Cost-cutting measures may become long-term for travel intermediaries

Globaldata Travel and Tourism 9 April 2020 (Last Updated April 9th, 2020 14:55)
Cost-cutting measures may become long-term for travel intermediaries

Cost-cutting procedures have been put in place to mitigate the effects of Covid-19. Post-pandemic, if operations remain somewhat efficient, alterations are likely to remain.

The array of operating expenses that have been cut include business travel, marketing, recruitment and staff adjustments alongside many other areas as companies look to cash conservation to weather this storm.

Due to the significant impact of Covid-19, the travel space will not return to normality for a sustained period of time. Therefore, internal strategies are likely to undergo significant evaluation. Cuts to areas such as business travel may remain in place post-pandemic as the threat of a global recession looms over the travel sector.

Large scale OTA’s were already beginning to simplify operations

Before Covid-19 was declared a global pandemic, Expedia Chairman Barry Diller announced that the company was ‘bloated’ and created an agenda to simplify operations across 2020.

$300m-$500m was announced to be cut from annual operating costs and 12% of the workforce was then laid off at the end of February. This action was one link in a chain of measures to increase efficiency across the business.

Following this, in the fourth quarter and the final year 2019 earnings call the CEO of Booking Holdings – the main rival of Expedia – announced that cuts are likely to follow. Figures are yet to emerge but amendments are likely to occur in the near future.

Strategic evaluation is more frequent due to the extent of the crisis

The Covid-19 outbreak is forcing companies to adapt quickly and alter business operations.

A company will usually undergo a strategic evaluation every quarter or half a year to monitor progression and alignment of goals in accordance with its vision, strategies and objectives. Yet, in light of current events, strategic evaluation is likely to occur weekly as all companies fight for survival during this time of heightened uncertainty.

This continuous analysis will offer companies the opportunity to keep in line with ongoing developments and the impact of Covid-19, analysing balance sheets and deciding where spending and investment is critically needed and also where it is not.

Business travel and transportation costs, for example, will have significantly declined due to a major lack of accessibility. Investment in virtual tools such as Zoom will be more cost-efficient, causing management to question operating expenses within this area.