History tells us that travel innovation accelerates in a recession but this time round, the likely winners will be in the B2B space.
We all know the bad news figures that show that the travel business is being decimated, but in bleak times tough-minded entrepreneurs can show what they are made of and find hope. One such is travel industry veteran is Adam Goldstein, who has developed an algorithm for anxiety, and told us: “The market has frozen so much that in a weird counterintuitive way, it actually gives a bit of negotiating power to the travel company.”
His very attractive take on the scene is: “If you own a hotel, and you say to the bank, ‘well look, if you guys foreclose you are going to have to own a hotel’, they are going to have to ask the question: ‘well what are we going to do with it’?”
No bank is going to want to own an asset that is going to deliver no revenue for the foreseeable future, says the MIT engineer and co-founder of travel start-up Hipmunk, which launched after the financial crash of 2008 and raised $55-million before selling to travel expense management firm CWT.
Expanding on this view, Goldstein says: “Most predators, and most shareholders are going to be more interested in seeing their companies survive than they are going to be in enforcing the companies to honour every single provision in their contract. So, there is going to be a little bit of relief as far as the actual travel companies themselves are concerned.”
That may be a positive for hotels but this is probably not the case for online travel agents (OTA) or metasearch companies. “No one is going to come to you and say ‘oh yeah, even though you are not selling airline tickets or hotel rooms, we are going to keep paying you’. Absolutely not,’” Goldstein adds.
This is why we are seeing the giants like Expedia, Booking.com and Airbnb raising new debt or issuing new shares with onerous terms. With access to the capital markets, these smart travel tech heavyweights know that they are big enough to survive and they will, whatever it takes. Already Expedia has said that it will lay off 3,000 employees, and even after securing $4-billion from bonds, Booking.com’s Glenn Fogel has told employees to expect layoffs in the coming months.
