The Thrive & Strive of Several Industries in Times of Corona-virus (Part II).
To Recap & Prepare…
In Part 1 of the article, we navigated the ray of hopes for several industries and eventually discussed five of the top performing ones in China during the COVID-19 outbreak. This time, we will be discussing some of the industries facing a downturn in China and outside of China, as a ripple effect during these stressful times. In both articles China is used as a leading example, sending both opportunities and warnings for the rest of the world as the Coronavirus continues its global spread.
Since now you’re all caught up and ready…“Buckle Up, bumpy Road Ahead!”
Ride Hailing & Sharing
You’ve probably all heard it, probably all of you are living it but China was the first to experience it. Chinese citizens were first to be kept indoors under quarantines and transportation is experiencing a complete shutdown. It comes to no surprise seeing the Ride sharing & hailing market in China having a free fall to say the least. According to SensorTower’s Store Intelligence data, downloads of the three most popular ride-share apps on iOS devices in China (Hello, Didi, and Dida) for the week of February 10,2020 were down 75% compared to the week of January 13th. These three apps accounted for more than 70% of total ride-share downloads on China’s App Store over the past year. Just prior to the Coronavirus outbreak, Dida was seeking to raise $300 million in a Pre-IPO round, and now it’s experiencing almost a 60% decrease in daily active users year-over-year.
Travel industry
As the Coronavirus continues to take its toll across the world, health officials around the world are urging people to avoid situations like travel where they will likely be exposed to crowds. As a result, major events such as conferences, summits, concerts, and sport events are being forced to cancel or postpone. These kind of practices had their fair share of sending the industry haywire. Demand for air travel, hotel rooms and cruise trips has been growing relatively steady in the last decade, rebounding from setbacks such as horrific airline disasters in Indonesia and a cruise ship sinking in Italy to name a few. Regardless, the Coronavirus outbreak had a deeper and longer-lasting effects on travel not only because of how fast the infection has spread but also because the outbreak has centered on China, which in the last few years has grown as an economic powerhouse and as the world’s fastest-growing source of international travelers.
Globally, Online travel agencies (OTAs), are on the decline as well. OTAs include companies like TripAdvisor, Expedia, Trivago, KAYAK, etc. on a global scale, they’ve seen new installs fall 17.1%.
The number of monthly active users on Chinese travel platforms decreased by 40% between February 2019 and January 2020. Large Chinese platforms were particularly affected: Chinese OTA giant Ctrip saw a 39% drop in users since the beginning of the outbreak, Qunar a reduction of 50.7%, and social platform Mafengwo a decrease of 64.7%, as compared to the same period of last year.
Non-Chinese Online travel agencies, airlines, and cruise lines all saw double-digit US sales declines in the week ended March 2nd, compared to a year earlier.
Below is an example of what OTA’s are dealing with relative to European destinations, Germany to be exact.
Germany is the second most popular tourist destination in Europe for Chinese tourists after the UK. While OTA’s cancellations rates in the first two month were around 22%, they went up to over 55% across all three big OTA’s in Germany after China’s lock-down and the worldwide flights cancellation.
Supply Chain & Freight
Supply chains were also pushed into uncertain waters. Countless companies, large and small, rely on a network of suppliers to produce and distribute products to buyers. A majority of necessary parts for products come from around the world. When it comes to China, we’re talking about the world’s biggest exporter and second biggest importer. Consequently, global Freight and supply Chains couldn’t help but feel the burn. Supply chain with all its verticals is a wide topic that requires a separate article by itself, this section will be focusing on freight platforms as part of the entire supply chain process.
It should be noted that about 80% of the world goods trade by volume is carried by sea and China is home to seven of the world’s 10 busiest container ports. China’s efforts to control the spread of the virus at the end of January started with shutting down the Yangtze River port city of Wuhan, an industrial city of 11 million people that ships 1.5 million freight containers each year. As the crisis unfolded, there was decline in the number of ships calling on Chinese ports including Shanghai and Yangshan since January as factories across the country remain closed or operating at low capacity.
The above chart compares Flexport (the most heavily VC-backed company in logistics industry history as of 2019) records of units shipped from China across holiday seasons 2018–2020 , based on both air and ocean freight and going to all destinations. Historically, the volume of shipped units rebounded after the first week of the Chinese new year (CNY). In 2020, the volume of shipped units continued to fall in the second week after CNY. Rather than beginning a rebound, units fell an additional 90% from the week after CNY. Fast forward four weeks since the CNY, shipped units are up slightly, they are up only about 35% over the reference week compared to 195% for the equivalent week in 2018 and 290% for 2019.
As China slowly recovers more units are being put on ships or planes. Yet, as more cases of COVID-19 crop up with other economic powerhouses such as South Korea, Italy, US and Japan, more challenges are presented to freight and supply chains.
Restaurants
Although there isn’t any specific data breakdown for the Chinese market, on a global scale, it looks like the situation will get worse before it gets better for an industry that relies on social contact, where the slight decrease in foot traffic is a cause for concern. Not surprisingly, with all the cancellations, closings and a thinning out of tables, restaurant reservation platforms were highly affected by the breakout. According to OpenTable, the world’s leading provider of online restaurant reservations for nearly 60,000 restaurants, online restaurant reservation service has reported a “sharp decline” for restaurants globally in the last week as the Coronavirus spreads across the world.
The data above shows year-over-year seated diners at restaurants on the OpenTable network across all channels: online reservations, phone reservations, and walk-ins. The coronavirus pandemic is causing a steep decline in people eating out, with numbers dropping rapidly over the past week. As of March 16th, restaurant reservations globally have dropped 56% since this time last year.
Friendly Reminder
These are unpleasant times and we are all in this together. As with unpleasant times, each of us will be remembered by our behavior during this time. Did we make things better? Or did we make things worse? As for us, at Pitango Venture Capital, we believe that adversity creates opportunity. Hence, for all entrepreneurs in all your industries we are here with you to make things better, eager to listen to all your ideas, especially during these times.
And as Baby Yoda tells us:
