We've heard it time and time again: the coronavirus pandemic is unprecedented. We can liken it to the effects on the travel industry during and post-9/11, SARS, MERS and recession years. It is similar in that travel will bounce back eventually. Unfortunately, we may have a long road ahead of us, because this pandemic is far-reaching.
Within the Travel Leaders Network and across our industry, travel advisors remain focused on helping their clients with refunds, rebooking or on still trying to get clients home. We have an advisor, Kurt Crowl in West Palm Beach, Fla., who has universities as clients and, in a couple of cases, he has been working with them to bring home groups of study-abroad students stranded in Peru. With one student who was studying in Zambia, they experienced flight cancellation after cancellation through Europe. Crowl eventually got her home to Miami via Sao Paulo. Pam MacIntyre in Maple Grove, Minn., helped a couple indefinitely postpone their international honeymoon two weeks before the trip. Alex Kutin in Indianapolis has seen his business drop 70% and lost a $65,000 booking on a destination wedding in Jamaica when the couple and 35 guests had to cancel.
These are the stories we are hearing throughout the travel agency industry. Advisors are the unsung heroes. They are steadfast in their work to assist their clients, all while knowing that their sales are plummeting and they don't know for sure when they will recover.
The stimulus package from the government should provide some relief, but in the short-term agency owners must take action.
Kate Rosevear, an owner in one of our Michigan locations, dropped her salary to zero so that she can continue to pay her staff. She says if the industry recovers in three months, she'll pull out of this OK. But if it goes on for longer, she will need major financial assistance. One of her large corporate clients is in the racing business, and with the brakes on Nascar, those bookings are at a standstill. Owner Pam Edwartoski, also in Michigan, our automotive capital, runs an agency where 80% of her clients are corporate, and half of which are tied to the automotive suppliers. Her agency would normally be booking tons of travel to China, Italy and India. In order to stay afloat, Pam has already laid off a part-time worker and, for her staffers who handle the corporate business, they are now working three days a week.
As the impact created by Covid-19 persists, you will be forced to make important, fundamental business decisions that will determine if and how your company survives this storm. Your clients have businesses and investments too, and they are looking at cutting expenses, or at least waiting for a point of greater predictability and stability, before spending on travel again.
The secret to surviving a business downturn is managing cashflow. I recently delivered a webinar to Travel Leaders Network members with several tips geared to help agency owners work toward improving their balance sheet. The first step is to cut or reduce your monthly expenses by focusing on the largest items first, such as salaries, and then moving on to expenses such as rent and utilities.
Cutting labor costs is not easy to pull off, but here are some tips that should help you weather the storm while maintaining the morale of your most-valuable asset: your hardworking employees.
Voluntary cutbacks: Determine if there are individuals who may be interested in an unpaid leave of absence or willing to voluntarily scale back their hours.
Cut overtime: Canceling options for overtime work can save enough to perhaps save one employee's job.
Reduce hours before reducing salaries. If you cut someone's salary by 10% but ask them to work the same number of hours, it will certainly reduce productivity by the same amount or more. Better to cut hours and retain employee productivity when you can.
Suspend certain benefits. Of course, nonessential employee travel should be halted. Reimbursements for health club fees and parking spaces can be eliminated, especially given the shelter-in-place and work-from-home priorities that are in play now.
Layoffs: Consider whether you need to lay off employees. If so, try to take an action like this only once. Constant layoffs can result in distracted, disgruntled and ineffective employees constantly worried about when the axe will fall next. Consult your legal counsel before taking any employee actions.
Renegotiate your rent: Call your landlord to negotiate better terms. For example, sign a longer-term lease in exchange for lower rent. Your landlord is also running a business, and they would likely rather have you stay at a lower rent than be saddled with the costs of trying to fill vacant space.
Total budget review: Go line item by line item to determine what services you truly need with internet, office phones, cell phones, office supplies, technology costs, office cleaning or security services.
Reduce service levels. Call service competitors to see if they will give a discount if you switch providers, even if it's just for the first year. Once you have that information, renegotiate with your current vendors to avoid the hassles of switching.
Speed up cash inflows: Review receivables and follow up on all outstanding commissions from suppliers. It's money you've earned, so be thorough and firm.
Hire an expert: If you're not completely comfortable with finance and accounting and are looking for more ways to cut costs, consult with an accountant. There is almost always an area of your business where you can save money or reallocate it to spend more wisely.
Work your network: Peer-to-peer support is what Travel Leaders does better than any other such organization. Our owners learn from other owners. One of our New York-based owners, Tom Carlsen, who has 11 agency locations across the U.S., managed to cut a million dollars in expenses just by renegotiating his lease and some services. His monthly rents at various sites went down from $2,300 to about $700, saving more than $1,500 per month. He contacted technology vendors and cut expenses by 25% to 30%. One cut of $1,000 a month came by reviewing his VoIP service and noticing that he was still paying at a head count that covered retired employees. He and his co-owner, Pat VanFossen, also cut their own salaries by 33% but kept staff salaries intact. Employees are now working a four-day work week.
No one knows for sure when the industry will turn around, but we know that one day it will. Taking these small steps can help ensure that your business will also be around when it does.
Roger E. Block, CTC, CFE, is president of Travel Leaders Network, a North American travel company specializing in corporate and leisure travel. Block oversees the strategic development and growth of Travel Leaders Network, which has 55,000 domestic and international travel advisors throughout more than 80 countries. He formerly served as Chairman of ASTA as and served in its national board of directors for nine years.