RedDoorz takes tough measures to survive Covid-19

Like all players in the travel sector, Singapore-based budget hotel startup RedDoorz has been “drastically affected” by Covid-19, Amit Saberwal, the founder and CEO at RedDoorz, tells Tech in Asia. As a result of the pandemic, the company saw an approximately 80% decrease in the volume of travel bookings and hotel occupancy.

Its Singapore business was the first to feel the effects because of its heavy reliance on inbound travelers, which mainly consist of Chinese tourists.

At the end of January, RedDoorz’s operations in Vietnam took a hit when the outbreak evolved to become a regional issue, and travel advisories and restrictions were beginning to be implemented. Its Indonesia and Philippine businesses were the next to be affected, as Covid-19 escalated into a pandemic.

RedDoorz founder and CEO Amit Saberwal / Photo credit: RedDoorz

“As a firm, we have been taking some tough and necessary decisions that will ensure that we stay focused and committed towards […] property owners, employees, and investors,” says Saberwal. These measures include cost cutting, layoffs, and temporary furloughs, among others.

In 2019, the travel and tourism industry made up 12.1% of Southeast Asia’s total economy, offering 42.3 million jobs, according to the World Travel and Tourism Council.

To mitigate the spread of Covid-19, however, countries are implementing lockdown measures and encouraging people to stay at home. This has led to a halt in traveling, causing revenue loss and job cuts for startups in the sector.

Myanmar-based travel startup Flymya laid off a third of its headcount this year as bookings dropped, while Indonesia’s Traveloka has also reportedly cut around 10% of its employees amid customer requests for refunds. Similarly, SoftBank-backed hotel chain Oyo placed “a significant number” of its employees on temporary leave or furloughs, as it saw a 50% to 60% drop in revenue.

Cost reduction

To keep its business going, Saberwal says RedDoorz has had to implement belt-tightening measures in two waves.

The first was carried out before March 15, which was when the crisis was just beginning to unfold in Southeast Asian markets. These measures included cutting costs – such as its digital marketing spend and travel expenses – implementing 15% to 35% pay cuts for senior management, applying a hiring freeze, forfeiting variable pay, and delaying work appraisals, among others.

The firm implemented the second wave in April when the effects of the outbreak started to deepen across countries, especially in Indonesia, RedDoorz’s core market. The company offered temporary furloughs and laid off “less than 10%” of its total workforce in Indonesia, Vietnam, and the Philippines, says Saberwal.

“We’re not ruling out taking more drastic measures based on how the situation develops,” notes the CEO. Startups need to make adjustments very carefully, especially when it comes to retrenchments because it won’t be easy rebuilding the team once it’s time to recover the business, he adds.

Photo credit: RedDoorz

Good time for much-needed fixes