an incident took place in one area they would have a fallback.
But this time was different. The lethal virus spared no one. Over a dizzying two-week period, practically the whole world shut down. Tour operators soon learned that their efforts to stem the flow were futile.
For many tour operators, a total cessation of business for a period of months could be an existential threat.
Driven to the brink
Tour operators are especially vulnerable to shutdowns of travel because it is a highly competitive market that forces operators to cut margins to a minimum to keep prices low and remain competitive.
They move a lot of money around, from clients to their suppliers, such as hotels, transportation providers, guides, restaurants, museums and attractions, etc. But they don’t keep much of it.
The yearly calendar is broken into periods when money flows in and when money flows out. It’s a large flow with only a relative trickle landing for keeps in the coffers of the tour operators themselves.
Consequently, tour operators confronted with a sudden run on the bank try to hold onto cash, to persuade customers to leave their deposits with the company and just postpone to a later date.
“To refund all the money, most companies don’t have it any more,” said Perillo. “I have a cushion. But for those who don’t have the money to refund to the people, it’s going to be a bloodbath. If someone wants their money back, you have to give it to them.”
When the bottom dropped out, it was for most tour operators the time of year when bookings were coming in and deposits were being placed. The winter travel market was in swing, but most of the activities were based on travel during the summer high season.
But by early March, almost no one wanted to travel anymore, and soon most of those who did were prevented from doing so by government restrictions.
The cash flows that normally take place over the year were halted and suddenly the only flow was outward. Practically no one was booking, or traveling, and many of them wanted their money back. All at once.
Now that business will be shut down for a while, those who can withstand the pressure, are moving beyond trying to preserve cash. Instead they are trying to rise to the occasion in an unprecedented crisis with higher levels of service to reassure customers and cement customer relations so they will be well-positioned when the storm passes.
With China now reporting no new cases, and countries around the world taking similar measures to halt the spread of the disease, an end to the full-blown crisis seems to be in sight.
“We do feel this is peaking right now,” said Ashish Sanghrajka, president of Big Five Tours and Expeditions. “I am actually on the road at a travel conference in Canada as we speak and that seems to be the consensus. The conversations we have with our advisors and our travelers uncover the same conclusion – that guests are more concerned about the quarantine possibility than over the virus itself.”
A loyal customer is an annuity, and there is nothing like reassurance during a crisis to cement customer loyalty.
Not only are the travel professional evolving through the challenge, so are the travelers.
“One remarkable thing I’ve noticed is how intrepid our international travelers are these days,” said Robert Drumm, president of Alexander + Roberts. “Well over 90% are rebooking or accepting a voucher for future travel …remarkable since no one knows how long this scourge might last or when countries will change their border regulations. Not only is our industry resilient, but so are our guests. I think that we are all becoming global citizens.”
Upping their games
“This is an opportunity for any and all tour operators to step up and show that they are indeed human,” said Dan Austin, president of Austin Adventures. “We are typically a caring compassionate bunch.
“This is an opportunity to rise above the fray and demonstrate exceptional customer service. People are so tired of IA, robots, cold processing, FAQ’s you could read for hours. A personal message from the front lines goes a long way. I am working more now than ever, 16-hour days, responding personally and taking any and all calls. No sales pitch, just listening, compassion and honest ‘we need you.’”
Although Austin Adventures is seeing unprecedented cancelations, the panic is subsiding as the company responds to its customers in a calm, supportive and non-defensive manner.
“We are finding that a flexible, head-down approach is serving us well,” said Austin, “looking for answers and providing not just support but optimism.
“We are taking each day and each situation on a case by case basis. We are doing more listening than anything. The good news is we are seeing resilience and positive signs on all fronts.”
As earth-shattering as the COVID-19 crisis seems, it is not the first major crisis of the travel industry and it will certainly not be the last. As the dust begins to clear and a path toward a future beyond the crisis comes into view, tour operators are putting one more trial under their belts and building a higher quality of service for the future.
“Definitely this has impacted everyone,” said Big Five’s Sanghrajka. “The world has come to a standstill. We need to look at this as a strong message that – A. We are being forced to remember what little victories look like and to celebrate them, and B. to continue to be selfless.
“All over social media, what is being missed in all of this is the ‘collateral beauty.’ The retail travel agent is being reborn and is getting so much positive press. Individual business owners are working tirelessly to help their clients regardless of what their income looks like.
“Just today, we got guests out of Egypt. The travel advisor and we worked tirelessly, including buying two business class tickets for the clients on our dime to fly home, while the airline approved the endorsement to another carrier. And all this while 70 travelers without a travel advisor and dedicated partner spent the night sleeping in the airport. Things will get better.”