Every day talking heads toss up a new conflicting consensus on the pandemic. Go to restaurants. Cruises are shut down. Actually you can only sit outdoors at restaurants. You can’t buy plane tickets. Festivals are cancelled. Oops, we’re closing the restaurants again. Only half capacity on flights. Have you considered taking a cruise? Our flights can be fully booked now.
All this has led to mass confusion as to what parts of our once-regular lives we can return to. For restaurants and salons, even the limited business of only-outdoor seating or limited capacity is better than none at all — especially when so much government stimulus went where it likely wasn’t needed.
Travel businesses have been taking a similar approach, opening up limited space in hotels or planes in the hopes that people would start taking trips again. Airlines in particular have rushed to return to business, which as we’ve seen everywhere else will likely end up hurting them — and the people who use their services — in the long run. The uncomfortable truth is that if you’re in the travel business in 2020, the pain isn’t going away anytime soon.
Just take a look at OYO ($PRIVATE:OYOROOMS), a “WeWork” for hotels that grew to be the largest hotel chain in the world in 2019 off the back of some rapid, no-profit expansion that now feels typical of a startup under SoftBank’s ($TYO:9984) umbrella. But almost overnight from July 3 to July 4, OYO appears to have shut down 18,100 locations — a staggering 53% drop for what was seen as one of the few golden eggs in SoftBank’s pocket less than a year ago.
As a hotel chain primarily servicing China and India, OYO felt the effects of COVID-19 far earlier than most American companies. In May, Thinknum Media found OYO had 500 locations in Hubei Province, China, where the novel coronavirus originated.
OYO spent the second half of 2019 with around 700 open positions as the company was poised to establish a solid foothold into US markets. But in early January just before the first confirmed case of COVID outside China appeared, it cut its openings by 709 (96%) between Jan. 8 and Jan. 9. It’s been a year of massive layoffs at OYO, which has slashed potentially thousands of jobs and cut pay across the company several times since the pandemic began.
The grass isn’t any greener for Airbnb ($PRIVATE:AIRBNB), which announced in May that it would lay off 1,900 employees, which the company said was around 25% of its workforce at the time. Airbnb’s job listings went from 500 last June, to 200 in January, to just 36 by recent counts after spending all of May and June dropping to as low as four openings.
Airbnb’s App Store data reflects the broader trend that people have simply stopped travelling. The second half of 2019 was a period of significant growth for Airbnb, with ratings climbing significantly month-over-month. But now they have utterly stagnated and held in a completely straight line since March 25. An increase in reviews is reflective of an increase in users, and three-and-a-half months is a long time to have few new adopters for an app.
The failure of travel hospitality also spells disaster for its ancillary industries. Nobody is going to buy luggage when they haven’t booked a room or a flight to bring that luggage to.
Away ($PRIVATE:AWAYTRAVEL) was an investor darling in 2019 when we were blissfully unaware of the horrors that awaited us in 2020, but they’ve since tumbled down the stairs. Away furloughed half its 500-person staff earlier this year and in a Medium post titled “A message from our founders” revealed that sales of their products had dropped by over 90%.
As if that wasn’t enough, Away faced controversy this month when co-CEO Steph Korey stepped down from the company for a second time after she posted Instagram stories criticizing the media and more or less blaming them for the first time she stepped down rather than, you know, the toxic environment she reportedly created at the company.
So if Away, a leader in the luggage space, is struggling, then everyone else whose business is contingent on travel probably is too.
So what will travel and hospitality look like on the other side of COVID-19? Whereas so many other industries like retail and healthcare will emerge completely changed with innovators on the rise and the old guard fading out, it’s hard to imagine that people will just stop travelling altogether. The more likely scenario is that hospitality apps will have a slow, painful, bloody crawl back up to regular business. Not only do they have to wait for medical developments that diminish the threat of COVID, they have to wait for them to get distributed and even longer for people to feel comfortable travelling again.
Would you feel safe taking an Uber to walk through an airport to get on a plane to travel across the world to stay in a hotel to walk around in public, all without a vaccine or at the very least a treatment that makes catching COVID as negligible as the common cold?
Thousands in hospitality and travel are losing their jobs with what feels like hundreds more getting laid off every day. But the failure of these apps doesn’t just impact its shareholders and workers. Many local economies depend on tourism for survival, and life may become harder even in the long term for mom-and-pop shops with companies that facilitate travel shrinking and shuttering. The stumblings of travel are going to be felt from the front door all the way up to the board room.
About the Data:
Thinknum tracks companies using the information they post online - jobs, social and web traffic, product sales, and app ratings - and creates data sets that measure factors like hiring, revenue, and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales.