The COVID-19 pandemic is having huge effects on almost every sector of the economy, but almost nowhere is this being more keenly felt than in the travel industry. If you run a travel startup, your marketing planning for April 2020 likely didn’t include “survive a global pandemic.”
But now you’re going to have to.
The entire travel industry is facing a huge stress test, with demand for travel and associated services down across the globe as people need to self-quarantine. Startups are, in some ways, particularly vulnerable to short-term market fluctuations, especially if they are at an early stage of funding acquisition.
On the other hand, the agility and flexibility that small startups possess means that some may be able to rapidly adjust their business models to survive – and even take advantage of – the current crisis. Doing so means mastering crisis communication, but also taking a strategic view of where your business stands today, and where you want to be when the pandemic subsides.
In this article, we’ll show you how to keep your travel startup alive during these unprecedented times.
The challenges for the travel industry
If you work in the travel industry, it’s likely that you are already acutely aware of the difficulties that the current pandemic represents. When taking a strategic view, however, it’s worth recognizing that the kind of demand shock that has been created by global lockdowns is not unique to the travel sector. People have been instructed not to travel, but in many countries, many other types of business are also closed.
That might not sound reassuring, but in reality, it points to a salient observation about the difficulties in the travel sector: they are not unique. This means that, as a travel startup, you can cast your net widely when it comes to searching for resources to help you deal with the current business environment.
There are plenty of lists of resources designed to help startups through the crisis, but one of the best comes from GGV Capital, who have collected a number of guides and response plans that are relevant for startups of all sizes and in all sectors.
Most of these resources present some variant on the following steps:
1. Cut non-essential costs
The first mechanism that will come to mind if you are a consumer-focused travel startup is to use price reductions to increase demand. The problem with doing this, in the current situation, is that it doesn’t target the root of the problem: people aren’t deciding not to travel because they can’t afford it, but because they have been instructed not to.
For most startups, this means that short-term liquidity and survival will depend on cutting costs rather than increasing revenue. You should look closely at your outgoings, contact your investors and contractors, and try to negotiate a payment holiday. You can also consider cutting staff, but this should always be a last resort, because after the pandemic passes, highly-skilled staff will be in huge demand, and you may find it difficult to rebuild your startup without them.
Your goal should be to keep your startup alive until investment activity picks up again. One issue with the current crisis is that many startups will fail before they get funded, so if you can hang on until the pandemic subsides, you are likely to catch the eye of opportunistic investors and companies seeking to make an acquisition. Or, worst case scenario, take out a small, calculated business loan from a bank or via the Fed’s new Paycheck Protection Program (PPP).
NOTE: Fundind for the Paycheck Protection Program is limited, though U.S. congress is looking to allocate additional funding for small businesses to utilize. For the latest info on the PPP, see the SBA’s official website.
In these dark times, remember that some of the most successful startups in the last decade were created during the market downturn in 2008 to 2009, including Slack, Uber, and Airbnb.
2. Look for new opportunities
Secondly, don’t be tempted to conclude that the reduction in demand for travel services is affecting every country and region equally. Take a systematic and methodical look at precisely how travel restrictions will affect your business, and look for creative ways to change your offer. You could, for instance, switch to targeting short-haul or domestic travelers, since internal travel has not been restricted in every territory.
Another approach is to use this period of enforced downtime to look for opportunities to improve your operational systems. With less demand on your time and that of your staff, this could be the time to complete those tasks you’ve been putting off: migrating to cloud storage, for instance, or undertaking a security audit of your web apps. Getting these tools and processes in place will ensure that you are in a better position when demand finally recovers.
3. Think long term
Remember, above all, that this pandemic is temporary. If you were planning to enter a funding round at this time, it’s probably best to put that on hold. This is not only because many investors are pausing their investments during the crisis, but also because those that are investing are looking to snap up a deal.
The valuation of your startup – and particularly travel startups – will be much lower now than in normal times. In addition, if you have been courting investors who are now hesitant to invest in the travel industry, now is the time to reassure them by referencing the long-term statistics on the industry.
4. Use your expertise
You should also recognize that, as a travel company, you are uniquely positioned to reassure your customers. Many travel startups base their USP on the fact that they have both local knowledge and global reach, and so you are likely more connected to what is happening around the world than many purely domestic companies.
