Heinecke spoke to media this week via Zoom, answering questions on everything from his favourite hotel to future expansion plans. This is an edit of his comments.
What is the current situation like at Minor Hotels?
At the moment nearly all of our 530 properties worldwide are closed. Almost everything is closed. Those that are open are struggling with very low occupancies. We don’t see a lot of tourism happening from domestic travellers. It’s only when we see countries opening up will we see more travel.
I was fairly vocal early on during this pandemic that we had to close down quickly in this country (Thailand) which is our headquarters and set an example to other countries to find a way to stop the amount of damage being done, and I’m pleased to say that the government did that.
I’m coming to a point now where I’m urging the government that we have to begin to open up carefully and slowly because health is at stake, but nonetheless we must open up.
We’re not going to die from this virus, but we may well die from the economic turmoil it is going to deliver, so for me it’s critical we begin to open up at the beginning of May here in Thailand, and hopefully in other countries where we have a presence. If we don’t, I have a very pessimistic view of the future of our industry.
What will it take for travel to start again?
There need to be bilateral arrangements between countries ensuring that travellers from countries that are considered safe are allowed to travel between those countries without quarantines being imposed.
Here in Thailand we might get some domestic travel by the summer, but I don’t think we’re realistically going to see any conventions or MICE (Meetings, Incentives, Conferences and Exhibitions), or other things until early 2021. My hope for this year is we might get some domestic travellers and maybe by July we might get some bilateral travel between various countries that want to accept other countries who will accept other countries. I’m worried that perhaps the EU will keep it to a EU domestic market for travel.
But in places like Asia, Taiwan has already passed its exams, you might say in respect of the Covid-19 virus. China has done, it, Korea has done it. So to me those should be the first countries we should be opening up to, and likewise they should be opening to Thai visitors to them. Some of the other countries, Singapore, Malaysia, Japan, may lag, but I’m hopeful they will open in the third quarter. But it all will all depend on bi-lateral arrangements. Right now if you were to come to Thailand you would be quarantined for 14 days and if you went from Thailand to China it would be the same. So it’s very important that the governments sit down and decide which countries are safe and start to put in these bi-lateral arrangements.
Will travel change as a result of the pandemic?
For sure travel will change. You’ll have temperature taking, social distancing, the use of masks and we will have to get on and live with it. I think it will affect us for a long time. For hotel guests there will be the expectation that staff will have masks when serving them and they will want reassurance that all the safety standards and cleanliness are being maintained.
The Generation Z are in it for travel, however. They aren’t buying houses, they are buying travel experiences. So it will be different than it was, it’s just a question of giving it time to get back up and hopefully avoid any reversals. There might be second waves.
There is no cure for this. We are going to have to live with it just as we live with so many other things that are dangerous for our health. So if you’re going to get into a crowded bar you are potentially endangering your health. It’s up to you. Most people are pretty mature about what’s happening and I think they will be responsible.
While we need to respect social distancing, there may well be people who want to continue flying. Do we want to deprive people of the opportunity to travel on a low-cost flight because the seating is quite tight, or do we say that part of the industry is gone and that’s the 15-20 per cent of people who are required to travel by low cost?
Once we start opening up we can’t go backwards, and people might have to determine themselves whether they want to take that risk. I’m being a little more realistic about it because we are all going to have to come about some decisions about how we live our lives. Some people are super fit and some people aren’t. What are we going to do, regulate everyone? I’m not taking this lightly. But life is what it is, and if you want or regulate the whole thing then our industry, or some parts of it will be regulated out of business. I’m confident you will see more Europeans coming back to Thailand that is currently being predicted.
Will there be some discounts when travel starts again?
There will be some discounts, but we also have to accept the costs for the travel industry will actually be higher. But long term the travel industry can’t afford to offer deep discounts to get people travelling again because it doesn’t help the industry – for the owners, for the employees.
In terms of occupancy we will be lucky if we can get into double digits from June 2020 onwards, and I don’t think anyone will have any problem getting a room anytime, anywhere this year.
It’s easy to close these airlines down, but it’s damned hard to get them back up and flying again to the schedules and getting the people lined up to get on those planes. And there will be people nervous about travelling. Don’t for a minute think we are not going to have another virus or pandemic. We will have to learn with this [sort of thing] without shutting down the world.”
What about the NH Hotels acquisition from 2018?
Well we are pleased with that. For sure if we’d known there was a pandemic coming we’d have thought a little bit harder about it. We are now in 55 countries and we are losing money in virtually all of them. But I’m sure this is a short term affair and we are going to get past it and as a result we will have acquired super brands, super locations and super people. I’m very pleased with that and I wouldn’t trade it for the world, even a pandemic.
Is Minor Hotels in a secure place? Will you look at buying other groups?
The very first thing we had to do was we assessed where we were financially. Fortunately we had a number of lines of credit that we had just had done, and we sold five hotels which we still manage in the last quarter of last year which raised quite a bit of cash. So financially we are pretty confident that we will see the light at the end of the tunnel and still be there when we get through that tunnel.
But it’s tough, especially when you watch the losses that came in. Our European operations reported a loss in March  of €52 million, which is a fairly significant thing. There’s no question that this year is going to be a total write-off. We are going to have substantial losses no matter what happens in the last quarter. And the numbers for the next quarter are pretty bleak, and the same announcements will come from virtually every airline and hotel group, I’m sure.
I don’t see anyone riding through this period comfortably. I’ve seen an optimistic view of what we’re going to do this year and it’s a huge loss, and the pessimistic view is an even greater loss. There’s no way it’s going to be turned round. And it’s sad because last year was our biggest year in our history. And this year the first quarter we are going to lose more money than we have ever lost in 50 years.
I don’t think we are going to go shopping [for acquisitions]. I think our banks would frown upon that. They are happy to give us a great deal of support, but they expect us to stay very focused on what we are doing which is running our own hotels.
In our board meeting in January our board of directors approved our dividend which would have been the highest ever, yet in our May meeting we will probably be retracting that so we can retain the cash and look after our people and everything else. So it’s painful for everyone. A lot of people won’t come through this, but I’m determined to make sure Minor Hotels does.