eTravel, pioneers of the Independent Travel Consultant (ITC) model in South Africa, a thriving R125-million monthly turnover business, was stopped dead in its tracks when Covid-19 struck. Looking back, Garth Wolff, CEO, told Travel News that a few fundamental business principles helped him and the business to get through the most brutal of storms.
“Firstly, keeping your business in a mostly-healthy state during normal times can help you to weather many storms (even the nasty COVID-19-type ones).
The analogy that I use is that the human body is no different to a business. If you are relatively healthy, you can enjoy a couple of tequilas from time to time. If there is a structured, clean, healthy life on weekdays and a bit of fun on the weekends, you are better equipped when something happens out of the blue, like a heart attack.
A basic liquidity ratio is an effective tool that I use to measure business health. Work out your current assets and your current liabilities. Next, take all the money that’s in your bank and add your debtors, loans and short-term loans. Now, if you had to stop your business today, do you have enough cash to cover your expenses?
When non-financial people hear these terms, they go into a panic state, but it’s just basic mathematics! You should be able to settle your debts immediately with the money you have in the bank. This is so important for everyone! The problem we have in travel is that we collect money from the customer today and pay it over later. There is money sitting in the bank and those who don’t understand that liquidity ratio will go out and spend that money… But, it’s not theirs!
On the other hand, having millions and millions of rands in your bank is silly! You’ll earn interest and get taxed on that interest… Any investor will tell you that is a bad investment.
Crisis management
It’s important to recognise, early on, the onset of a crisis. Early on in the pandemic, eTravel’s executive leadership, including Tammy Hunt, MD, and Ruan van Niekerk, Group Financial Director, worked on a plan to buy eTravel valuable time.
The minute the pandemic happened, Ruan, Tammy and I met and we said: ‘We’ve got a crisis.’
It’s like an aircraft suddenly losing power. Except with 270 ITCs and 55 staff and all their families in the back of the plane. We just had to remain calm. It was tough. I allocated tasks and we knew that communication was important. Tammy reached out to the staff and ITCs, and so did I… constantly. Ruan’s job was to look at the income statement, line item by line item.
For at least three months, eTravel went from producing R125 million in turnover to – negative R7 million per month due to excessive refunds due clients canceling trips. My personal assets and properties were sold, many way below market value, while I tried to get a loan (which proved a difficult task at the time). Sadly nothing could spare the business from having to retrench several staff and the Johannesburg office was closed permanently.
The executive emergency plan was communicated clearly to the entire staff and ITCs, and we kept that up with monthly e-mails. I encourage any business-owner experiencing times of difficulty to keep their lines of communication open.
We cancelled everything and cut our income statement to the bone. The number one goal was to keep eTravel alive. Within six months, we had done pretty much all we needed to do. We had enough cash to last 30 - 36 months. We didn’t know how long the pandemic was going to last. When you are bleeding that much cash, it’s scary. Nonetheless, we had our tasks and we carried them out with discipline. And, we communicated like never before!
I drew from previous work experience at big-name brands like Johnsons Wax and South African Breweries, and cost breakdowns became critical. I had worked at a factory where I analysed costs and cost breakdowns and that understanding became quite natural - thankfully.
There are a lot of people in senior positions in travel who are scared of an Excel spreadsheet and who are reluctant to break their business into components. But, it’s absolutely no different to our own body and having a plan to keep it healthy.
At eTravel, that plan is decided at a yearly budget breakaway. We go away each year to decide on our annual budgets. From there, we set our strategy. There are 20 key drivers and 15 - 20 things that we aim to do well. Then, we allocate a ‘champion’ to each task. Tammy or Ruan or I will assign those tasks and that becomes part of a staff member’s job description… KPIs (Key Performance Indicators) are measured, which count towards their increase. There are no surprises and, continually, we help our staff to focus on their responsibilities. All of this filters up into the key drivers and into our business strategy. It makes sure that we have cash in the bank, that we can settle debt as much as possible, and that we run a healthy business.
Other golden business rules are:
- Consolidate your debt so that you settle your debt more quickly;
- Avoid debt!
- Keep separate personal and business bank accounts;
- Google-search a simple healthy business budget - and stick to it!
- Manage income and expenses (this takes discipline!)
What about diversification?
I am working on a marketing plan for eTravel Group’s new Big Five game lodge in Hoedspruit. I believe that enlarging a range of products or services can be healthy – but just don’t spread yourself too thin.
eTravel is my core business, and I’ve thinned out the number of entities that I am involved in. eHolidays is small. I’ve also got eGroup, which owns the buildings in Jo’burg and Cape Town, a house and an airplane. Under GDW Lodges, we have Leopard’s Bend opening in June - my absolute life’s dream.
The logic was that eTravel is about outbound travellers going overseas. I thought, let me diversify into inbound and take advantage of the foreign currencies coming in. When COVID-19 struck, all incomes streams were turned off. I thought, I’ve diversified into the wrong industry!
But, in the same breath, I knew I was, and am, a travel & tourism person, and it still made total sense to take the learning skills I had and to apply them to something similar to eTravel. The cross-pollination is huge. Now, when I open my lodge, I hopefully have 270 ITCs who will be able to sell it to their clients.
Leopard’s Bend Bush Lodge is small and intimate five-chalet lodge located on the Blue Canyon Private Game Reserve just outside of Hoedspruit (Limpopo). The 10 000 hectare game reserve offers an abundance of game, including the Big 5, spectacular mountain views and peace and tranquility of the lowveld. It has all the ingredients for a winning business.
Three years since COVID-19 was first reported in South Africa, I still believe travel is a sound investment. I’m excited for the journey ahead.
My feeling is that the scruffy businesses that hung on to the coattails of more efficient businesses are gone. Also, travellers have realised the benefits of working with a professional travel consultant. I have my concerns, because there are not streams of professional travel consultants coming into travel, and that’s also a reason why I have diversified into inbound. I believe that there is huge potential for inbound tourism.”
Read more about eTravel’s radical turnaround here.
