‘That money was essentially burned’: Google’s aid isn’t enough to save travel businesses, CEOs say

Stephen Oddo, CEO of the travel company walks, saw a preview of the huge financial damage the coronavirus could do when he saw sales evaporate for his company’s daily tours of Milan. At the beginning of this year, Italy closed its economy to prevent the spread of COVID-19and Oddo feared that the pattern would soon play out in other cities where Walks sells his special tours.

When global travel came to a standstill, the Austin, Texas-based company was looking for ways to cut costs. Walks turned to Google, where the company spends around $ 1 million annually on ads, and asked the search giant to work with him on a payment plan that took expected fluctuations in sales into account. (Google collects outstanding ad invoices from the first quarter.)

The two sides have not agreed. In the meantime, Oddo took more drastic steps to make ends meet. He fired or released more than half of his employees and reduced his team from more than 100 to around 45 employees.

“Everyone is still in shock,” said Oddo. “The wind is knocked out of you.”

Walks, which sells travel tours that include a Summer of Love excursion through San Francisco and a real crime thriller trek through New York City, is not alone in seeking relief for the search giant. At the end of March, Google announced a $ 800 million package to help companies suffering from the corona virus. That means $ 340 million in advertising credit for small and medium businesses across all industries. The credits go to companies with active Google Ads accounts and must be redeemed before the end of the year.

Travel chiefs say that’s not enough. Oddo is one of several leaders of small travel companies who have asked Google to increase their support. In addition to negotiating a new payment plan, he wants more time to use the credits. Other CEOs are asking for cash discounts on advertising in the first quarter, which didn’t bring much return as people around the world canceled their trips. All CEOs complain that Google’s current promise to help small businesses is little more than a PR move that barely helps businesses.

In an email, a Google spokesman acknowledged the “unprecedented challenges” the travel industry faces, but declined to discuss specific requests from travel CEOs. “We treat payment terms with our customers or partners confidentially and cannot disclose details,” he said.

Google’s travel search products also appear in cancellation policies, the spokesman said, pointing to a Pilot program The company expanded last month and only charges hotel advertisers when a guest actually uses the property.

The relationship between Google and the travel industry is symbiotic. According to analysts, Google’s typically muscular advertising business plummeted in the first quarter, partly due to the disappearance of travel ads. Despite the setback, Google’s well-oiled vending machine managed to exceed sales expectations. However, the search giant reported that revenue fell sharply in March as the coronavirus crisis hit, and the company warned of a “difficult” second quarter for its advertising business. Google has also slowed down the hiring for the rest of the year and is reported to have cut its own marketing budget in half for the second half of 2020.

Even big tour operators hurt. Expedia, which typically spends $ 5 billion a year on ads, said it was an expense is unlikely to crack $ 1 billion this year. Booking Holdings, one of Google’s largest customers, is expected to cut The search giant’s ad budget increased from $ 4 billion last year to just over two billion in 2020. The travel company owns Booking.com, Priceline and Kayak. Airbnb, the rental company, said last week that it was firing 1,900 of its employees – a quarter of the company – one of the largest mass layoffs for a Silicon Valley company since the pandemic began.

The situation is more difficult for companies like Walks. Oddo says the expenses his company spent in the first quarter have been wasted. “The money was essentially burned,” says Oddo.

“You can’t eat credits”

Douglas Quinby, CEO of Arival, a travel research company based in Boulder, Colorado, says the tourism industry is on the brink of collapse. March 18 Quinby launched a Change.org petition Ask Google and Facebook to offer ad credit to the travel industry. A week later, Google announced its ad credit relief package. According to Quinby, the amount that Google spends is tiny for a company that has annual sales of $ 160 billion.

Arival surveyed around 600 tourism, attraction and activity companies, and almost half of those surveyed said they were at risk of being closed if the trip did not resume within the next six months. According to some estimates, a trip may not be permitted or desirable until next year at the earliest. Treasury Secretary Steven Mnuchin said last week It is “too difficult to say” whether the US will ease international travel restrictions by the end of the year.

In many cases, if you set an expiration date for 2020 for ad credit, it simply won’t be used, says Dan Yates, CEO of Pitchup, a London-based company that books camping accommodations. Many tour operators advertise seasonally, usually in the first and second quarters, to boost business for the peak travel months of spring and summer, says Yates. Advertising tends to decrease in the second half of the year.

The situation is bleak for pitchup. The company reduced the workforce from 48 to around 12 through layoffs and vacations. Sales have dropped 98% since the beginning of March. One day in late April, the company had sales of $ 2,500 compared to $ 125,000 the same day the previous year.

Yates is one of the CEOs asking for a discount on ad purchases instead of credits. In April a group of German travel starts wrote an open letter to Philipp Schindler, Google’s chief business officer, requesting further relief, including cash refunds. (Google did not provide Schindler for an interview.)

“You can’t eat credits,” says Yates. “It won’t put food on the table.”

In addition to help with ad payments, Yates has asked other parts of Google for help. Pitchup also leverages the company’s cloud hosting services as well as GSuite, the search giant’s product range for productivity apps for businesses. According to Yates, Google has offered deferrals, but it won’t matter if companies like him don’t survive.

In an email from customer support, Google rejected an application to facilitate payment for its cloud services. “We strongly recommend that you cut costs if you can while Google suggests another solution,” wrote a representative in an email reviewed by CNET.

“A reasonable request”

The recoil of travel chiefs raises questions about the role of a public company like Google in helping other companies, a responsibility that is typically assumed by the government. The U.S. is supporting small businesses through the Paycheck Protection Program and sending stimulus checks to citizens to help them cope with the pandemic.

Supporting the travel industry and providing more flexible terms could be good business for Google, says V.G. Narayanan, a professor at Harvard Business School, is studying financial incentives and management.

“Many trips will be postponed and there will be a lot of catching up to do,” said Narayanan. “You could even win new customers if you say there is no payment due for six months.” Google should also consider giving discounts to selected companies, he said.

Ann Skeet, senior director of leadership ethics at the Markkula Center for Applied Ethics at Santa Clara University, says the call goes beyond smart business. Google has a moral obligation to help businesses in a more meaningful way, she says.

“If you believe, like you said, that you don’t want to do anything bad, this is a moment to bring people together,” said Skeet, referring to Google’s earlier mantra, “Don’t be bad.” “A discount is a reasonable request. If I were Google, I would think about the long-term outcome.”

Oddo, the CEO of Walks, says he is fortunate that his company is not at risk of collapse like other companies in the industry. However, rebuilding migrations after the damage to the pandemic will take at least three years, he says.

Since the travel ban, Walks has offered virtual tours around the world, including one through Wuhan, China, where the corona virus originated. Google could make a big contribution to supporting the travel industry – and itself – if the support is more aggressive, he says.

“The best antidote is to restart the economic engine,” said Oddo. “Sales will breathe life back into the industry.”