The COVID-19 viral outbreak’s restrictions on economic activity have grounded the travel and hospitality industry, sending many players’ revenue down to zero. But there are companies who are trying to keep afloat, by pivoting to new businesses.
Globally, there are 2,544,792 confirmed infections of COVID-19, with 175,694 deaths, as of April 23, according to the World Health Organization.
The current global health crisis is proving to be worse than previous major upheavals. During the SARS outbreak in 2003, the 2001 terrorist attacks, the dotcom bust and the Global Financial Crisis in 2009 – the travel industry did not quite face the shutdown of most air traffic, land travel and hotel operations as it is now.
In mid-March, the World Travel & Tourism Council estimated that up to 50 million travel- and tourism-related jobs globally were at risk due to the COVID-19 pandemic, with global travel likely to take an up to 25 per cent hit this year.
And, earlier in April, the U.N. World Tourism Organisation estimated global international tourist arrivals could fall 20-30 per cent this year, translating into losses of $30 billion to $50 billion in international tourist spending.
Even significant players may not be not immune to the fallout. Just this week, air carrier Virgin Australia, the second-biggest airline in Australia, entered voluntary administration to try to attract buyers after Australia’s government failed to provide a bailout.
We take a look at some travel and allied startups that are trying to adapt to the current situation.
TravelFlan pivots to e-commerce
TravelFlan, which uses AI and big data to make consumer travel recommendations, pivoted to e-commerce to tide over the current situation.
William Bao Bean, a general partner at seed-stage investor SOSV, told DealStreetAsia, that one of his firm’s travel investments went into hibernation, while two, including TravelFlan, have jumped into e-commerce.
“If you can sell a plane ticket, you can sell a hotel room, you can also sell clothing. Or at least they can,” Bean said. “This is the same user demographic.”
TravelFlan CEO and co-founder Abel Zhao told DealStreetAsia his company was suddenly faced with no transactions at all on the travel side, starting from mid-February.
While the company had planned to enter e-commerce and the daily lifestyle sector in a year or two, TravelFlan found itself pushing out a product in a 48-hour cram session, he said.
In South Korea, customers will be able to order coffee and pre-prepared food for delivery, Zhao said, adding the company is also working with a Hong Kong property management group, which has nine China and four Hong Kong properties, to offer coupons and advertisements.
Zhao said the company offers its services via platforms from China Mobile and Samsung, and clients include Hong Kong Airlines and Korean Air.
In addition, after closing a $7 million Series A round in December, and preparing to close a $12 million round by end-May, Zhao said TravelFlan is scouting for acquisitions in China and South Korea amid signs of green shoots in domestic travel in those countries.
“A lot of travel-related companies, unfortunately, did not survive, but from the business perspective, I think it’s a good opportunity to expand,” he said. “We need, for example, a travel agency license in China. [It’s] just impossible for a foreign company to get one. It’s actually best to acquire a local travel agency.”
YouTrip banks on purchases on cross-border websites
YouTrip – a mobile app that offers an e-wallet with multiple currencies and better foreign-exchange rates for travellers – is placing its bets on e-commerce users.
“Travel obviously has been greatly impacted,” Caecilia Chu, co-founder and CEO of YouTrip, told DealStreetAsia. “But we have a big portion of our users who have always been using YouTrip from online purchases, particularly for the cross-border websites.”
She declined to provide a pre-2020 breakdown of how much of YouTrip’s transactions were related to travel and how much related to e-commerce, but she pointed to an around 20 per cent growth in online transactions for cross-border websites and gaming. She noted that much of the boost is coming from discount websites, with less shopping on full-price sites.
YouTrip said the February transaction volume on Taobao more than doubled on-month, while Alibaba has seen a 41 per cent increase in the gaming category, Nintendo transaction volume nearly quadrupled on-month in March. Singapore-based e-commerce sites also saw a pickup, with grocery store NTUC’s online transactions more than tripling, while EZbuy posted a 65 percent on-month increase, YouTrip said.
Chu said YouTrip hasn’t changed its plan to expand into at least two Southeast Asian markets over the next 12 to 18 months from its current operations in Singapore and Thailand. She noted YouTrip offers regulated consumer-finance products and the talks with strategic partners and regulators is continuing.
During the travel downturn, Chu said YouTrip is accelerating the addition of features, such as security upgrades and the ability to lock specific use cases, and the company is trying to build a merchant network to offer rewards and discounts to users.
Bobobox tapping on office crowd
Indonesia-based capsule hotel operator Bobobox is still bringing in guests, albeit at a slower rate, bucking industry downturn to an extent.
That’s in part because Indonesia has only locked down parts of the country allowing some domestic travel.
Bobobox co-founder Indra Gunawan told DealStreetAsia occupancy has fallen to around 40 per cent in the Jakarta central business district area, from as high as 90 per cent previously. But he noted Bobobox’s locations in tourist areas were faring worse, with around 15 per cent occupancy.
He said Bobobox could sustain its model with an around 40 per cent occupancy rate because of better unit economics as its technology lets it use fewer workers. Gunawan estimated Bobobox’s financial runway at around four years if current market conditions were to persist.
The hotel operator was also seeing business from new quarters.
“We do see new behavior,” he said. “For those branches that have a 40-50 per cent occupancy rate today are basically people who are looking for a safe place to stay with high-speed internet connections,” with stay lengths increasing to more than two weeks from just a few nights previously.
“A lot of offices require their employees to work from home and a lot of the employees in Jakarta don’t have access to a good internet connection, so we do have several cases where companies actually direct their employees to stay with us,” he said.
Gunawan said the company was likely getting some benefit from its contact-less systems, such as allowing check-ins via an app that can also be used as the room key. Housekeepers are also notified of check-outs via the app, so they are less likely to encounter guests in hallways, he said.
“We’ve been getting a lot of potential investors contacting us as well because they see that we can still operate,” he said, adding the company decided in March to extend its round.
“The pricing for rentals has decreased and has been hitting its lowest point. We believe it is a good opportunity for us to secure more locations with better pricing. So we did extend an interim mini-round and our existing investors participated in that round,” he said, adding the investor list was confidential.
Bobobox closed a $1.5 million seed round of funding in April 2019, according to Crunchbase data.
TripZilla adding new content to cater to a work-from-home audience
Travel-related content and package-comparison site TripZilla has also faced a hit from the industry slowdown.
TripZilla co-founder Eric Koh told DealStreetAsia the site has been adding content on culture and shopping to reflect shifts in user behavior toward e-commerce, working from home and streaming movies.
“That’s a bit of a change in another direction so that we can probably approach other sorts of clients outside of travel,” Koh said, noting potential clients include banks, fast-moving consumer goods and cameras.
“Audience wise, it is quite compatible,” he said. “Travel consumers or readers actually belong to the group where there is higher spending power, especially outside of Singapore,” such as in Malaysia and Indonesia.
TripZilla is self-funded and isn’t seeking to raise capital, Koh said.
Luxstay turns to acquisitions in search for a new revenue source
Luxstay, Vietnam’s answer to Airbnb, told DealStreetAsia earlier this month its booking rate has halved over the past two months.
To counter the situation, the startup is redirecting funding from marketing to acquisitions, with plans to find media channels with a significant user base to provide another revenue source.
Luxstay CEO Steven Nguyen told DealStreetAsia earlier this month that the startup has cut marketing costs and reduced personnel expenses by 30 per cent. “We are adjusting our costs to ensure the lifetime of the firm is as long as possible,” Nguyen said.