Bill Heinecke has weathered many crises over five decades. His advice is to not panic, trust your team, and be patient
When Minor International (SET: MINT) reported Q2 financial results in August 2020, investors were expecting to see the full effects of COVID-19 lockdowns on one of Asia’s largest hospitality companies with over 500 hotels and resorts and 2,300 restaurants across the region. A worst-ever net loss of 8.4 billion Baht (approximately USD266 million) compared to a net profit of 1.8 billion Baht in 2Q19 underlined the impact on global tourism and F&B.
Company founder and Chairman Bill Heinecke, who watched Minor’s businesses in China come to a standstill before COVID-19 spread around the world, understood the financial implications when it inevitably would and dealt with it decisively.
“We saw earlier than most companies what was coming, and in February we started to make plans for capital-raising,” Heinecke explained to a virtual audience in a recent SMU Visionary Series webinar, “Overcoming the unexpected”. “With the losses that we were suffering, our equity was shrinking, which would trigger calls on our bonds and other instruments that we’d been using. We went very early into the market.”
Minor would raise about USD1 billion dollars through a perpetual bond offer (USD300 million), a rights offering (USD300-400 million), and warrants. The company also opened additional credit lines to make sure it had enough liquidity to ride through the storm.
“By going to the market early, we got some really low rates on that billion dollars’ worth of new equity and borrowings that we had to bring in. It’s going to be increasingly difficult for some of our peers who are having to go to the market now as the situation has gotten much worse.”
Coping with COVID
For Minor, which counts Anantara and Four Seasons among its stable of hospitality brands on top of restaurant chains such as Burger King, things are perhaps looking up. Heinecke pointed out that its restaurants in China are “100 percent open” while those in Thailand are 90 percent open. He added that 75 percent of Minor’s hotels are now operating once again.
Heinecke, who has guided the company through the 1997 Asian Financial Crisis, 9-11 and the 2008 Global Financial Crisis, shared his experiences of leading through troubled waters.
“The first and most important one is: don’t panic,” he urged. “The panic-stricken individual cannot act or think effectively. This applies to when you are learning to fly an airplane or go diving – don’t panic! The minute you panic, you’re dead.
“You also need to determine your priorities. During COVID our main priorities were to survive, stabilise, and grow. We immediately identified our financial and non-financial priorities which included: health and safety, business continuity management, sustainability, stress test, cost-cutting initiatives, and most importantly, ensuring we have the liquidity and cashflow management.”
By cancelling dividend payments for the first time in company history and suspending all capital expenditure (CAPEX), Heinecke hopes to cut up to 30 percent of expenditure compared to 2019. The goal, he explained, was to lower the breakeven point “in order to make sure we survive”.
With countries starting to implement green lane travel agreements, there is cautious optimism for the travel and hospitality industries. But will consumer tourism ever return to pre-COVID levels? If so, will it be a ‘new normal’ that is fundamentally different from what came before?
“Once a vaccine is finally approved or if the coronavirus drifts out of the picture, people will return to what they were used to doing,” Heinecke asserted, saying that hotels will still have much of the same elements going forward. “I can’t visualise casinos operating with social distancing. I don’t think the mammoth hotels that we have now will be torn down [even though] people feel safer in smaller hotels.
“You can’t get away from the fact that people like to be together. You’re not going to give up sports and all that. I’m a great believer that things will return to the previous norm than they will to a new norm.”
Sustaining people, business, and the environment
While emphasising Minor’s commitment to providing a safe environment for its guests and employees, Heinecke lamented the need to furlough up to 20,000 of his staff, many whom he conceded will not return. “We looked at all the salary schemes that we could tap into. But when you have a payroll of 80,000 people and zero income coming in, it’s impossible to keep all of them.
“What we could do was to make sure that those who did stay were the best in the business and understand the challenges at hand and focus on them.”
However, to continually attract the best talent is not about money or career prospects, Heinecke said in response to a question about Minor’s sustainability efforts.
“They are motivated by giving back, by what we are doing for society and the environment,” he elaborated. “Because of that, we focus a lot of attention on that for selfish reasons because we want those people.
“I think it’s healthy to have a certain amount of selfishness as you look at sustainability because you want to get something out of it. If we as a company are not successful and continue to be profitable, we’re never going to be able to continue to have the impact on the environment and on people as we want to have.”
He added: “We focus at our hotels, wherever they are in the world, to raise money in their respective communities and we spend that money in the community. We’re very keen in the north of Thailand on elephants because that’s an important part of northern culture. In the Maldives and Phuket we are raising turtles and releasing them back into the wild.
“We want things to get going in those areas because that’s what our future depends on. If we’re not protective of our environment at the beaches, we’re never going to get tourists to come.”
Patience and passion
For someone who took his first entrepreneurial step as a 17-year-old – “The company is called Minor because I was 17 when I started the company; I needed my parents to co-sign virtually anything that I did!” – Heinecke cites passion for his success and longevity in the industry. “Without passion you’re not going to invest the time and energy to be good at what you do,” he noted.
And when everything is in place, one thing remains: Patience.
“We admired Banyan Tree and [Chairman of the SMU Board of Trustees and Banyan Tree founder] Ho Kwon Ping for what they did in the early days but we never tried to get there as quickly as they did. We had to take our time and follow in their footsteps in the Maldives and Phuket.
“We’re an overnight success that took 50 years. The greatest disasters I’ve seen among the companies in our space have been those who tried to replicate what took us 50 years within a five-year period or a three-year period. You can’t build the team and experience and the global knowledge in that quick a time.
“Some things just have to be built slowly, brick by brick.”
William E. Heinecke, Founder and Chairman of Minor International, was the speaker at the SMU Visionary Series webinar "Overcoming the unexpected" that was held on 9 September 2020.
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Last updated on 30 Sep 2020 .
