Having identified the major trends and structural elements Rhino Africa is tracking, David Ryan and Grant Rapaport have entered a scenario assessment as they plot the way forward for their business.
With a strong conviction that this moment will pass, and travel will be back, our immediate attention is focused on how we endure and see this COVID-19 crisis playing out. Here we have chosen to focus on two primary scenarios. The first being a 6-12-month time frame to rein in the pandemic and restart travel and the second looking at 12+ months as the pandemic continues.
As we examine the current situation, we have already discounted a third scenario, that Covid-19 would last between 3 and 6 months. A best-case scenario where we are relatively successful in containing the outbreak of Covid-19 in Sub-Saharan Africa, given the developments in our source markets, there is a high probability that our borders may not be able to be opened to these high-risk countries for some time, leading to the discounting of the optimistic scenario.
Both our scenario plans for recovery, starts with the premise that capacity will be required as we anticipate all travel booked and scheduled to end July 2020 will need to be postponed to future dates and August to October travel should be considered at risk based on the structural factors identified.
A 6 TO 12-MONTH DISRUPTION DUE TO THE PANDEMIC
Our base-case scenario for planning a recovery strategy for Rhino is based on the premise of virus containment within a 6 to 12-month period.
What does this look like? In this scenario, the curve has largely been flattened globally (most critically in our key source and destination markets), which means the healthcare infrastructure is coping, and people and businesses are returning to their normal economic activities. Airlines have resumed consistent service between major airports though likely at a reduced frequency to start. Airports and governments have worked to implement procedures to ensure the safety of passengers and destination populations most likely utilising rapid testing capacity at airports pre-boarding meaning that all passengers are COVID-19 negative and facilitating the responsible relaxation of border controls.
Once the logistics are in place, confidence will be the most critical factor that will dictate the speed of recovery for travel at scale. In this scenario, governments in source and destination countries work closely to establish and roll out testing guidelines like those currently commonplace in the airport security sector. This will give guests the confidence to travel and not be denied entry on arrival, or on their return. The memories of forced quarantine post-arrival will be fresh in everyone’s minds and this will need to be counterbalanced by clear, consistent guidelines. The more globally accepted, the better.
All governments will now be on high alert having paid a huge economic price for the required containment steps and the cost of moving too quickly will be well known. These containment efforts in Southern and Sub-Saharan Africa have been predominantly successful through a combination of aggressive lockdowns, testing improvements, and learning from the experience of the northern hemisphere countries. This will allow the easing of domestic and regional mobility by mid-year and as measures taken to prevent the spread of Covid-19 in this process show results this will give governments the confidence to fully re-open borders to key long-haul destinations. Inevitable health issues will come up, but rapid response teams will efficiently deal with these in a private-public partnership to widespread praise proving greater tangible confidence that tourism is back fuelling the recovery and bookings as a result.
During the initial phase, we expect to see some opportunistic local demand for high-end, experience-based leisure travel at lower yields and business travel as executives reconnect and realign their businesses post isolation. Specials targeted at local markets would support this first phase recovery and could be necessary to build confidence in the staying power of the destination’s sustained containment efforts. This would send a strong signal internally and externally that “We are open for business” aiding our medium-term recovery and getting operations back on track.
International arrivals will take some time to ramp up as distressed airlines that would initially focus on short, profitable routes and avoid higher risk, load-dependent long-haul routes. This wait and see approach from both governments and airlines are likely to limit volumes throughout July to September and as demand picks up, we expect to see long haul flight schedules start to return to regular schedules in Q4 2020. Coinciding with these confidence-building measures some of the existing forward book of guests will be able to travel in Q3 and will work through the system over the next 6 quarters through Q4 2021.
Lead generation will start to pick up as the acute shock of COVID-19 wanes but we expect these early signs of life in search interest and repeat guests to require significantly longer to convert to bookings as all guests will be waiting to see consistent signs of recovery. The return of travel insurers to the market and/or upfront flexibility from bed, flight and logistic providers on more flexible terms. As confidence returns, search interest will increase as well as improved conversion ratios to booking and shorter conversion and lead times. Destination longer-term macro trends will again start to emerge unless regional branding is improved to change this picture. In the two years pre Covid-19, destinations like South Africa were already witnessing annual declines in arrival numbers from our traditional markets, placing added pressure on many long-haul carriers’ viability into Southern Africa. This was not the case in East Africa which had been witnessing year on year growth.
If in line with our scenario analysis, if we witness a containment of Covid-19 within a 6 to 12 month period and the associated certainties around international mobility, we would expect to see a recovery in Tour Operator bookings commencing in late Q2, steadily improving into early 2021. Travel dates would lag this with currently scheduled guests and some new bookings expected to start travelling in larger numbers from late Q3 2020 and into the middle of 2021.
One remains cognisant of the fact that, due to the postponement of current forward books into late 2020, 2021, new bookings potentially face availability challenges and hence the latter half of 2021 could be a bumper year for tourism as we see overflow into shoulder seasons as the postponements of Mar to Sep 2020 travel take up peak availability in late 2020 and 2021.
