The peak is close, get ready for the descent
Worldwide: Sean Worker of T5 Strategies offers his thoughts on planning the descent from the other side of the Covid-19 mountain.
It seems like we have been clawing our way up the C-19 mountain for a while now. As a cyclist, my teammates and I have [before social distancing] climbed a lot of mountains. In any “mountain stage’, we plan for hazards, bends, fatigue, equipment failure and competitors – then we GO! We don’t climb a mountain staring at the summit. Instead, we focus on the three metres directly ahead and around us. It’s still rough going but when the problem is tackled in small parts, it’s bearable and we reach the PEAK better prepared for the next challenge – the descent!
As tough as the climb was and fighting through the pain, at that point the job is far from over. The moment you hit the peak and take a breath, the descent starts. Everything changes and so must the team strategy. Descending speeds can reach between 45-80km/h, sharp bends, plunging body temperatures and tons of data to process to survive. Races can be won or lost on the descent as the finish line has yet to be crossed. The same may be true for our ascent and descent of the Covid-19 curve.
Like a professional peloton, the travel and hospitality community are generally a resilient bunch, and this includes the bankers and investors in the category. Covid-19 has delivered a powerful reminder that this sector is nearly always the fragile canary in the coal mine, first to get hit and last to come out. This crisis, according to McKinsey, is seven times worse for the US airline industry while the US accommodation sector saw an eight times drop in occupancy vs the 2008 financial crisis.
Europe and other markets are experiencing the same or worse. Contextually, over 230 countries are fighting Covid-19 today, compared to the 130 that engaged in World War Two. Today’s heroes are super brave healthcare workers, delivery drivers and all essential workers. The unsung heroes are those that have hospitality and care in their souls that are helping deliver food to the elderly, making phone calls to the isolated and simply being a good community neighbour. May this attitude remain in our social consciousness long after this passes.
In the hospitality space we have already seen casualties on the climb such as Stay Alfred and Hostmaker and deals cancelled like the one between Dwellworks and Oakwood. Airbnb has taken on more debt and overtly focused on the extended stay market segment. Many hotels have closed temporarily and some may never open again. According to McKinsey & Company [April 2020], the northern hemisphere summer travel peak season will be badly impacted. Government funding programmes to subsidise air and travel may only last about two to six months. They project that domestic travel will take up to two to three quarters to see meaningful demand return and up to six quarters for long haul and international travel.
We as a global population have never faced such a major problem simultaneously. We can see that there are as many solutions and approaches as there are countries involved. Politics, ideology and economics are sabre rattling. Nationalism, finger pointing and varying degrees of competent leadership abounds. This pandemic has exposed holes in many countries’ infrastructures, social contracts, healthcare systems, and the ability to manage through a crisis. Sadly, my guess is that a culture of blame, confusion and fear will linger for a while, but if we are going to reinvent rather than reboot, it is time to focus on these problems and unite to triage, stabilise to ultimately win what is most likely the important race of our generation.
The previous paragraph could easily refer to a business and as much a country. All is not lost, in fact according to Ray Dalio [Bridgewater and Principles], this tumultuous time will result in major structural changes and an opportunity for many to shine. Crisis drives innovation.
We as a species are inclined to survive by innovating. Will Zoom change us all into ‘Zoomites’? Maybe. Will the remote working movement become structural? Will conferences be Zoomed? Will brand-sponsored avatars invade to sell products and services? Will robots replace front desks? How will weddings, reunions and other gatherings be socially and medically safe? As Richard Branson once said: “Every success story is a tale of constant adaption, revision and change.” It is inevitable that smart minds are working to solve, innovate and adapt even as we speak. New startups are incubating and seeking funding. So what are you doing to adapt?
The peak is the first stage of recovery. We must still descend safely to find the next finish line. We have over 230 economies to reopen and probably not all opening simultaneously. Businesses will be lost, lives impacted. Yet, we press on and we will thrive!
T5 exit tips to thrive – respond v react
I. Top of the C-19 Curve – plan to descend [the downside] the slope carefully, it will be completely different than the climb up the curve.
II. Bottom of the curve plan – what do you want your business to be as you reimagine / reinvent your business? Assume nearly everything will change, cost more, and take longer. Build out two or three loose scenarios to help shape the thinking and approach of your Team.
III. Be a community hero at all segments of the curve – reputations matter, actions build trust- do what you can!
A. Build a vision for where and what you want your business to be in a year. Breathe! As an example, one major hotel company is redesigning its entire back and front office platform. With business halted, they can move fast to reinvent both experiences. Many serviced apartment operators have now built new relationships [customers] with local government and health services, as well as new companies that service these sectors. Loyalty comes out of being on the front lines together. Find your new competitive perspective.
