How SoftBank-backed GetYourGuide will survive travel's 'nuclear winter' with 50% founder pay cuts and shorter working hours
- SoftBank-backed travel startup GetYourGuide has described the COVID-19 pandemic as a "nuclear winter" for the travel industry.
- The company runs an online marketplace that lets people book tours and experiences while travelling, and saw a 90% drop in bookings in March.
- The company has raised around $650 million to date, but says being born out of the 2008 crisis has made it disciplined about spending.
- GetYourGuide is focused on building out its tech platform during the crisis, and is offering support to its local suppliers.
- Its founders have committed to pay cuts in 2020, and the company has shortened employees' working hours in order to avoid layoffs.
- Visit Business Insider's homepage for more stories.
The US and Europe should be headed into peak travel season, as the weather warms up and school vacations loom.
But the coronavirus outbreak has grounded airlines and left hotels empty, as countries around the world go into lengthy periods of lockdown.
Airline passenger demand was down 14% year on year for February 2020, the steepest decline since 9/11, according to data from the International Air Transport Association.
GetYourGuide, one of Europe's biggest and most well-funded startups, is no less affected.
"Nobody knows how long this will last and how deep it is for people," GetYourGuide COO and cofounder Tao Tao told BI via a Zoom call with a seaside backdrop. "We call it a nuclear winter for travel. I mean, this is unprecedented."
GetYourGuide saw a 90% drop in bookings in March
GetYourGuide is a German-headquartered startup that runs an online booking platform for travel and tour experiences.
It is one of Europe's best-funded startups, and was experiencing phenomenal growth as travellers eye authentic experiences. The bulk of its customers are in Europe and the US.
Until last month, that is. The startup has seen a 90% drop in bookings in March, and says some of its local partners are struggling financially.
Tao is nonetheless outwardly upbeat, and may have reason to be compared with smaller startups.
GetYourGuide raised $484 million in 2019 from a consortium led by SoftBank's Vision Fund. The firm hasn't disclosed its valuation. Its other backers in the round included Temasek, Lakestar, Korelya Capital and Heartcore Capital. That gives GetYourGuide plenty of "runway" - enough cash to survive months or even a year of zero travel.
Vision Fund startups have a reputation for superfast - even overly fast - spending and expansion, a position that may leave portfolio firms vulnerable to an expected global recession. A number of SoftBank-funded startups have already laid off a collective 3,000 people in 2020, BI earlier reported. Job cuts took place at pizza robot startup Zume, hotel chain Oyo, delivery service Rappi, and car rental startup Getaround.
GetYourGuide says it is different.
CEO Johannes Reck told TechCrunch in March that the company hadn't spent much of its new cash yet.
"We were very frugal with it," he said, according to the publication. "In the early months after the fund raise SoftBank was very angry with us that we were so disciplined and we weren't investing more in growth. Now they're, I think, very, very happy - the new role model for the portfolio."
Tao told Business Insider: "Having raised more than $600 million doesn't make us frugal, if you will... The way I would describe it is brimming with discipline."
Tao, aged 35, notes that the firm was built in the aftermath of the 2008 financial crisis. "It definitely builds resilience," he said.
GetYourGuide's founders committed to a pay cut in 2020 to help keep the company going
Four of the five cofounders who remain with GetYourGuide, including Tao and Reck, have committed to taking a 50% pay cut this year. Execs have committed to a 30% pay cut.
The company says it wants to avoid layoffs, and may be in a stronger position than US counterparts thanks to its European roots.
It has, for example, taken advantage of Germany's "Kurzarbeit" scheme. This involves reducing an employee's working hours and salary, with the government stepping in to pay part of that wage difference. GetYourGuide says the bulk of its 700 staff are located in Germany, and able to qualify for the scheme.
Furloughing in the US is patchier by comparison. In some cases, employees have been put on leave with zero pay, or only continue to receive company benefits.
"It's these times I think you are grateful that you live, or most of your basis is in Europe," said Tao. "Europe, you can tell, was born out of war. A lot of the structures, policies, and frameworks are made to withstand external shocks. Europe is much better with external shocks. There's more support from the governments on how to support startups, we're in constant talks with the [German] economic ministry."
Other European startups have taken similar measures. Swedish startup Voi furloughed or laid off the bulk of its staff this month to cope with the pandemic. "We realized that we needed to change our strategy and take drastic measures," Voi cofounder and CEO Fredrik Hjelm told Business Insider.
Tao says the firm has shifted its focus to helping customers who are stranded abroad or need to change their plans. "We now allow customers to cancel, no questions asked, 24 hours ahead of their tour. Then we deal with how we get our money back later. Cancelling these things at scale, tens of thousands of cancellations, that took a lot of focus from the team," he said.
The company is also trying to help its suppliers, with a dedicated hub to answer frequently asked questions.
Fergal Mullen, partner at investment firm Highland Europe and an early backer of GetYourGuide, said the startup's actions to take pay cuts and reduce employee hours should give it sufficient runway for up to two years.
"We're extremely well-financed and have taken measures across the team," he said. "[Germany's] Kurzarbeit is an incredible tool to have at your disposal, and it isn't in the US. Having to do deep [job] cuts are painful at the execution, and it's painful again to the company when all of this ends."
He added that GetYourGuide was focused on hunkering down and building out its tech platform during this period.
"When you don't have external demand, you can really focus on the internal stuff that may have been under pressure with high growth. But we can do it with teams operating remotely, we have all the infrastructure in place."
Tao added: "People will start to travel again. We're starting to see some early signs of some folks in Asia travelling domestically... we'll see more of that in Germany, France, and Italy.
"Consumers worldwide want a great digital product, they want great inventory, great experiences, which is investment. We need our people to work on these things, we need to be ready when the market comes back."
In the meantime, GetYourGuide is offering some of its experiences virtually, such as cooking classes and street art classes offered via Facebook Live.
Still, there's nothing like the real thing, and Tao is planning his escape in the anticipation that the world goes back to normal.
"The one thing I really want to do is a food trip to Taiwan," he said. "I'm from Beijing, but I've never been to Taiwan, and I've heard great things about the Taipei food markets. That's what I want to do."