Coronavirus: With flights grounded indefinitely, how will travel agencies survive Covid-19?

Friday, 17 April 2020

Steve Lee started his travel broker business in 2007. Today, New Zealand Travel Brokers works with 175 contracting brokers across the country. But tomorrow? Who knows.

Along with the rest of the travel and tourism industry, the Palmerston North company is experiencing 'negative sales' as it refunds clients forced to cancel trips amid the global coronavirus pandemic.

'It's heart-breaking to see the hard toil over the last 14 years quickly disappear down the toilet,' he says. 'But we started with nothing in 2007 and we can again if that's what it takes.'

When New Zealand closed its borders on March 19, the country's $16 billion international tourism industry suffered an immediate and devastating blow. Domestic travel also ceased ahead of the country going into alert level 4 lockdown.

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'We saw the death of tourism in three days,' says Data Ventures executive director Drew Broadley, who is leading a team feeding mobile tracking data into the Government's pandemic planning. Queenstown, for example, has seen a 90 per cent fall in visitor numbers.

A discussion paper published on Friday by Koi Tū: The Centre for Informed Futures describes the tourism and travel sector, along with small business, as 'the hardest and fastest hit sector of the economy'.

'In the face of complete shutdown of international tourism for the foreseeable future, and an inevitable, potentially lengthy downturn in the New Zealand domestic economy, even domestic travel and tourism may be somewhat reduced,' Koi Tū says.

Card spending on travel agency and tour arrangement services had the biggest fall on record in March 2020, according to Statistics New Zealand.

Air New Zealand has announced plans to make up to 1460 cabin crew and 387 pilots redundant and hundreds of workers at travel agencies have lost their jobs, while others are taking pay cuts.

Travel agencies and brokers are hurting, but many are still working around the clock for their clients. Meanwhile, travellers who tried to save money by booking through third party sites such as Expedia and other online travel agencies are struggling to get assistance and refunds.

Lee hopes the crisis has highlighted the worth of, and strengthened trust in, travel experts.

Steve Lee of New Zealand Travel Brokers says the coronavirus pandemic will probably result in more travel agencies turning to remote working to minimise overhead costs.

'We've received plenty of messages during recent weeks from clients indicating their brokers have gone over and above what they would expect.

'Our guys have worked tirelessly on behalf of their clients. We said to them at the very beginning of this thing, this was their opportunity to build client relationships for life. If anything good can come out of this, it's strengthened client relationships.'

Sue Matson, retail general manager at Flight Centre, agrees. 'The expertise of a professional at a time like this is invaluable.'

Domestic tourism in the near future is likely to involve road trips highlighting New Zealand's natural beauty, rather than flights and luxury accommodation, experts say.

She recalls one customer, doing a yoga teacher training course in India, blissfully unaware of the novel coronavirus spreading around the world. Flight Centre staff eventually managed to contact her and bring forward her return flights. She was able to get one of the last available seats of out India and back to New Zealand, hours before Delhi Airport closed.

While international flights are grounded, Infometrics senior economist Brad Olsen expects to see travel agencies and brokers switch to domestic tourism – when possible – in a fight for survival.

But what's worked for the international market won't work for the domestic market, he says. 'Kiwis will want flexible packages and expert, local knowledge.

'We'll see some of the regional development agencies working with brokers. I'm actually excited to see the level of innovation the sector brings.'

Unlike international tourists, New Zealanders will probably want to keep costs down with free, outdoor activities such as mountain biking and hiking.

Infometrics economist Brad Olsen says travel agents will switch to appeal to domestic travellers, who will be looking for low-cost holiday options.

'For brokers, I think the challenge will be adding value while still keeping the bills paid. People just won't have the money they previously did to spend on tourism.'

Even when domestic flights restart, he anticipates Kiwis will prefer road tripping. 'The road trip idea very much speaks to maintaining the bubble. And with the current oil prices, petrol is cheaper than normal.'

Even before Covid-19, there was a trend away from structured bus tours and a move towards more self-guided touring, he says.

'I suspect that very much that will appeal to Kiwis.'

Even if the country experiences a steep increase in domestic tourism, it's unlikely to compensate for the lack of international visitors, says associate professor of tourism futures at Wellington's Victoria University, Ian Yeoman.

'There will be a lot of contraction and consolidation within the market.

'International visitors spend twice as much as domestic tourists. They plan for a year in advance.'

Flight Centre has announced at least 250 redundancies nationally due to the coronavirus pandemic.

For Kiwis, for the next 18 months, Yeoman expects travel will be about connecting with friends and relatives, rather than holidaying.

'They'll retrench and go back to basics, and take on conservative-type behaviour. They won't spend $200 a night like international tourists will.'

They're less likely to use travel agents to explore their own country, he says. When they do, they'll look for value.

But when asked what he would tell students heading down a tourism career path, he wouldn't deter them. 'We've gone from a situation where there have been major shortages in hospitality and tourism, and now it'll be the opposite.'

But tourism is a resilient sector, he says. 'We'll see people reengineering what their business is about and what their focus is.

'There's a strong fear factor. We paint this as the end of the world. But it's not. Countries and industries have recovered from major disruptions in the past and that will continue.

'Tourism in New Zealand in 2030 will look very different from today. It'll be buoyant and strong.'

Travel Agents' Association New Zealand chief executive Andrew Olsen says as with many service sector and hospitality businesses, many travel agencies won't survive the recession.

Business for the 5000-strong agent workforce was down around 100 per cent year on year.

'I can't think of another industry where everyone is handing back everything they made.'

But while baristas are currently unable to work, for example, 'travel agents have probably never been as busy as they are now, dealing with client refunds and queries'.

'There are a lot of talented people at home now simply managing [refunds].'

Along with Yeoman, he has faith in the sector's ability to adapt.

'Disruption has been at work in this industry for some time. We've seen the rise of online providers. In this case, we've seen a complete stop.

'But on the other side, travel agents' models will be very different. They'll be very resilient and flexible. Their knowledge and experience is their IP (intellectual property), and so you'll see cost-saving through remote working.'

The travel broker model, where agents work remotely, online, rather than from brick and mortar stores, will become more popular, he says.

He also anticipates more regulation in the currently unregulated marketplace.

'I think there's a benefit there, in a framework where everything, for example refund policies, is applied consistently. And we think more work can be done in keeping agencies safe if suppliers fail, Yeoman says.

'If you work for 40 years and an airline collapses, your business is gone. Adding more belts and braces is for everyone's benefit.'

Lee, of New Zealand Travel Brokers, says brokers' point of difference is they predominantly contract travel experts who are mobile and work remotely.

'In an industry noted for low margins, it's not surprising the [broker] model is doing so well with the low overheads that go with it,' he says.

'We already have 25 per cent of our support team working from home. And lockdown may prove that we don't even need a support office premises, who knows, nothing is off the table now.'