As virus hits travel market, a startup seeks survival tips
INTERNATIONAL - From his office inside a converted century-old Berlin power station, Johannes Reck watched the bookings at his travel company evaporate.
Having built GetYourGuide over a decade from his student dorm in Zurich into one on Europe’s most highly valued startups, Reck and his three co-founders were accustomed to challenges. But what was unfolding here, with the novel coronavirus spreading across the globe, was beyond anything the team had witnessed. Bookings were down by almost half, and Reck realized that he could do with some help.
“This is the most severe shock that I’ve seen in the last 10 years,” Reck said. “The irony of Europe is that we had a fantastic start to the year, consumer sentiment was high, and then it fell off a cliff a few days ago.”
Reck picked up the phone last week to get advice from an unlikely source: Kees Koolen and Arthur Kosten, the founders of Booking.com, one of his biggest rivals, but also a business that’s been battle-hardened by shocks like the 9/11 terrorist attacks and the 2008 financial crisis.
The duo gave the startup entrepreneur some valuable tips, Reck, 35, said in an interview in the red-brick headquarters. Among their advice was to keep a close eye on the data, focus on core activities, but also not to retrench too aggressively because that makes rebuilding harder once the crisis eases.
Koolen was a GetYourGuide board member for four years from 2014, according to his LinkedIn page.
Reck is one of a young generation of entrepreneurs who have enjoyed the fruits of a decade-long bull market unencumbered by severe external shocks. But the spreading coronavirus has become a watershed moment, particularly for consumer-facing industries like travel and hospitality, because of sweeping lockdowns and travel restrictions.
An airline trade group said last week that the industry will lose as much as $113 billion in sales because of the virus. On Monday, Booking.com withdrew its forecast, citing the worsening impact of the virus on travel.
That was before Italy went into a country-wide quarantine and U.S. President Donald Trump closed the borders to most Europeans for 30 days on non-Americans who have spent the prior two weeks in Europe.
It’s a tough test for a company founded by Reck in 2009 with three former classmates. In May, SoftBank Group Corp.’s Vision Fund led a $484 million investment, valuing the company at well over $1 billion, a person familiar with the investment said at the time. The company, with more than 600 employees, also counts Singapore’s state-owned investment firm Temasek and KKR & Co. among its investors.
GetYourGuide’s platform allows travelers to book tours and experiences online from operators on the ground in the destination city. Reck said because of his Asian investors, he and his team were made aware of the impact the virus would have before it hit Europe. So long as the company can maintain and improve the customer experience in the downturn, it will thrive when the market picks up again, the CEO said.
“We had roughly two months to prepare in Europe and had a plan in place for the virus hitting here,” Reck said. The response includes strengthening customer service and reducing costs like advertising and marketing spend, consulting fees, and slowing down on hiring. The company is also looking ahead to further growth.
“We’ve not been acquisitive at all but it’s something we’re reviewing as we speak,” said Reck. Before the virus hit, GetYourGuide had already looked to Asia for potential takeover targets, according to the CEO.
Italy as a travel destination is important to GetYourGuide, but as a global market player, Reck said the company is spread out enough so that no single target market has a majority share. And Reck said he thrives in moments of crisis because they remind him of the early startup days.
“This is how we grew the business,” he said. “It feels like we’re a startup again, with our back to the wall and we really need to deliver”.
Reck said he’s optimistic that GetYourGuide will weather the storm given his company’s lower fixed costs and support from deep-pocketed backers.
At the same time, he’s not taking any chances. On March 11, GetYourGuide sent out a company wide memo to all its employees in Berlin: an order to work from home to avoid a spread of the virus.