Industry Update
Opinion Article22 May 2020

Turning the Crisis into an Opportunity – Insights from Ted Teng on combating COVID-19!

By L. Aruna Dhir, Author, Columnist, Communications Specialist, YouTuber

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There is a short video made by an Indian Travel Agent that is doing the rounds on Social Media. The script line is farcical and funny on the surface but the messaging could not be more solemn and sombre.

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In the opening frame a man is shown wheeling a vegetable cart. He then proceeds to sell a batch of ginger to a customer while talking about response time, after-sales service, and how efficient his team is. The confounded customer asks the man what service he is really selling while peddling a mere push cart of vegetables. The man quickly regains composure and tells the lady that he was earlier a Travel Agent but is now reduced to selling vegetables. At the end of the video, the Travel Agent appears on the screen imploring the Government and the allied bodies to think and plan cohesively and bring out steps that would prohibit such a deplorable transition in a skilled and profit-making industry.

Elsewhere, an erstwhile enterprising entrepreneur has been lamenting about how she has had to bring the shutter down on her restaurant. The eatery was trendy, situated in a hip, hugely frequented location and had a steady traffic of devout patrons. Still, the demise of the Diner has been painfully quick and sharply hurting to the investors and owners.

There is the overriding sentiment during the pandemic that the travel and tourism industry is one of the worst hit.

It, no doubt, is. It is good to recognize and acknowledge that fact. Pre-informed is pre-warned, which in turn helps one get pre-armed.

The other truth of the matter is; every crisis has a cycle. What spirals down is bound to curve back up. That is the law of nature.

It would be wise to have a larger overview of the situation at hand and strategize keeping the long term perspective in mind.

My free-wheeling chat with Ted Teng springs up thought-provoking insights into the matter and bears hope and promise for the resilient industry.

A renowned, multiple awards-winning Hotelier, Ted Teng has been a global hospitality leader for four decades. In his earlier roles, Ted has served as President and Chief Operating Officer of Wyndham International Inc. and President, Asia-Pacific for Starwood Hotels & Resorts Worldwide Inc. Most recently, Ted Teng was the President and Chief Executive Officer of The Leading Hotels of the World, a position he held for over a decade from 2008 until April last year.

Teng has followed his motto, "Preserve, Enhance, and Invent" fervently. As someone who has enjoyed intense and high engagement with the industry, Ted's insights are holistic, with a remarkable sense of clarity, superlative strategic thinking and tactical disposition of the highest order.

Do step into my conversation with Ted Teng for some extremely pertinent pointers from one of the tallest leaders in our industry.

L. Aruna Dhir - What are some of the worst ways, COVID 19 has affected the industry?
Ted Teng
- I think the crisis is affecting pretty much everyone around the world. However, the phrase "We are all in this together" is not entirely accurate. Yes, we are all in the same storm, but we are not all in the same boat. Some boats are better able to weather the storm than others.

First and foremost, those who were infected by the virus and had to be hospitalized or died, have suffered the most along with their families. There is simply no way to quantify this harsh reality.

From an industry standpoint, without a doubt the millions of workers laid off or furloughed are affected the most. Most of the workers depend solely on the work income to support their families. In normal times, when workers are laid off, they can look for other jobs. But when most workers are laid off, there is nothing a worker can do.

The second group would be the suppliers to the industry. We buy their food, toiletries, linen, beverages, services, etc. They in turn hire people and now these people are laid off. Again, they have very little other prospects.

Many small businesses near a hotel such as restaurants, bars, and retail shops depend on the guests at the hotels. When hotels are closed, these businesses and their employees suffer.

Many local governments depend on the occupancy and sales taxes collected from the visitor spend. Without visitors, these cities' ability to provide public services is gravely impacted.

Our industry is only viable with the support of intermediaries such as travel advisors, meeting planners and others who bring the buyers and sellers together. These often small businesses are mostly without income right now. Their livelihoods are affected.

The uncertainty of recovery, lack of income, and health risk concerns are all putting tremendous stress and anxieties on the people of this industry.

L. Aruna Dhir - What can hotel owners do to keep themselves afloat?
Ted Teng
- Frankly now is a little late to be thinking about staying afloat. This is a cyclical business. This recession has been coming for some time after the longest economic expansion in history. We just didn't know what will trigger this recession.

Strategically businesses need to:

A). Determine the right mix of capital stack for the owner. Want a higher return on equity with high debt? Then one better have high reserves to survive the dips. Don't want the risk; then reduce the debt load.

B). Match the facilities cycle with the economic cycles. This is the best time to renovate when the opportunity cost is lower in addition to lower labor and material costs. Always plan ahead.

C). Think long term and holistically as to "afloat".

