So, what was it like managing through the most difficult market conditions any CEO has seen in a lifetime? And what are the common characteristics, and the strategies, that set the survivors apart and positioned them to thrive in the inevitable recovery?

We spoke to the leaders of five travel companies about their approaches during COVID. Four of them are now well placed to capitalise on the recovery.

One, unfortunately, has had a very different experience.

The four surviving (if not thriving) businesses — Serko (CEO Darrin Grafton), Magic Memories (co-Founder John Wikstrom), RealNZ (CEO, Stephen England-Hall) and Zuzu Hospitality (co-founder Dan Lynn) — have differing expectations for recovery. 

We’ve consistently said that travel is a broad church. And doesn’t this cross-section prove just that? Serko runs a global business travel tech platform, Magic Memories takes digital images of people having fun in the world’s leading tourism locations, RealNZ runs a premium collection of land and water-based attractions in the Deep South of New Zealand, and Zuzu is the key online distribution channel for thousands of long tail two and three star hotels across Southeast Asia.

Because each of these businesses is so different, their founders see them returning to pre-pandemic levels of business at different times. Although Q2 2022 seems to be the magic date for most, some markets - like China outbound - could take until 2024.

Most said they have seen consolidation in their specific travel tech markets — although most major competitors continue to trade, effectively maintaining the status quo. We were surprised to see several say that capital raising was not a major problem during the lockdowns and border closures. Indeed, we think anyone who says that is looking backwards through rose-coloured glasses — we know from experience just how brutal it was. There was a time during 2020 when some businesses in the sector couldn’t raise money for love nor money, such was the uncertainty and fear in markets.

England-Hall said “There has been a lot of interest in investment in the sector — especially over the last 12 months, rather than the first six of the pandemic.” He said that in his case, investors are looking for asset-backed businesses with strategic competitive advantages and unique access.

Magic Memories’ Wikstrom conceded that from the outside looking in, it probably seemed like an impossible scenario. He told us it wasn’t difficult, but did require a relentless focus. “We used external expertise to guide us on the capital raise process and successfully raised $25.5m new capital in August 2020.” [note – that external expertise was from North Ridge Partners and even if John didn’t find it difficult — we sure had to work hard to get a great result!]

Meanwhile, Serko’s Grafton said the approach of his team was to deliver what it could control and to recognize that “we always have to earn the right to go back to the market by delivering the outcomes we said we would do.” Serko did indeed, and has created a significant amount of value for shareholders in the process. [Editor’s note: the Serko journey from zero to near-unicorn deserves its own story - with its CEO mentored by one of the Atlassian founders, and non-linear thinking Chair Claudia Batten’s hand on the tiller, Serko’s OKRs include 20% of global business travel flowing through its platform. Indeed, a story for another time…]  

Dan Lynn from Zuzu sounded a realistic note, cautioning that the investor community was split between those who wouldn’t touch travel no matter what the terms, and those who were open to taking the time to understand the underlying fundamentals of the business. “I think for those investors that took the time, the only risk associated with investing in travel during the pandemic was ensuring that the company was well enough capitalized to manage through an uncertain timeframe of disruption. So, like many fundraisings, every incremental dollar became easier to raise as each marginal dollar materially reduced the risk of any investment.”

He said Zuzu was able to raise more capital during the pandemic than it had cumulatively raised before the pandemic, at terms it was reasonably happy with. 

Responding to the crisis

If there is a common thread through all the survival stories — beyond the need to manage cash, and strong exposure to domestic travel markets — it is sustained attention to detail over a long time.

In the case of RealNZ — which owns several iconic land and water-based attractions in the South Island including Walter Peak and the Earnslaw, Cardona and Treble Cone ski fields — that meant disciplined cost management and alignment of capacity with demand. The business also shifted marketing and sales into addressable markets, and restructured the group to better position itself for the recovery. It also managed to tap in to Government funding during the peak of the downturn.

Serko, whose platform connects travel suppliers with corporate travel buyers, operates in over 180 countries. The company was to some extent buttressed by the fact that its core Australia and New Zealand markets largely avoided mass COVID outbreaks — although they were subject to a series of rolling short-term shutdowns (and longer-term in the states of Victoria and NSW in Australia). After an initially tardy rollout, Australia now boasts one of the strongest vaccination rates in the world, with NSW having vaccinated over 90% of its eligible population.

