Tim Hansing, co-founder and CEO of Red Planet Hotels, has a simple message for U.S. hoteliers grappling with the reality of COVID-19: “You have not seen anything like this ever in your life.”
Bangkok-based Red Planet operates 31 budget hotels totaling nearly 5,000 rooms in Indonesia, Japan, the Philippines and Thailand. His hotels are seeing single-digit occupancy, but he says early government responses and precautions taken by the population have helped mitigate the situation.
Hansing, whose background includes stints as SVP of acquisitions and development at Kingdom Hotel Investments and at Movenpick Hotels & Resorts, offers a few steps hoteliers should take immediately. He spoke with HOTELS late last week.
HOTELS: From your location and perspective, what’s happening?
Tim Hansing: The most critical thing is that the virus itself seems not to be that harmful. But the panic around it, and the crisis around it, is causing more damage, more economic harm, more wealth destruction and probably more death, than the virus itself. So the panic is causing more crisis than the virus. It’s really important to understand, but unfortunately you ain’t going to reverse the panic now so we’re in it, right?
And so whatever numbers that your guys are working on, hotel controller or CFO, with some sort of crisis management in mind, and he’s reducing his ops and teams or he’s reducing his revenues, whatever it is that you’ve done, halve it. You’re going to single-digit occupancy… This will ripple through the economy in a way that we’ve never seen as fast.
H: You said the U.S. situation is where your region was in January. How will this play out?
TH: It’s going to ramp up every week. You’re going to think, “Oh my God, how has it changed so dramatically in seven days?”… You cannot be prepared enough. Businesses need to immediately, today, go to survival mode, preserve cash and think about what you’re going to do for the next three months.
H: What are you doing?
TH: The big item is the fact that your hotels aren’t going to make any money, and it doesn’t matter what you’re going to do, hotels are not going to make money. So what you’ve got to do is stop losing money. You’ve got to make sure your P&L is at zero…
(Then) you’ve got to restructure your debt immediately. You need to have that conversation today. If you’re reading this, and you haven’t had that conversation, stop reading this and have that conversation… Probably about 50% of our banks have already agreed to give us debt relief. The other 50%, it’s highly likely that they will do that. So, that’s the best advice that I can give.
H: What other factors should be considered?
TH: Your staff are going to unfortunately not be needed. There are going to be no guests… I think the best way to look at it is some sort of temporary layoffs. And, of course, that’s going to have a horrible, horrible impact for families, but you know when I say temporary, because this thing’s probably got a three- to five-month life cycle. But the shock is so hard, and so severe, that your business has to go into survival mode so you can re-employ those people at the other end.
H: Are you furloughing people?
TH: In Japan, the government has put in place a number of measures where you actually don’t have to. They will give you assistance to do that. In Thailand, Indonesia and the Philippines, the three other markets that we’re in, the whole virus itself hasn’t really hit that hard that we’ve had to do that yet. But it is absolutely something that we’re looking at.
H: Have you closed any hotels?
TH: We’ve not closed any hotels yet, but we are looking at it. We are in single-digit occupancy for some hotels at the moment. I have to say the Japanese government gets it. They were really fast to react, and they put in a number of measures where they have softened the shock of this massive, massive impact of the virus. So they’re providing emergency loans, they’re telling banks not to foreclose. They’re giving (loans to) companies that have had reductions in revenue of over 30%. Our reduction in revenue is about 80%. And they’re putting measures in place to assist companies like ourselves to remain intact through this time…
I think the U.K. is doing a great job like Japan, but I think the EU is going to have big problems. And I think – I’m sorry to say this – I think the U.S. is probably the least prepared in the world for what’s coming, both medically and economically.
The reason I’m doing this interview is I’m hoping to get your readers out of denial, because a lot of people are in this denial phase, right? You’ve got to get out of that, you’ve got to stop worrying because you’re in the shit, and it’s bad… It is 9/11 and Lehman Bros. combined. So if any of the readers are old enough, like me, to know those two things, combine them, and then take measures that are appropriate to that.
H: What’s your outlook?
TH: The big infection zones in Asia are China and South Korea. China is basically almost over… The peak has gone. The new infections are, in terms of China, negligible. So, and South Korea really has this thing under control. Japan has had its time, it’s clearly under control there. So, I’m hoping that these markets are going to open up soon again. Now, if we’re lucky, our demand, 80% of it, is Southeast Asian. So, I’m hoping within the next two months, this thing’s going to ease up. But that’s because these guys are used to this stuff. I don’t see the same rosy picture in Europe and the U.S. I think it’s going to be harder, more severe and longer.
H: How are your employees doing? How are you communicating with them?
TH: Our employees are fine. We’re communicating with them all the time. We’ve had to put in a big expense cutting exercise. I approve every single expense now in the company, down to 25 dollars for tissues and water. You’ve got to really manage that closely. But so far we have had no employees (of our 550) with any virus, with any sickness, but obviously we’re monitoring closely.
H: How long can you ride this out?
TH: I think we’re safe. One of our shareholders is Goldman Sachs. And we’re working with them as well to provide some assistance, and they’re great, great partners… But I think we had enough cash to be able to weather this storm, there’ll be others that don’t. But, then again, we have enough cash if we get the debt relief that we need, right? But I think we’ll get that.