The Wall Street Journal - 14.03.2020 - 15.03.2020

THE WALL STREET JOURNAL. ** Saturday/Sunday, March 14 - 15, 2020 |B3

It is tough to work in a
handshake business when you
can’t shake hands.
As companies around the
world grapple with the fast-
spreading coronavirus, they
are trying to balance protect-
ing employees with minimiz-
ing the impact on operations.
At many technology and
customer-service companies,
working remotely is a simple
fix.
But for a huge part of Wall
Street—buyout and invest-
ment firms, investment bank-
ers and consultants—working
from home is difficult.
Some deals, loans and in-
vestments have to get done in
person. Meanwhile, stock-price
volatility and uncertainty in
credit markets are making it
difficult to price and finance
deals.
At Ion Pacific, a Hong Kong-
based investor in technology
companies and funds, one
founder has decamped to
Northern California, while the
other has based himself in Eu-
rope since coronavirus began
to spread in China.
Keeping some employees in
different regions was done
strategically so that meetings
could be held in person with
counterparties in case of po-
tential quarantines. Even for
meetings that do take place,
the event can be awkward, es-
pecially since the traditional
way to seal a deal—the hand-
shake—has been upended.
“Nobody knows what to do.
It’s like the weirdest blind date
and you’re not sure what they
think about you,” said Michael
Joseph, the firm’s co-founder.
“It’s Tinder gone bad.”
In some regions, clients
have canceled meetings for
now. But in London, Mr. Jo-
seph said he had 14 meetings
in three days this week.
In a lot of parts of the fi-
nance field, much of the work
has traditionally been done in
person. And it isn’t just
schmoozing.

Before closing on a large
commercial purchase, for exam-
ple, a real-estate investor must
travel to the property they
want to buy. An investment
banker looking to underwrite a
loan will visit with manage-
ment and look over proprietary
financial documents a company
might be uncomfortable shar-
ing electronically.
Bankers, lawyers and pri-
vate-equity executives say sale
processes of businesses that
started ahead of the global
spread of coronavirus remain
in the works and will be fin-
ished if the financing market
allows.
Potential deals that haven’t
gotten off the ground are
likely to be sidelined until
signs emerge of greater mar-
ket and economic stability.
Dozens of capital-markets law-
yers at large international
firms left work early this week
in London, with some heading
out at 1 or 2 p.m. because of
the lack of deals being brought
to market, some of them said.
That slowdown is under-
scored by a 21% drop in the
total value of mergers and ac-
quisitions globally so far this
year to $557.7 billion from the
year-earlier period, according
to Dealogic, driven in part by
a 46% decline in the U.S.—the
world’s biggest M&A market.
And some deals that are
moving forward are attracting
fewer bidders, one lawyer
said, prompting concerns over
potentially fewer price wars
and depressed valuations as a
result.
The deal slowdown is a po-
tential problem for some hard-
hit industries, like energy
companies and airlines, which
might need loans as their
businesses get squeezed from
coronavirus and a collapse in
oil prices.
—Simon Clark
and Laura Saunders
contributed to this article.

BYBENDUMMETT
ANDJULIESTEINBERG

In-Person

Meetings

Still Key

For Deals

And without those

handshakes? ‘It’s

like the weirdest

blind date.’

Ian Schrager’s Public hotel in downtown New York City has laid off some employees ‘temporarily.’

celed all its U.S. cruises until

April 30.

“We understand the gravity

of the public health crisis con-

fronting the country. And this

is our part to play,” a Royal Ca-

ribbean spokesman said. The

30-day suspension affects 26

ships and 114 sailings, he said.

Carnival has 104 boats, in-

cluding its namesake fleet, Hol-

land America and Cunard. Ear-

lier Friday, its Costa and Aida

brands, which sail mostly in

Europe, had announced suspen-

sions.

“The cruises currently taking

place will now call at ports to

allow guests to disembark and

return to their homes,” a Carni-

val spokesman said.

Viking Cruises, which has 79

mostly smaller vessels, and

Walt Disney Co.’s cruise line

have also suspended services.

In a letter to customers, Viking

Cruises’ chairman said 29 pas-

sengers on a river cruise in

Southeast Asia were being

quarantined after one guest

was exposed to the virus on a

flight.

Cruise ships moved 30 mil-

lion passengers last year, most

of them Americans. Carnival is

the biggest operator, with

nearly 13 million passengers

last year. Before the virus, the

industry was enjoying strong

demand from travelers and

competing to build bigger and

more luxurious vessels.

Carnival, Royal Caribbean

and Norwegian had more than

227,000 employees as well as a

number of contractors and sea-

sonal staff last year, generating

combined revenue of more than

$38 billion.

Shares of the three compa-

nies have tumbled more than

65% apiece so far this year,

erasing nearly $50 billion in

combined market value through

Friday’s close.

Now, there will be dozens of

massive cruise ships sitting idly

at sea. While most of the com-

panies said they expect to re-

sume sailings in April, it isn’t

clear how quickly demand

might return.