Are your people really your most important assets? If they are, why would you not create work for them during the downturn in order to retain them? Perhaps conduct training that you couldn't do when the business was busy. Deep cleaning may need to be done. Use your employees to help you rethink the future. They really need you now. Businesses which invest in their people during downturns will have grateful employees who would then naturally provide better services to your customers.

We had 10+ good years, where are the profits? Why not take a loss this year, invest in the business and inject cash? Is minimizing loss really the most important task right now? What would you do now if you looked at your profit and loss statement on a five-year or ten-year basis? When businesses are starting up, owners often take a loss for several years. Why? For the sake of future successes! This is no different. You have a choice.

In investments, I would like to achieve a certain return on my invested capital over time. But I don't achieve the same return every year. Some years are higher and some years lower. Some years, it is even negative. I am investing in the long term. If I don't ever want a negative return, I should buy US Treasury and accept a lower return with no risk. Running a business is no different.

L. Aruna Dhir - What is the role of the top-tier management in battling the Pandemic?
Ted Teng
- Senior management's role is to connect labor and capital for the long-term success of the business. This is the time to be strategic and courageous. Short term survival tactics are important, but they will not differentiate you from others. This is an opportunity to stand out.

L. Aruna Dhir - When the chips are down and when the countries are under lockdown, how can the hotel companies keep up the morale of their employees?
Ted Teng
- The best way is to keep them employed and active. Workers are not just looking for an income. Their sense of pride, self-worth and dignity are tied to their work. They will always remember who took care of them when it was most difficult to do so.

L. Aruna Dhir - What must hotels do to continue an optimal level of engagement with their current and prospective guests?
Ted Teng
- This is not a time to sell. This is a time to check in to see if there's anything you can do for them to help them through the crisis. It may be something personal like checking in on their family members near your location. Tell them what you are doing in taking care of your people. Tell them what you are doing for the community. This will tell them what you stand for, as a responsible, conscientious, sustaining and sustainable entity.

L. Aruna Dhir - Looking into your crystal ball, what do you foresee to be the state of the industry in the coming half year and the next year?
Ted Teng
- I personally believe the economic recovery will take longer to start. But once it starts, it will be a quicker recovery. This is a health driven crisis unlike past financial or economic crisis. The recovery will start once the health crisis is no longer a threat which is why I believe it will take longer. I believe the rest of 2020 is a write-off. I think 2021 will see a substantial recovery if a vaccine or cure is in place.

L. Aruna Dhir - Going forward, what will be the NEW NORMAL for the Travel and hotel industry?
Ted Teng
- In my experience of past crises, we stop doing what we do in the short term. But stopping what we do is never the longer-term solution. We continue to do WHAT we do but we change HOW we do them. To illustrate my point, we didn't stop driving after the oil shortage in the 70's. Instead we have better fuel-efficient cars. We didn't stop having sex due to the HIV virus. We have safer sex. When the stock market crashed in '89, we didn't stop investing in the stock market. We learned to diversify and invest for the long term. When terrorists hijacked airplanes, we didn't stop flying, we have greater security. I don't believe we will stop traveling because we are instinctively curious about the rest of the world and people. We will continue to travel and explore. We will do it more carefully and selectively.

Short term solutions are seldom for the longer term. Six feet apart will not work for restaurants. Perhaps we will have more partitions between tables (solid or clear). Perhaps we will look at the menu on our smart phones and order via video with our servers. Perhaps the food will be delivered to the table via a robot cart. Perhaps we will bring our own utensils. I don't know what the solutions will be, but we will invent them. We have to think what is six feet apart trying to accomplish rather than using six feet apart as the solution. Six feet apart is trying to prevent the spread of the virus and there are many different ways to accomplish that.

Hotels and food establishments have dealt well whenever there is food safety issue. They will learn and change their protocols and offer safer food processing and preparation going forward and we all will be risk-free and happier. Cruise ships have not done well with the various outbreaks as they are not as well regulated. Going forward I think there will be more regulations required of any ships that dock and pick up customers. We will all benefit tremendously from secure and protection-specific regulations in the long run.

In my experience, crisis does not reduce the long-term sales. It does increase our cost of doing business which when created well customers are happy to pay for them as they keep them free from danger or otherwise better off. The crisis will add cost to the businesses, but it will be fine.

L. Aruna Dhir - What according to you, is the top thing companies must do to secure their Bottom-line and just about aim for profit protection?
Ted Teng
- Again, it depends on short term profits or long-term success. To me, businesses which think in the long term will not only survive this but will come through this better off.

The pandemic has, indeed, thrown novel challenges at people and industries. But it is nothing that cannot be circumvented. Humans are naturally serendipitous.

Also remember what Ted Teng said above - We are all still driving, still procreating, still flying, and still aspiring to create wealth!

L. Aruna Dhir

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