FSIN publication: 'Stronger from the crisis' - Interview with Walter Seib

At the height of the crisis, the successful airport operator HMSHost International still realised 1.5 percent of its normal turnover. CEO Walter Seib saw in January that things were going wrong. "We lived in a kind of Peter Stuyvesant world. We conquered the world, everything went well. From one moment to the next you come to a standstill and you have to think: what now?"

"Tough times, tough decisions, tough leaders."

"We had the advantage of seeing this coming. HMSHost International is active in 19 countries, including Asia. That is where you saw that corona suddenly changed everything drastically. I will never forget the conversation I had with Autogrill [parent organisation of HMSHost, ed.). It was about the situation in China and what we should do about it. Based on previous experience with SARS, the general opinion was that it would blow over. I said: I don't believe it, this time it will become much bigger. From that moment on, we prepared."

How do you prepare a business for something that might not happen at all?

"We are a company that has grown by an average of 20-25 percent since 2012. This year we expected to grow by such a percentage again. We were in a Peter Stuyvesant-like organisation. We conquered the world and everything went well. As you grow, you add people and positions. That's fine, but it's not always the most efficient. As a leader I saw things where I thought ‘that could be better, but we will come back to that later’. We had different priorities. In April last year [2019] I said that we had to look at our organisation. At some point it is good to take a picture of your organisation and ask yourself: this is the picture, how would we organise it now? At the end of February, we began accelerating last year's plans to streamline the organisation. Then came Covid-19."

What did you do when things went completely wrong?

"The first thing we said: cash is king. Preserve your cash. If you have 1.5 percent turnover, no more cash will come in. But your obligations continue: the rent, wages, energy. Therefore: preserve your cash. We immediately took tough measures. All investments were stopped. Rock hard, no more money is being spent. You want the cash you have left to stay in the house. We examined all costs and entered into discussions with all parties. About the rent, about the service costs. We have good conversations with our landlords. Everyone throughout the chain is in the same boat, the airport, KLM, us. There are no winners, we are all losers.

We've gone through everything from energy costs to insurance to office supplies. You are trying to get rid of your stock. Ideally you want the supplier to take it back, otherwise you have to throw everything away. Well, we prefer not to throw away anything, in that case we give the goods to charity, as we did together with Coca Cola."

How did your employees react to this disaster?

"We lost 98.5 percent of our sales in April. The world stood still. Everyone immediately realised: this is not possible, something has to be done. You saw different emotions. There are types who see it as a chance, as an opportunity. ‘We're going to tackle things, come up with new things!’ Other people become insecure. They keep under the radar. ‘If I don't stand out, they forget me’, so to speak. Some people become scared, because the effect of the virus is visible in personal contacts, in the circle of acquaintances. But everyone sees that things are not going well if you have 1.5 percent turnover. What I like is that it has brought the company and people closer together. Everyone saw the urgency. There is no time to polder, it has to be done now."

How many people have you had to fire?

"One of the first measures was not to renew fixed-term contracts. Without exception. That is very hard. There are people with potential. But if you start making exceptions, you will be lost. Globally, we have farewelled more than half of our employees, 6,500 people. I got emails from employees saying ‘if the company needs me, I want to work for free’. But I also got emails from people who wrote ‘I'm from a poor family, we need to eat. Please don't fire me’.

“I received emails from employees: I'm from a poor family, we need to eat. Please don't fire me.”

We said goodbye to a third of the people at this office at Schiphol. It's hard to say to good people, ‘there's no room left for you’. You can not save everyone. That is no different with us. Tough times, tough decisions, tough leaders. Our priority is: preserve as many jobs as possible. And when I say that, it also means saying goodbye to people. There is no other way.

I have to say that we have a very good works council. I said very openly to them: this is the situation, these are the numbers, this is how we are and this is what we are going to do. People need clarity, we don't need any more confusion. We worked together on solutions and came out without major debates."

Did you conduct the exit interviews yourself?

"We did it together with the works council, some of which I conducted myself. In the German language we have a nice word: chefsache. Some things you have to do yourself, you cannot delegate everything. That is also leadership."

“The German language has a nice word: chefsache. Some things you have to do yourself, you cannot delegate everything. That is also leadership.”