B. Business continuity [C-19 exit plan to restart engines] – update your BCP and crisis management plan weekly. Find space for a C-19 exit wall / room set up, even a whiteboard in your house. The environment will be unpredictable at best and exceedingly difficult at worst. Break the problem into small categories so that you can add and subtract concepts and adapt as new information becomes available. This may help manage stress a little and allow you to drive towards a successful exit and a new beginning faster than most. Allow yourself to be dynamic in your thinking. If there ever was a time to test the edges, this is it. Try calling those that have been successful during the crisis and learn.
C. Cashflow management – every business should have an eight- to 13-week cashflow plan that essentially reflects your micro business plan. Cash elasticity is a practical matter. Take full advantage of any government support available. Humility is an essential survival tool at this point.
D. Demand must trust you – it will come back. Prepare aggressively. Work with your customers to help shape the likely changes in companies’ travel policies. Join or host a thought leadership group such as ASAP, AHLA, BHA or CHPA. It is imperative that we convince customers that your serviced apartment, hotel, Uber, co-living or co-working business is C-19 safe for every stay, every day. Train your sales leadership team to communicate the steps you have taken to adapt to the post C-19 world and push hard to get the message out. What will be your marketing message? Does your existing agency have the capability to impact a likely crowded advertising and communication space? I heard recently that a major consulting firm is offering its services in exchange for non-cash payments such as equity, stock or service barter. This sounds like a creative way to align and build a trusted long-term relationship. As the business academic Jim Collins puts it: “Do you know what turns your business flywheel?”
E. People – once you feel that you have a working plan, focus on:
- Staying connected – communicate with your team, be it on Zoom, WhatsApp or whatever platform you use. Be the community leader that they need you to be. Acknowledge those that are making the climb and negotiating the descent with you.
- Reassessing your team – are their capabilities and capacity in balance? Many have capacity but are they capable under the conditions they have been presented with? Look for your stars that have capability and capacity to take on more, even if they appear underqualified.
- Evolve – make the changes required and hire the teams that will help you reinvent your business. Be prepared! This stage may well occur several times as the economy scales and consumer demand picks up.
- Hire smart – middle management matters. They run the business, solve problems, and find solutions – this tier of experts will be more important than ever during scale up.
- Attitudes – people’s attitudes to work / life balance may have changed. Let’s prepare for social issues, working remotely, mental wellbeing issues and other demands such as higher wages, job security and better healthcare, maybe even hazard pay.
- You – remember, you are a person, too. Take care yourself and you will have the fortitude to care for your family and team.
F. Product trust – supply chain diversification. Buzz terms die quickly; this one is around to stay. This is hard and slow to solve depending on your business sector. Travel and hospitality, manufacturing, technology and services have now experienced what it’s like to have empty shelves. Aeroplane seats, beds and boxes have all had a visit from passenger C-19. This must be addressed. In the short–term, you may consider cooperating with a competitor or helping a local company retool to ensure continuity. Furniture and fittings may require domestic suppliers as well as foreign. This brings a whole new meaning to thinking outside the box to ensure your business functions and grows, one container at a time.
Seventy per cent of the US economy [Marketplace NPR] is driven by the consumer and consumer confidence is directly related to having a job and feeling good. The consumer has become accustomed to cheaper trusted products and will likely moan if prices rise disproportionately to wages.
The challenge ahead is to produce products that are trusted, available during a crisis yet at a price that the consumer can afford.
G. Security – physical and digital. It’s table stakes to run a trusted business. As an example, Zoom has had several “security breaches” but it learnt quickly and communicated brilliantly to instil confidence that its product was safe. Hack attempts will continue and you must have the technical support to manage them. The BCP must address a range of threats and now add C-19 attacks to your over-stretched plan. Countries have now employed security and population tracking systems that may well stay in place after the crisis has passed. How will this affect your business and adhere to laws such as the European Union GDPR protocols and others? As McKinsey and company observed: “Be clear about how regulatory and competitive environments in your industry may shift.”
H. Consolidation and partnership – expect to see consolidation. This could happen between some of the major airline carriers, restaurant chains or even cruise operators. Could a couple of the major hotel franchise companies be forced to merge to survive? At Airbnb’s valuation, is it a target? Who knows, this could be your opportunity to grow.
T5 Strategies’ team has spent a lot of time speaking with The Adapters ™ in travel, co-living, co-working, technology, academia, investment bankers and hospitality over the last couple of months. These Adapters realise that the infamous political awareness phrase, “It’s about jobs-stupid” applies now more than ever. We may well be adding healthcare and possibly rewriting the social contract between governments and their people to that adage. These times are clearly uncertain and we in business hate uncertainty. JFK had a view on the future that resonates today: “Change is the law of life. and those who look only to the past or present are certain to miss the future.”
As tough as this is right now, stay focused on your race plan; the three metres around you and the descent to the next finish line.