COVID-19 Grounds Tourists, Forcing Travel Companies to Think Outside the Box

On May 23, Chinese online travel agency Tuniu issued an announcement saying that because the closing price of its ADS was below the minimum purchase price of $1 for 30 consecutive trading days, the company received a warning from Nasdaq’s listing eligibility department.

Another major Chinese online travel company Tongcheng Elong recently released its financial results for Q1 2020. Unsurprisingly, both revenue and profit saw a significant year-on-year decline. In Q1, Tongcheng Elong reported revenue of 1.005 billion yuan, a year-on-year decrease of 43.6%; adjusted profit was 78.1 million yuan, a 74.2% year-on-year decline.

COVID-19 virtually obliterated travel for the first several months of 2020. Chinese are the largest tourist demographic on earth, and as China and many other countries keep their borders closed, companies servicing this massive body of travelers are experiencing enormous losses and are forced to rethink their approach to business. 

However, China is also a popular tourist destination in and of itself, and companies specializing in bringing foreigners to the Middle Kingdom are also struggling.

“We never expected something this big would hit us when we were expecting what was supposed to be perhaps the best year in tour sales since our company started 8 years ago. Many tours that were already booked for summer had to be canceled, refunded, or postponed,” said Andrés Rodríguez, CMO of a Beijing-based boutique travel agency Bespoke Travel Company.

Nonetheless, while reporting on Tongcheng Elong’s performance, the Daily Economic News noted that although the market expected the company’s performance to be impaired, since March 19, 2020 the company’s stock price has risen by 50%. All this despite the fact that the platform’s monthly active users decreased by 25.5% and average monthly paying users shrank by 35.9%.

Tongcheng Elong’s accommodation booking service revenue in the first quarter was 229 million yuan, down 53.2% year-on-year; revenue from transportation ticketing was 687 million yuan, down 45.4% year-on-year. However, other income (advertising service income, income from supporting value-added user services, scenic spot ticket income) increased by over 153% year-on-year.

COVID-19, while a curse to traditional travel, has forced companies to adapt and innovate. As in the case with Tongcheng Elong, growth points can occur outside companies’ core business competencies, often producing unexpected results.

“For a small boutique travel company like us, the impact was severe but it was also a great opportunity to challenge ourselves on how to help the company survive during this period and scale. We tried online webinars during April and early May that had a fairly good turnout. Our longtime collaborators helped us produce some great online classes, and talks showing the beauty of Chinese culture. We also created two new scavenger hunts aimed at locals, where participants go through Beijing and Shanghai’s major sights on the hunt for clues, while learning historical facts and stories about the place they are visiting,” said Andrés of Bespoke Travel Company. “We are reinventing ourselves, and focusing on locals craving adventures. Exploring their own country seems to be the right way to restart travel as we know it, with some social distance implemented for now.” 

Chinese streets are already bustling with crowds and life seems to be returning to normal. The only reminders of the virus are medical masks worn by practically everyone and frequent temperature checks. Yet, this is enough to embolden local businesses and build up their hopes.

“Our business is undoubtedly affected by the outbreak. However, we’ve seized the user demand that originated from the end of February and March 2020,” commented Tongcheng Elong. “We believe that with our core competitive advantages in traffic channels, market positioning, technological innovation and management, we have good conditions to ride the future recovery trend in a short period of time and achieve growth.“

“Tourist sights in China are partially opening, hotel rooms are getting bookings again, hence the tourist sector is starting to get active, but we need to get used to the new normal, as new practices involve new choices as well. Some touch-points we will have to consider are an expected boom in domestic travel, avoidance of crowds at all costs, and focus on outdoor activities,” added Andréz.