“The industry will eventually

recover,” as long as the compa-

nies remain liquid and solvent,

said James Hardiman, an ana-

lyst at Wedbush Securities Inc.

“But I still hear people talking

about hopefully things will go

back to normal in the next few

months. I think that’s a fantasy

for the cruise space.”

BUSINESS & FINANCE NEWS

The world’s four biggest

cruise lines said they were cut-

ting short voyages and sus-

pending much of their opera-

tions until April, an

unprecedented shutdown of a

$38 billion industry in the wake

of the coronavirus pandemic.

The U.S. State Department

and health officials have ad-

vised Americans not to take

cruises, and bookings have

plunged after two Princess

Cruises ships suffered out-

breaks of the respiratory ill-

ness. The companies’ efforts to

reassure customers, such as

preboarding screenings and re-

strictions on passengers over

70 years old, have been over-

whelmed by virus fears and

travel restrictions.

Carnival Corp., Royal Carib-

bean Cruises Ltd., Norwegian

Cruise Line Holdings Ltd. and

MSC Cruises said Friday they

were cancelling dozens of trips

from the U.S. The decisions, an-

nounced hours apart, came a

day after Carnival’s Princess

Cruises suspended its opera-

tions for 60 days.

President Donald Trump

said the decision was made at

his request and will go into ef-

fect at midnight.

Royal Caribbean, which has

61 boats, said it was suspending

all cruises in the U.S. for 30

days beginning Saturday. Nor-

wegian said it was halting its

28 ships, including the Oceania

and Regent Seven Seas lines,

until April 11. MSC Cruises can-

BYDAVESEBASTIAN

ANDCOSTASPARIS

Cruise Business Comes to a Halt

The companies’ efforts to reassure customers have been overwhelmed by virus fears and travel restrictions. Aida halted trips until April 10.

GERARD JULIEN/AGENCE FRANCE-PRESSE/GETTY IMAGES

U.S. banning travel from conti-

nental Europe for 30 days.

In San Francisco, where

STR said revenue per available

room tumbled 46% for the

week ended March 7 compared

with a year ago, hotel manag-

ers were the most aggressive

in cutting room rates in hopes

of luring new business. Hotels

slashed their daily rate for

corporate reservations by 35%

to $302 between March 3 and

March 10, Tripbam said.

“It’s one of the most expen-

sive markets in the world and

we rarely see rate drops,” said

Steve Reynolds, Tripbam’s

chief executive.

Hotels in other hard-hit cit-

ies followed suit. Average

People are afraid to travel,” he

said in an interview. “And by

the way, it’s not an irrational

fear. It’s judicious to try to

stay away from crowds.”

Many hotel managers have

been urging staff to use vaca-

tion days now, with business

off dramatically, and some

may ask staff to take unpaid

furloughs in an effort to avoid

permanent job cuts, hotel

owners and executives said.

New corporate bookings at

U.S. hotels dropped by about

20% over the past few days,

according to Tripbam Inc., a

firm that tracks and books

corporate hotel rates. The out-

look is expected to deteriorate

further, especially with the

laid off about 40 employees,

according to people familiar

with the matter.

“Due to the changing travel

environment, the team at

Kimpton Hotel Eventi has had

to make the difficult decision

to modify staffing in order to

reflect current business lev-

els,” a Kimpton spokeswoman

said.

Hotelier Ian Schrager’s Pub-

lic hotel in downtown New

York City has laid off some

employees “temporarily” until

the business can get its foot-

ing again, Mr. Schrager said.

In the past week, the hotel’s

occupancy has dropped by

more than 50%.

“People are afraid to go out.

sent a letter urging Harvard’s

president to prioritize diver-

sity and inclusion in the

search.

The university said the

search for the new dean won’t

be delayed despite the corona-

virus outbreak, and those in-

volved in the search process

will continue to take any pre-

cautions warranted.

The current dean is facing

the challenge of Harvard stu-

dents finishing the semester’s

classes remotely via online

learning platforms. Tuesday,

the university told students to

move out of their campus

housing by Sunday and not to

return until further notice.

Trevor Hill, co-president of

HBS’s energy and environment

club, said he would like to see

a dean who throws the weight

of the school behind specific

policy solutions that combat

climate change. He sent a let-

ter to the dean search commit-

tee in February asking for a

leader who will push leaders in

the corporate world for action.

oritize taking “the challenge of

revamping the curriculum to

reflect environmental and so-

cietal challenges seriously.”

The letter was written by

two M.B.A. students from the

class of 2021, Tarun Galagali

and Tomas Rosales, who co-

chair the Next Generation Cap-

italism group on campus. The

letter stated they are encour-

aged by the steps Harvard has

taken in recent years to mod-

ernize the business school’s

curriculum but more can still

be done. The students said

they met with the provost this

week in a constructive meeting

to discuss the points they raise

in the letter.

“The new dean should be

someone who challenges or-

thodoxy when he or she thinks

it’s stale and has a track re-

cord of doing so,” Mr. Galagali

said in an interview.

A university spokesman de-

clined to comment on the

school’s search process.

