Behind GetYourGuide's strategy of zero bookings and zero layoffs

Every element of the tours and activities sector has been unhinged by the COVID-19 coronavirus, from large well-funded online marketplaces to software suppliers to local operators in far corners of the world. But strategies to survive the crisis vary, and one interesting example is that of Berlin-based GetYourGuide.

Founded in 2009 by four college classmates, GetYourGuide has raised more than $650 million, including a massive $484 million Series E round nearly one year ago. But even with that cushion, co-founder and COO Tao Tao says the founders have not forgotten the lessons they learned in the early days as they built a new type of travel startup in the aftermath of the global financial crisis.

“In a way our culture was shaped bootstrapping between 2009 and 2012. We only raised a Series A in 2012, which is very late for a startup nowadays,” he says.

“A lot of our culture has always been to thrive in uncertainty, to take ownership, to do something out of nothing. These are some of the core values for the last 10 years."

As the virus began to permeate communities around the globe, Tao and his co-founders crafted a survival plan based on a combination of reducing expenses, adjusting forecasting and conserving cash, with an underlying objective of avoiding any layoffs for the company’s more than 700 employees in 17 offices around the world.

“This is a plan that predicts basically that 2020 is nonexistent. You cannot have less than zero bookings. So it’s a very conservative plan that we think is very strong,” he says.

“I think it’s dangerous to change the strategy and direction every week, [for example] just because you get new news about vaccines or not vaccines. Right now it’s important to be principled, and we’re doing that.”

Cost-cutting

The company says bookings are not truly at zero. Remote locations - for example Vanuatu and Papua New Guinea - are getting some activity currently, and a broader range of bookings are trickling in for the fall. But, of course, it’s nothing like the rapidly growing volume the company had been experiencing at the start of the year.

Labor is generally the biggest cost for a business, so a key component of the GetYourGuide’s plan is a mix of voluntary reductions in salary and workings hours, including the four founders taking 50% cuts in pay and senior management taking “significant voluntary pay cuts.”

The voluntary cutbacks in salary and hours are spread across GetYourGuide offices globally, impacting more than half of the 700 employees.

For those in Germany - about three-quarters of the total staff - pay reductions are subsidized by the government through a financial assistance program known as Kurzarbeit, which translates to “short-time work.” Through the program, companies can cut employees hours and pay, and the government provides those employees a supplement equal to about two-thirds of their lost wages – reducing both costs for employers and distress for employees.

This program is part of what has enabled GetYourGuide to avoid any layoffs, unlike its main competitor, Hong Kong-based Klook, which has implemented a mix of layoffs and furloughs of at least three months for 10 to 20% of its workforce, according to a Klook spokesperson.

“You lose so much knowledge, you lose so much of your culture [with layoffs]. And then you have to rehire and you have twice the cost in recruiting, the cost in training and onboarding. This way you can save cost while also maintaining ties between the employees to the organization,” Tao says.

“What makes sense for us is to secure the future, but also to protect our workforce as much as possible.”

The company says its current reduction agreements are in effect until the end of 2020, but that could change if bookings pick up.

Suppliers

Like other marketplaces, GetYourGuide is also navigating the delicate balance of serving both travelers and suppliers.

Early in the crisis, on March 1, the company revised its cancellation policies, which prior to the outbreak were determined by suppliers. As part of what Tao says is a commitment to remain “100% customer-centric,” the company now gives full refunds for all cancellations made more than 24 hours in advance and a voucher for future use for any made within 24 hours.

“If a supplier didn’t agree to a cancellation, we just ate the cost,” Tao says.

“We will do the right thing by our customers in any case, and then we would talk with our suppliers to say this is a terrible situation for everyone, can we do the right thing by our customers together. And the overwhelmingly majority of our suppliers did."

To assist those suppliers in the short-term, the company has compiled information on how to apply for government assistance in markets around the world. And as bookings pick up, Tao says GetYourGuide is giving suppliers the option to receive more frequent payouts - bimonthly instead of monthly – to accelerate their recovery and “give them liquidity to pay tour guides, buy tickets they may need, rent equipment.”

The company is also talking to suppliers about the changes that will need to be made to minimize health risks as travel activity resumes. Tao says he expects there will be many, such as more contactless experiences, smaller group sizes and longer operating hours to disperse demand.

But what won’t change, he says, is the ability to continue to grow GetYourGuide and the tours and activities sector as a whole.

“The long-term vision has not changed. This is a $100 billion-plus market, not very much online penetration,” he says.

“People will travel. People will book experiences. But right now we are very much focusing on maintaining financial flexibility without impacting the operations.”