The global economy is currently undergoing a crisis as a result of the COVID-19 pandemic. This impacts every industry, but perhaps none so severely (and immediately) as the travel and hospitality sector. With lockdowns and social distancing measures in effect around the world, travel is nearly impossible. To learn more about what CFOs in this industry are doing to cope with these unprecedented challenges, I spoke with Robert Parsons, finance chief of members-only luxury vacations provider Exclusive Resorts, and Vishal Save, CFO at cloud-based hotel revenue management software company Duetto.
Both these finance leaders are now in a position where they must not only address major setbacks but provide long-term confidence and shore up recovery and growth prospects. Their insights as CFOs in an industry that can be considered a “canary in the coal mine” for possible recession can perhaps help guide business leaders in other sectors, who will soon face similar challenges.
Jeff Thomson: As a CFO in the travel/hospitality industry, you are responsible for financial management at a time when finances are severely impacted by COVID-19. Can you offer a general overview of your immediate challenges and what you are doing to keep your company afloat in the short term? What crisis management plans do you have in place to ensure business continuity?
Robert Parsons: There is no question that the travel and hospitality industries have been significantly impacted by COVID-19. At Exclusive Resorts, the ability for our Club Members to travel is the lynchpin to our business. When they are unable to do so, our ecosystem becomes off balance. At the same time, we have a unique business model that is not as reliant on day-to-day revenue generation. Our Members pay Club dues a year in advance and then have the following twelve months to travel throughout our Club network of luxury homes, villas and suites. While Exclusive Resorts is uniquely positioned within the travel industry to weather this storm due to our Membership model, we have, of course, taken significant measures to contain costs and reduce expenditures across the organization to ensure the long-term health and viability of The Club for Members and our employees. This includes eliminating nonessential business travel, reducing marketing spend, pausing contracts with outside vendors and temporarily reducing resort operations costs due to the travel restrictions imposed by government authorities in the majority of our Club destinations.
We are fully committed to ensuring that the hundreds of Club employees and service providers at our headquarters and across our resort destinations are well taken care of. In an effort to avoid layoffs, we have instead reduced our entire corporate team to a four-day work week to achieve overhead savings. For our field teams, rather than putting our employees on unpaid leave while our destinations are closed, we continue to employ every one of our Concierges, albeit at a reduced salary level, and provide full benefits. We have also made the difficult decision to temporarily furlough a small number of employees at our corporate office through the end of May. Given the unprecedented health crisis, it was imperative to us that all our employees—including those on furlough—continue to have full healthcare benefits and coverage.
Vishal Save: Duetto serves hotels, resorts and casinos. The global pandemic has resulted in a slump in the hospitality industry with many of our customers having to close for business temporarily. While our recurring revenue model will ensure a robust bounce back once recovery starts to happen, in the short term, we need to maintain our financial health.
Speed of response and flawless execution are critical in any crisis to reduce its impact and provide confidence to all stakeholders. As soon as we had leading indicators of tough times ahead, we created a cross-functional commando task force with select employees from our Finance, HR and Ops teams (fun fact: it’s an all-women team code-named “Angels”). The team helped put together various scenarios for the business and its short- and long-term implications for our customers, employees and investors. We then launched three work streams – one focused on collections, another to manage expenses and a third for continuous monitoring of business health to be able to make real-time decisions. We feel confident that these early measures and continued efforts will help us get over the short-term challenges and emerge as an even stronger company.
Thomson: Global risk and uncertainty are at all-time highs, making it difficult for leaders and employees to stay engaged amid distractions. How have you been keeping employee morale up during this uncertain and difficult time? What are some of the ways that you’re ensuring staff do not lose confidence in the long-term prospects of the company?
Parsons: Keeping employee morale strong is more critical than ever. During this crisis, we have implemented daily all-company video conference calls, and each day we have a different theme and hand out prizes for contest and raffle winners. Themes have included best bathrobe, bring your pet to work, best hat, ski gear and favorite sports teams. We also created custom video call backgrounds depicting some of Exclusive Resorts’ 400+ destinations – like Paris, Vail and Caribbean islands – for employees and Members to use on video calls.
We also created a custom coloring booklet highlighting a handful of Member-favorite destinations to help relieve stress and serve as a reminder that the travel industry will bounce back. We kicked off an employee fitness challenge last week, encouraging all our employees to get in at least 30 minutes of activity each day. Everyone is responsible for tracking their own activity, but we have a dedicated Slack channel for colleagues to post their workouts, provide ideas and encourage one another. We’ve seen great comradery and participation. Additionally, we have an employee book club for those who want to participate, and a new novel is selected every month for the group to read. These ideas really seem to be making a difference and are helping employees connect with other team members in a unique way, even those they might not have worked with before.
