How Will COVID-19 Impact the Fishing & Hunting Lodge, Camp & Resort Industry
When news of the Coronavirus outbreak began to escalate, lodge, camp and resort operators had just finished up their off-season tradeshow circuit. This time of year, owners have their marketing in high gear in attempt to fill any and all vacancies as spring is around the corner and peak visitation season is not far behind it.
Having spoken with several lodge operators near the Ontario/US border, they are beginning to receive cancellations mostly from guests that are booked to arrive in the spring.
The bookings drag this virus has caused will likely spread into the second quarter (April, May, June) and almost certainly affect the start of the peak season for outdoor tourism operations that rely on international travellers. June is a very important month in the fishing lodge industry, its typically a peak occupancy month and it will surely be affected during the 2020 season.
Expect bookings from international guests (US included) to be majorly impacted for the remainder of the first quarter and most of the second quarter. Even if the virus situation is controlled in the near future, the media is likely to milk this story for months which will influence travel patterns.
Demographics Will Increase the Impact on our Industry
Consideration must also be given to the demographics of the international guests that attend Canadian fishing & hunting lodges, camps and resorts.
Emphasis has been placed on the serious effects that COVID-19 has on the older population. Most of the international guests that are reliable return customers are age 50+. It is likely that these individuals will be especially cautious travelling and this will last late into the year.
In many ways, this coming tourism season may be the toughest environment fishing & hunting lodge, camp and resort operators have had to contend with in most of their histories. This is due to the unique combination of major travel restrictions and the higher risk of infection among older individuals who make up the fishing & hunting lodge, camp and resorts industry’s core customer base.
The rapid rate at which the virus has spread across the globe will no doubt create a long-lasting bookings slowdown.
The fishing & hunting lodge, camp and resort industry has seen several major shocks over the decades, such as the events of 9/11, SARS and the US economic collapse and demand has always returned and grown. I expect the aftermath of COVID-19 to be no different, with the greatest uncertainties being how long and how wide the virus will continue to spread and how long the psychological impact will last.
How Long Will the Psychological Impact Last?
When SARS hit Canada roughly 17 years ago, by the end of the outbreak there had been 438 probable and confirmed cases of the virus, mostly contained within Toronto and the GTA. It cost the Canadian economy an estimated $5.25 billion and 28,000 jobs.
The number of cases of COVID-19 in Canada has surpassed the number of cases related to the SARS outbreak in 2003, a sobering milestone that health officials had been warning about from the beginning.
As of March 18th 2020, Canada has 690 confirmed cases of COVID-19 across not merely one or two provinces, but across all ten provinces. No cases have been reported yet within the three territories.
The damage to the Fishing & Hunting Lodge, Camp and Resort industry from the SARS outbreak came in large part from fear-based shifts in consumer behaviour rather than higher medical expenditures or actual continued risk of infection.
The fear of contagion prompted widespread aversion behaviour, in which people significantly reduced activities that put them in close proximity with others like travelling and visiting public places.
The added fear of borders closing and flights being cancelled during the COVID-19 outbreak is expected to greatly increase this aversion behaviour.
It’s important that we step back and look not just at how long this travel restriction and virus spread will last, but how long the psychological impact on potential travellers will last.
In 2003 after the SARS outbreak which occurred at the same time of year as COVID-19, the Canadian tourism industry rebounded toward the end of the year. I think at best August and September of the upcoming tourism season could be salvaged.
Owner’s Need to Control What They Can Control
The intent of this article is to help you develop a plan for how to approach the impending tourism downturn. It’s important to respond to the tourism downturn in an intelligent and strategic fashion.
Below is a list of 12 actions that Fishing & Hunting Lodge, Camp and Resort Operators can implement to help soften the inevitable blow this is going to have on their business:
1. Don't Cut Back on Marketing:
In lean times, many lodges, camps and resorts make the mistake of cutting their marketing budget or even eliminating it entirely. But when the tourism industry takes a nose dive is when your business needs marketing the most. Times like this, guests become restless and this can impact their travel patterns. This may be the time to step up your marketing efforts if you can.
Ensure you’re reaching out to your past guests but look to reach a new customer base with your marketing. The same psychological impact regarding international travel will affect Canadians as well. This may mean that more Canadians will prefer to spend their travel dollars at home this year. During the SARS outbreak domestic travel held up quite well. Redirecting your marketing efforts to focus solely on Canadian markets in hopes of capitalizing on the lack of international travel would be wise. Consider this marketing strategy.
2. Maintain Service Levels:
If you need to cut costs, do so in areas of the fishing & hunting lodge, camp or resort that have the least impact on guest satisfaction and the business’ image. Don’t reduce standards, guests are very sensitive to changes. Bad times are not forever, and it could take a longer time to recover if you cut corners to save a buck. If customer satisfaction and service quality are diminished, it will be more difficult to both maintain your current guests and attract new guests after the tourism downturn is over.