You can utilize these contacts, and your expertise in working internationally, to generate intelligence on exactly what is happening in the regions and territories that you work in. Doing this has two major advantages. Not only will it allow you to react to upcoming shifts in markets quicker than your rivals, but it will also allow you to reassure customers who are less well informed than you are. This can help to mitigate the level – and impact – of cancellations.
Some startups are even donating their expertise and resources to the fight against the virus. In addition to being an objectively good thing to do, these initiatives can also help your business’ sustainability. Not only will helping out improve your brand positioning, but it will also bring you to the attention of investors who are looking for agile, socially responsible startups to invest in.
5. Build partnerships
After working through the steps above, you may have concluded that you need to radically change your business model in order to survive the next few months. Not surprisingly, many businesses have pulled back on higher growth channels like affiliate marketing, including giants like Amazon to upstarts like Ally Invest. That’s great for them, but for many bootstrapped businesses this gives rise to another problem: how to take advantage of technology and new forms of advertising to reach new audiences in new ways.
An effective way to do this is to reach out for partners. Many startups, across many industries, are experiencing short-term issues with demand, and by teaming up with another business, you will be able to leverage the skills, expertise, and knowledge that both of you bring to the table.
A good example of this is Airbnb, which has recently partnered with a number of businesses, nonprofits, and governments in order to provide housing for healthcare workers. Other startups have helped their customers to prepare for their next trip by recommending tools for travel such as VPNs for travelers or recommending travel insurance.
Practically speaking, the best way to look for partners is to research those industries that are being hit by the pandemic, and then reach out with an offer to share resources and expertise. And who knows: a short-term team built in this way could even lead into a long-term partnership.
6. Communication
Last, but definitely not least, you should remember the importance of communication during these times of crisis. How you communicate with your customers, partners, and investors in difficult times says a lot about your business, and research shows that all of these groups actually trust the companies they do business with more than governments, NGOs, and think tanks.
There are a few ways to improve communication. Some startups are using video to engage supporters and to provide weekly updates on their response to the pandemic. Others are even making their internal communication plans public, in order for colleagues to learn from them. The key to all these approaches is honesty. Your investors – in particular – will be looking very closely at your projections for the coming year, and if these are not credible you are likely to lose their confidence. In other words, a genuine assessment of your position is more valuable to investors than blind optimism.
Related to this point is another which is very important but often overlooked. Cybersecurity analysts have pointed to a huge increase in phishing attacks over the past few months, and you should take steps to avoid hackers impersonating your company to commit crimes. This will involve investing in a secure internal email system, and giving staff who are working remotely access to a VPN that will protect your sensitive personal information.
The future of the travel industry
Given the current difficulties that startups are facing in all industries, it might seem insensitive to mention that the pandemic will also create opportunities for startups, but this is the truth.
Companies agile enough to adapt their business processes to COVID-19, and thereby survive the next few months, are going to find that the post-pandemic market is a lot less competitive.
In addition, the lessons learned during the pandemic will be invaluable to travel startups in responding to future crises. In other words, if your startup can survive this pandemic, you will be able to survive anything.
Research on what the travel industry will look like after COVID-19 is still being conducted, but it seems clear that a number of key elements of the market will change. Given that many airlines are offering air miles rather than straight refunds for canceled flights, there is likely to be a short-term spike in international travel as soon as flight restrictions are lifted. On the other hand, many families who have taken this years’ holiday within their own country might have found a more convenient – and cheaper – repeat destination.
Third, travelers are going to require reassurance that their planned destination is safe from the virus for years to come. Startups in the travel industry will need to ascertain how these trends will affect business, and plan for them. Though the pandemic is temporary, it is likely to have long-term effects on the industry.
The bottom line
Let’s return to the present, though, by reiterating that this is a crucial time for the travel industry. Some are predicting that the market will be permanently changed by the pandemic, and it certainly represents a major test for startups. Many of the tools, processes, and ideas above will be familiar to successful startup CEOs, because they form part of the must-dos for travel professionals in normal times, but their importance has been greatly magnified by the crisis.
At the very least, travel startups need to ensure that they are able to retain staff, expertise, and investors through the next few months. If that involves putting your expansion plans on hold, or even limiting your services for a while, so be it. If you can survive this, you might find that the respect afforded to you for merely surviving this calamity will be enough to take your startup to the next level.
The post How to Keep Your Travel Startup Going During the Coronavirus appeared first on Constant Contact.