What is your state of mind now?

"I am positive, I believe in the future. We are going to rise from the ashes like a phoenix. But sometimes I feel powerless about the situation we ended up through no fault of our own, and what I have to deal with. As a human being, I think that the discussion about corona is far too one-dimensional. There are more factors than hospital admissions or the number of infections. Corona is also about the economy, about depression, about the quality of education, about domestic violence, about loneliness in the elderly, about children disappearing from the radar, about the cultural sector. In October, we were confronted with two suicides at our company. One in Vietnam and one in the Netherlands. We sometimes forget that. Corona has a dramatic effect on our children. We are now teaching them that physical contact is dangerous. I wonder what the effect of this will be in the longer term. Time will tell.”

The clear and present danger is that people become seriously ill and die?

"I'm not here to give a political interview. You can knock it flat and say: the economic damage in the Netherlands is 80 billion, that is x million per deceased. But there is no equal to the value of a life. It's an ethical issue. I have a lot of respect for our government, which has to weigh so many interests."

Are the support measures actually sufficient?

"You can discuss at length whether the support measures in the Netherlands are sufficient, but I can tell you that of the 19 countries where we operate, there are very many that give zero support. To give an example: during lockdown in India, the government said: you do not receive a subsidy and you cannot fire people. End of discussion. So you have zero turnover, but you have to keep paying all those people. In India we employ 2,000 people. The wage costs are different there than here, but it is still cash out.

But there are also richer countries that do not provide subsidies. In Asia and the Middle East you get nothing. So yes, what is your frame of reference. If your frame of reference is nothing, the Netherlands is doing really great. If your frame of reference is Denmark, where they reimburse everything, you will find the Dutch support only moderate. I think we have done very well in the Netherlands so far, but future generations will pay the bill."

How big is the damage at HMSHost?

"We are listed, so I have to be careful what I say here. But we still have 450 million in cash. We will try to preserve it for as long as possible. In terms of turnover, this year we arrive at -56 percent. But not everything is doom and gloom. We have continued with a number of projects. In the Designer Outlet Roermond we opened a Starbucks Store, which did very well in between lockdowns. At the airports we have started the roll-out of YOP, Your Order Please, an application based on a QR code. You can pre-order and pay with it. We have accelerated that product because we see that consumer behaviour is changing. The consumer wants less physical interaction, fewer touch points. We have also accelerated our e-learning process. In the months from April to June, our employees took 52,000 online courses."

When do you expect recovery?

"I don't have a crystal ball. It will take a few years before we get back to pre-corona levels. If you look at the IATA figures now, you can see that 50 to 70 percent of the passengers will return in 2021. I think we're going to see the first improvements after the first quarter and a projection of 60 percent by the end of the year should be achievable.

“In China, local air traffic is again higher than before corona. That gives hope. ”

But it could be faster. In China, local air traffic is again higher than before corona. That gives hope. It is in people to travel and explore the world. The difficulty we have with the lockdowns is proof of that. What matters now is survival and securing as many jobs as possible. Everyone is convinced that it will soon pick up again. The assets are there: the airports are there, the planes are there, the square meters of commercial space are there, the security checks are there. Now for the passengers."

Are you taking into account an economic recession and lower spending?

"I hope I'm wrong, but I think unemployment will continue to rise and people will become more cautious. But the effects of this are mainly seen on high-street locations and luxury goods. I'm pretty optimistic for us. The spending pattern at airports will not differ very much from before corona. Your holiday starts at the airport. Not that you eat caviar all day, but you still take that glass of prosecco, a nice sandwich, a nice cup of coffee. We also saw this during previous crises."

 

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**This article is a translation of the original article, as featured in the FoodService Institute Netherlands (FSIN) December publication 'Stronger from the crisis'.**

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About FSIN publication: Stronger from the crisis

This article is one of the many stories in the extensive December issue of the 'FSIN publication: Stronger from the crisis'. This publication is provided by The Food Research Company on behalf of the FoodService Institute Netherlands (FSIN). The Food Research Company is responsible for all publications of the FSIN.

Text: Radboud Bergevoet and image: Koos Groenewold.

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