The Impact Of Government Stimulus On The Travel Industry

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Home > Articles > The Impact Of Government Stimulus On The Travel Industry

 The Impact Of Government Stimulus On The Travel Industry

Tim Hentschel | General
May 6, 2020

​To date, the COVID-19 outbreak has spread across the globe and quickly become one of the most severe and detrimental crises the industry has seen. As an 18-year-old brand, HotelPlanner has seen its fair share of how breaking news has an impact on the industry, including that of 9/11 and the SARS outbreak. It’s not difficult to conclude that the COVID-19 spread is one of the worst for the industry from how it has effectively shut down global travel.

The damage on the industry has furthermore been exacerbated by its timing: the high-demand summer travel season. The current situation sees CFOs scramble to find the cash to refund billions in customers’ prepaid summer reservations, and companies digging into cash reserves without the possibility of future revenues.

With the recent injection of government stimulus (both from the United States of America and Singapore government), it is clear that everything helps in a crisis of this magnitude. However, it remains to see that the types of financial aid provided will require some adjustments for long-term success. It will serve companies well to adopt a practical approach to government stimulus and assess on a case-by-case basis the best strategy for the brand.

The recent Resilience Budget in Singapore announced two difference schemes, the Enhanced Job Support Scheme (JSS) and the Wage Credit Scheme (WCS), to aid the industry in terms of keeping staff employed. However, while helpful to some, what is to be considered is whether the travel demand bounces back fast enough to justify keeping staff employed at the expense of the company’s resources.

Most financial support like the above require the travel and hospitality companies to take on heavy debt loads, but with revenues down by more than 80 per cent some companies, it is difficult to justify adding more jobs or keeping jobs.

Another aspect of the budget that we see affecting the industry is the Property Tax Rebate, where qualifying commercial properties are not required to pay Property Tax. HotelPlanner works predominantly with hotels and while we can envision the relief provided through the rebate, the majority of hotel expenses lies in mortgage and labour. What might serve them better may instead be an offer of deferred mortgage payments and payroll tax relief and grants—offering help on the fronts they need most. 

What we will advise is to be prudent in accepting support. The company’s priority has to always be maintaining the flexibility to bounce back once the industry enters recovery, and to have the funds and resources to ride on the wave back up, regardless of how slow it may be.

Despite this all, it serves companies well to be optimistic. With the government setting aside S$90 million to help the tourism industry rebound, we are most interested to see how it can be well-spent in the events industry. Attractive packages may lure in big corporate events, sports events, concerts and conventions. Large events make the biggest impact on hotels, transportations, shops and restaurants, and may just be the all-in-one solution the industry needs. 



Tim Hentschel is the CEO and co-founder of HotelPlanner. His company is the leading online provider of group hotel bookings and individual hotel stays worldwide, and is set to revolutionise the way Southeast Asians travel, book and stay with the company’s extensive industry expertise and robust travel technology with highly specialised AI.

 


IMAGE: SHUTTERSTOCK

 

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