After the first wave of COVID-19 hit Australia, the country outperformed most of the worst-case scenarios authorities predicted. However, with COVID-19 impacting the world globally one of the hardest hit industries has been tourism, hospitality and hotels.
Since the outbreak of COVID-19 one of Australia's two major airlines has gone into Voluntary administration and the other has announced it has cancelled most international flights through to at least June 2021. Some industry commentators are saying international travel will not return to previous levels until 2024.
It appears as though we will not be heading overseas anytime soon or that anyone will be visiting our shores in the near future, particularly with the way some other Countries are responding to the pandemic.
In 2018-19, according to statistics published by Tourism Research Australia, total revenue across the industry was $146 Billion with $46 Billion from international visitors, almost a third of the total market revenue. This revenue has effectively reduced to zero.
After the first wave of COVID-19, while the international travel restrictions gave hope this would encourage people who would ordinarily travel overseas to now spend that money in Australia, the concerns of a second wave and possibly more appear to be putting a stop to that.
The Queensland borders have once again closed and States and Territories are constantly adjusting restrictions as COVID-19 clusters appear in the community. It appears inevitable that authorities will be more cautious as to when restrictions will be removed going forward. The Prime Minister has already recently flagged that we should not be planning to travel interstate for Christmas.
While some economists predict the economy will bounce back quickly, as is reported to have occurred after other global events, who knows when this will be and how much the economy will bounce back with so many job losses.
What does all of this mean for business owners?
We recommend that businesses need to adjust and adapt as to what is in front of them right now. They need to learn to survive in this market right now. While better times may be ahead, the when is unknown.
How does a business survive in these times?
- It needs to engage in regular, strong and honest communication with its key stakeholders being financiers, creditors, landlord, employees and customers. If everyone knows where the business is heading and what the goals are, the more willing stakeholders are to participate in that process and those goals may become shared.
- The business needs to understand the cost of doing business. To understand the costs of doing business you need to develop a robust cash flow and test that cash flow against actual results achieved. In this market that may involve streamlining certain aspects or even restructuring.
- If it becomes evident that business is struggling or cannot operate in this market, it needs to seek assistance early. With early assistance there are many more options to enable a business to survive. This may be from an informal arrangement with stakeholders or more formal arrangements. Either way early assistance provides the best chance of survival.
BRI Ferrier are business recovery specialists. We provide practical advice, innovative solutions for clients in times of distress, such as those created by this COVID-19 pandemic.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.