In January, HBS’s African-

American Alumni Association

Several stakeholders of Har-

vard Business School are push-

ing the university to name a

new dean who will use the

school’s clout to raise aware-

ness on social issues ranging

from climate change to diver-

sity in hiring.

Harvard Business School

has been on the hunt for a new

boss since November when Ni-

tin Nohria, the current dean,

said he planned to step down

in June after 10 years on the

job. Since then, several stu-

dent and alumni groups have

sent letters to the president of

Harvard University, Lawrence

Bacow, asking for a more di-

verse hire, such as a woman or

person of color, or someone

who will voice support for cer-

tain ideologies, such as the

benefits of stakeholder-fo-

cused capitalism.

Last month, more than 250

HBS students signed a letter to

the school’s search committee

asking that the new dean pri-

BYPATRICKTHOMAS

Harvard Pressed on Dean Search

daily prices for corporate

bookings fell about 18% for

Austin hotels, which are reel-

ing from the cancellation of

the annual South by South-

west festival that was sched-

uled to start March 13.

In New York City, RevPAR

fell 20%. Hotels reduced cor-

porate rates by almost 5%,

Tripbam said. Hotel rooms in

the popular Times Square

neighborhood that in previous

years at this time would go for

$200 to $300 a night could be

had for as little as $60, said

Sean Hennessey, chief execu-

tive officer of hotel consultant

Lodging Advisors.

“Even midsized hotels are

racking up millions of dollars

in canceled reservations and

canceled group contracts,” Mr.

Hennessey said.

Hoteliers usually view cut-

ting room rates as something

of a last resort, mostly be-

cause it can be difficult to re-

sell customers the same room

a bit later at a steeper price.

“Some of them hit the panic

button and are dropping

rates,” Mr. Reynolds said.

The big brands tend to dis-

courage their hotel operators

from reducing room rates, and

history shows that the prac-

tice has at best mixed results.

Reducing rates is a direct

hit to profits, and once the

prices come down it is diffi-

cult to quickly raise them.

Consumers generally resist

price increases and are armed

with online tools to shop

around, said Jim Butler, chair-

man of the Global Hospitality

Group at law firm Jeffer Man-

gels Butler & Mitchell LLP.

Hotels reeling from the out-

break of the coronavirus are

cutting room rates and start-

ing to reduce staff, an effort to

stabilize the business after

plunging revenue, canceled

group events and sharp de-

clines in corporate travel.

The U.S. hotel industry ab-

sorbed a direct blow during

the first week of March with

revenue per available room, or

RevPAR, a critical perfor-

mance metric, falling 11.6%,

hotel data firm STR said. That

was the biggest weekly decline

since 2013. Occupancy rates

declined 7.3%.

Some hotel companies in

the U.S. and Europe are brac-

ing for the worst by cutting

payroll. Scandic, the largest

hotel company in Europe’s

Nordic countries, with more

than 280 properties in opera-

tion or under development,

said on Thursday it would give

“notice of termination” to

2,000 staff members in Swe-

den. That represents about

half of its permanent employ-

ees in its home country.

“Significant cutbacks will

also be necessary in Scandic’s

other markets,” it said. The

terminations will include back-

office employees, as well as

front-desk receptionists, con-

cierges and other customer-

facing staff, said a person fa-

miliar with the matter.

The Kimpton Hotel Eventi

in Manhattan, part of the

Kimpton lifestyle-brand chain

owned by InterContinental

Hotels GroupPLC, recently

BYKEIKOMORRIS

ANDCRAIGKARMIN

Hotels Cut Staff, Prices as Bookings Sink

shares in recent days as a re-

sult of marketwide circuit

breakers as a failure of any

condition to acquire HP. Xerox

said it would take the same

view in future trading halts.

HP last week rejected Xe-

rox’s $35 billion bid to take

over the company, saying a

combination would dispropor-

tionately benefit Xerox share-

holders and that Xerox doesn’t

have the operational experi-

ence in HP’s sectors, such as

personal systems, home print-

ing and 3-D and digital manu-

facturing.

A deal would combine

household names that have

been trying to reorient their

businesses. The two compa-

nies dominate different areas

of the printer market and have

both been cutting costs as the

need for printed documents

declines.

Xerox HoldingsCorp. said

it is putting its campaign to

take overHPInc. on hold, a

sign that the coronavirus pan-

demic is affecting deal making.

The company said Friday it

is postponing additional pre-

sentations, interviews with the

press and meetings with HP

shareholders.

“In light of the escalating

Covid-19 pandemic, Xerox

needs to prioritize health and

safety of its employees, cus-

tomers, partners and affiliates

over and above all consider-

ations, including its proposal

to acquire HP,” Xerox Vice

Chairman and Chief Executive

John Visentin said.

The company said it doesn’t

consider the market decline

since it put out its bid or the

temporary suspensions of HP

BYDAVESEBASTIAN

Xerox Pauses Takeover

Campaign for HP,

Citing Virus Concerns

KEVIN HAGEN FOR THE WALL STREET JOURNAL