Save: Fortunately, Duettos – our term for Duetto employees – believe passionately in the value we create for our customers. So, it’s really a test of their confidence in the CEO, CFO and the rest of the leadership team and our ability to navigate through the crisis. This is where you need to have built this credibility over time and not start when the crisis hits. We have always been transparent with the employees about any business challenges we needed to overcome, and our employees have always risen to the occasion. Even now, our CEO and our leadership team continue to communicate regularly with the employees. While the times are challenging, we also see that the organization is using this as an opportunity to cross-train, retool our operations and be more focused on our strategic initiatives. This sense of purpose coupled with the confidence employees have in the company is keeping the morale stable. Strong interpersonal bonds cultivated across the company are also helping a lot.
Thomson: What is your strategy for customer retention during this downturn? How do you prevent customers from leaving?
Parsons: Exclusive Resorts is a Membership-based vacation club. When our Members join, they select a 10- or 30-year Membership Plan. Because of this, we are uniquely positioned within the travel industry because our Members pay their Annual Dues at the beginning of each plan year and for the duration of their Membership contract. Because we are not a subscription base, our Members are not as fleeting as they might otherwise be; they feel a personal connection to Exclusive Resorts, and we have a deep commitment to them—to ensure their safety, health and happiness whenever and wherever they travel with us. There is a strong bond between us and our Member families. It very much feels like we are in this together. We’ve had countless Members reach out to ask how they can support Exclusive Resorts at this time—both our Club as a whole, but also the individuals our Members have worked with throughout the world for many years. In return, we are being proactive and transparent in our communications, while also providing them unique ways to engage with The Club (such as our Exclusive Connections series) and help them dream about future travels. We recently sent a video to Club Members from on-site Concierges across the globe saying hello and wishing them well. The response was phenomenal—Members absolutely loved it. We want to be a bright spot in our Members’ days. Helping them recall fond memories made while traveling with Exclusive Resorts and dreaming about upcoming vacations are two of the best ways we can support our Members and the overall travel industry by encouraging them to continue booking vacations in the coming months and years. We also have a few other ideas we are working on right now.
Because we are a private club, we have the opportunity to adjust our policies as needed to accommodate Members and address unexpected external factors. From a tactical perspective, and in response to the effects of COVID-19, we revised our cancellation policy for travel through the end of August to provide Members additional flexibility to plan and adjust their existing reservations. We are also allowing Members whose scheduled trips for March, April or May were cancelled due to the outbreak the option to utilize those vacation days over the next two years.
Save: Even as we go through our own pain, Duettos across all departments have always held genuine empathy for our customers. We have launched various initiatives across our Product, Marketing, Customer Success as well as Sales teams to remain relevant and create further value for our customers as they go through the tough times, and then extending further into the times when recovery starts to happen. Instead of rolling out a uniform program, which on the face of it could have been simpler and scalable for us to manage internally, we are partnering with our customers individually to create a win-win solution in each case. We believe partnering is the right approach, and will only strengthen our relationship with our customers.
Thomson: In addition to their day-to-day responsibilities managing the COVID-19 crisis, CFOs are charged with building a pipeline of talent for the future. What is your approach to recruiting and retaining top tier finance talent? How prepared are today’s finance undergraduates for the challenges they will face in the workforce of today and tomorrow? What could undergraduate institutions do to improve the quality of undergraduate finance education?
Parsons: We always want to hire the absolute best people, and in the case of Exclusive Resorts, those people also need to have an inherent desire to provide the highest levels of service to others. Our culture demands our employees bring people together and care for them as family so that they can focus on what matters most—time with their own loved ones! From our on-site Concierges to a manager in our finance group, we expect this level of service and commitment from everyone.
Of course, teamwork is critical. I learned early on in my career just how important it is to be able to work with others in a team environment. Almost everything in today’s business world requires a team effort! When I was in graduate school, my least favorite class was organizational behavior where we talked a lot about working in groups and being disciplined. I now believe discipline is one of the most important traits a leader should have. Overall, I believe finance undergraduates are better prepared today for the challenges they will face than ever before. I have had the opportunity to serve on the advisory board of a major business school for many years, and each year I am more and more impressed with the quality of the graduates.
Save: Today’s finance undergraduates absolutely have the necessary hard skills and drive to be successful in the workforce of today and tomorrow. Besides, their ambitions are not curtailed by outdated notions of career trajectories. All they need is an opportunity and then some mentorship. My approach to recruiting and cultivating top talent is to look for the right attitude and core problem solving skills over just the finance hard skills, and then create opportunities for career advancement. It has worked extremely well, and I take great pride in tracking the success of folks who have been on my teams. The skills I would like finance undergraduates to acquire sooner in their careers are interpersonal skills, team skills and leadership skills. At the end of the day, the right answer that does not get implemented is worthless.