Currently Australia and New Zealand domestic make up 90% of Serko’s volume, said Grafton. “With the introduction of the Booking for Business platform we are now seeing strong volume in Europe and the USA as new growth markets.”

While COVID is certainly the most significant challenge it has faced, Serko’s experience managing through earlier crises such as 9/11, the GFC, SARS and Swine Flu gave it the confidence that travel would eventually recover.

“We focused on what we could control,” said Grafton. More than that, the disruptions and upheavals of the pandemic made it likely that the nature of travel would evolve, and that technology would become even more important.

“So, we invested heavily in bringing new technology to the market and staying focused on building for the recovery and being ready in as many countries as we could. This has proven to have been the right move.”

Magic Memories is a tourism technology business that creates and distributes personalized content experiences for guests to attractions. Its niche within the travel sector was especially vulnerable to the pandemic.

When COVID struck and partners started closing their attractions, Wikstrom said his business quickly moved into hibernation mode — which meant reducing headcount to a very minimal number while utilizing government subsidy programs across all markets. 

Communication was critical to both its people and its partners. For instance, Magic Memories communicated to all its partners and suppliers that it needed to raise additional capital, and it consequently would stall outstanding payments. After its August capital raising, it paid all its partners and suppliers and began the process of bringing its business back to life as the USA started to reopen.

“Since then, we have started up most of our attractions again — albeit with lower visitor volume — and have opened 76 new business partnerships across six new countries.”

Zuzu spent the acute phase of the pandemic in early 2020 rationalising its business and cutting back on investments that would not deliver meaningful upside in the coming three to six month period. This involved reducing team size, focusing its geographic scope on emerging markets, and cutting back on some longer-term projects. “Then for the 12 months that followed, we have worked on reinventing our products and processes,” said Lynn.

“We built out automation solutions for our customers, to meet their pressing needs to reduce manual work in their back offices. This led us to launch EZ Payments - a full automation solution for our customers’ accounts payable and accounts receivable. We also built out new product offerings to drive direct bookings, with booking engine and website solutions for our customers.”

The company automated its internal processes, taking what Lynn described as “the rare luxury of time in a fast-growth start-up” to build systematized solutions to its processes, and to prepare for the ultimate recovery in the market. “As we are now seeing an acceleration in volumes again, we are focused on scaling these increasingly profitably, and have built an operating model capable of significant cost leverage as we scale.”

As these leaders read the tea leaves to determine where the best opportunities in the recovery will come from, they rely on a variety of internal and external forecasting services and data sources.

While the world went into lockdown on a relatively consistent timeline, the disjointed nature of reopening around the world has travel tech businesses hungry for data from recovering countries — many of which used a range of lockdown models.

England-Hall from RealNZ says his company scours wider industry intelligence, government commentary and forecasts, as well as aviation route developments. 

Zuzu’s Lynn said his group has stopped relying on external forecast altogether, preferring to focus on its own data.

“As we manage over 2,500 hotels, we think the best thing to do is to use our own internal benchmarks. From that we can get a good sense of the sort of domestic and international reopenings that lead to a quick pick-up in travel, relative to other changes that don’t immediately shift volumes.”

Not all stories end well

While the four companies above have so far navigated the COVID shutdown and the first hints of recovery well, we also spoke to the CEO of one company that had a much tougher outcome.

This B2B2C company, which sells international travel online in emerging markets now generates just 10% of its pre-pandemic revenues and has retreated from some markets. Costs have been stripped back to such an extent that the business is cash-flow positive, but when we spoke to the CEO, he said the business is now a day-to-day proposition.

With three quarters of its 200-strong pre-pandemic team made redundant, only the core technology team is left. The founder had to surrender control of the business in return for a small shareholder cash injection. 

Unlike the businesses above that could draw on domestic markets to ride out the storm, this company was highly reliant on international travel.

The firm is now just collecting outstanding receivables and managing payments to suppliers. It has largely given up trying to track forecasts which, according to the CEO, are often in conflict with each other. 

The owners are currently in a divestment process that involves carving the business into several products which can be sold off.

The current valuation is less than 20% of the value that could have realized had it been sold to a foreign buyer with whom they were in discussions before the pandemic.