A 12+ MONTHS AS THE PANDEMIC CONTINUES
Our second scenario in planning a recovery strategy for Rhino is based on the premise that virus containment efforts are less successful in one or both of our key source and destination markets. The premise of this scenario includes several rolling waves of travel bans and lockdowns, that are necessary as stretched healthcare systems are unable to cope as COVID-19 persists through the northern summer and even possible resurgence in Northern Hemisphere’s Autumn/Fall 2020.
That being said, as the initial shock turns to more coordinated action, increased surge hospital capacity, the advent of treatments, and newly galvanised world populations educated in the importance of basic precautions, a reduction in the R0 and mortality is possible moving COVID closer to a serious, but manageable enemy as we forge an uneasy peace with the virus waiting for widespread vaccine availabilities and increased recovered populations into 2021. These conditions, though not ideal, will mean increased economic hardship and longer travel restrictions. These elements will reduce the buying power of even high-end guests significantly and mean that the crucial element of confidence in travel will simply take longer to establish.
This delayed slower recovery means international tourism volumes would be expected to remain very low for the remainder of 2020, only increasing in 2021 and into 2022. Booking lead times will mean that we will see an extended period of low search interest and enquiries, with limited recovery starting in Q4 2020 for Tour Operators. This may well cause availability issues in 2021 as 2 years of adjusted demand is working to travel in the same shortened period. The impact of this supply constraint will need to be assessed as we see more data into Q3 2020.
The below graph depicts these two recovery scenarios from the baseline of 0% representing volumes prior to COVID-19. As you can see Bed/Flights delivery (dotted line) lags Tour Operator demand (solid line) in both cases. Our experience was a sharp drop off in demand starting in the second half of February 2020 and rapidly accelerating into March culminating with the lockdown of Southern Africa in late March. The bookings moved from existing 2020 travel dates can be seen to aid travel volumes recovery in the months following the restart of travel and will be highly sensitive to confidence levels discussed previously.
However fleeting or long-lived, no business will emerge from this crisis without significant change, and hence our attention is now focused on how best to adjust our operations and structures to ensure we can continue to serve our guests and suppliers in either of these scenarios. Whether your belief is that this crisis will be short or long-lived, the road to recovery, to returning to pre Covid-19 booking numbers and sales will require different areas of focus, expertise and capacity.
In the absence of substantive Government intervention or rescue funding, now is the time that many of our partners and peers will need to focus on using this crisis to recalibrate our businesses. In the case of Rhino, that is to ensure that when we emerge, we can increase our market share and productivity as we play our role in the recovery of this industry, we all love so much.
CONSEQUENCES OF COVID-19 IN SHAPING OUR INDUSTRY
Somewhat controversial and arguably self-serving, perhaps the most significant shift we will see as a result of this COVID-19 pandemic, is the accelerated channel distribution in favour of the B2C channel, as the value of direct client relationships and data required to understand and serve them comes to the fore in the management of clients through a crisis. Bed operators will note a stark difference between both the rate of cancellations and the standard terms and conditions being applied by the various channels, which are directly related to the ability to manage clients through a relationship of trust and on the ground expertise.
B2C Tour Operators share a unique connectedness with their clients through months of intimately planning and suggesting routes, logistics, activities and accommodations as we curate tailor-made experiences. That connectedness, while increasing workload, has the significant benefit in times of crisis of allowing us to continue that experience of weighing options and scenarios with our guests ensuring we consider the best course of action. This requires consideration for and translating of the significant complexity in play behind the scenes to ensure all options available and thereby maintaining a large proportion of the forward book for when travel returns. In addition, as conditions improve history will show that B2C’s led our recovery through proactively mobilising new, repeat and referral clients to connect with suppliers that have gaps in occupancy and specials as we do our part to rebuild occupancies faster than any other available channel. More than ever, on the ground knowledge and experience will be invaluable as clients shaken by the disruptions caused in all areas of life by COVID-19 will need information and reassurance that we have their backs as they cautiously return to rediscover Africa.
As such, we are reminded that now is not the time to fear, falter or hide, for in this moment, however fleeting or long-lived, is our chance as a generation and industry to leave our mark. With that in mind, we recognise the need to redefine and restructure our business, even more than ever before; not only to create better value for our guests, our people and our partners, but to ensure we are able to survive this crisis.
We recognise that it is in times of uncertainty that people remember those who were there and chose to make a difference. On that note, we would like to thank every one of our Rhinos, mentors, partners, peers and industry associations that have come together to work with a common purpose as we navigate this challenge together.
As this progresses, we all can spread hope, knowledge and humanity with one another, as everyone continues to seek ways to fill their time with purpose and a sense of connectedness. While no business will emerge from this crisis without significant change, we thank you for being part of the Rhino story. We’re making history, and we’re going to be okay as an industry – together.