Bundling allows you to disguise rates. If you can bundle your package rates in with either additional nights (e.g., stay 4 nights, get another one free) or with other services (e.g., professional guiding, upgraded boat & motor), it will help disguise the fact that you are offering lower rates. Some resorts use bundling effectively by bundling the vacation package with airfare and on route hotel accommodations. Bundling makes it difficult for customers to determine the prices of the individual components. The key to developing an effective bundle is to determine what your customers want and then deliver it in a profitable manner.
Depending on your competitive situation, another approach is to base your rate on only your core vacation package (i.e., a clean cabin with a bed and bath) and charge additional amounts for any other services that guests might wish to use (i.e., boats, meals, guiding, bait). By unbundling, you can keep your base rates relatively low and allow guests to choose which additional services they would like. Although care must be taken when using this approach because of the potential damage to customer satisfaction.
5. Improve Operational Efficiency:
Improving operational efficiency is one of the best ways for fishing & hunting lodge, camp and resort operators to invest now and see a payoff down the road. This is a great time to eliminate operational waste and free up capital. The impact of COVID-19 is going to force operators to ensure their supply chains and processes are lean and delivering results. Over paying for supplies, wasted marketing dollars, poor inventory management and poorly trained employees are just a few of the possible sources of waste that operators should look for. Also keep in mind that almost all businesses are going to be affected by COVID-19, which offers a good opportunity to take advantage of cheaper prices from suppliers of equipment and supplies that could help to free up capital.
Consider all of your utilities like water, power, propane, internet, and phones. Call your vendors’ competitors and ask what kind of deal they can offer your business. Let them know you’re willing to switch vendors if they can give you a big discount (even if it’s just for the first year). The frontline sales reps will often have unadvertised discounts they can offer new customers. All you have to do is ask for them. Once you know how much you can save by switching, call your current vendors. Get them to match the offer so you don’t actually have to go through the trouble of switching.
6. Keep Personal Credit in Good Shape:
Tourism industry downturns make it harder for fishing & hunting lodges, camps and resorts to borrow money. With good personal credit, you’ll stand a much better chance of being able to borrow the money needed to keep your business afloat if you need to. To help protect your business, pay close attention to your personal credit rating as well as your business’ and do what’s necessary to keep your credit ratings in good shape.
7. Lease Rather Than Buy (Or Buy Used):
Need new boats, motors or office equipment? Lease it instead of buying. You will end up paying more in the long run, but while the tourism industry is suffering, it’s all about cash flow. If your business runs out of cash in 6 months, it won’t matter that you paid less for that boat by paying the full amount up front. At this point we don’t know how hard the COVID-19 situation is going to impact our industry. With the potential tourism downturn we’re looking at, you unfortunately won’t have the luxury of doing things the “optimal” way.
8. Pay Payables Later:
Call your vendors and get better terms. For example, you may be able to get 45-day terms instead of 30-day terms. Having cash on hand for an extra 15 days may be crucial in your survival. While you have your vendors on the phone, and especially if they won’t extend your terms, see if they will give you a small discount for paying early. 1-2% off for paying within 10 days is a typical example. Consider using a charge card to further extend your payables. For example, if you have 30-day terms with a supplier, you can effectively extend those terms to 90-days by paying that invoice on day 30 using an American Express PLUM card. The PLUM card gives you 60-day terms with no interest. By using the PLUM card instead of a check, you’ve basically given yourself 90-day terms to pay your suppliers — without incurring any interest charges.
9. Collect Receivables Sooner:
Get cash in hand by offering your guests a discount for paying sooner. A common discount is 1-2% off for paying a larger deposit for their trip.
When it comes to deleveraging, it helps to start early. Reduce your debt levels before it’s clear how hard COVID-19 is going to hit the industry. You need to take a hard look at your essential equipment and property because shedding assets can be a way to reduce leverage without necessarily cutting core aspects of your operation.
The more debt you have, the more cash you need to make your interest and principal payment. If the tourism downturn is as bad as it could potentially be and less cash is coming in the door, it puts you at risk of defaulting.
11. Intelligently Discount:
I believe it’s possible for lodges, camps and resorts to “intelligently” discount. Essentially, there are two ways this can be done: through nonprice methods and through price methods.
Nonprice methods include competing on the basis of quality, creating strategic partnerships, developing additional revenue sources, and developing additional market segments. Price-based methods consist of offering creative packages and offering discounted rates to selected market segments.
Discounting should be a last resort as it can take years for your rates to recover from the discounting you engage in now. Many lodges, camps and resorts have been very aggressive with increasing their package pricing over the past 3 years. You don’t want to undo all of that work and more in the space of a few months. If you must discount, consider creative packaging of your trips.
12. Employee Lay-Offs and Benefit Reductions:
Lay-offs and benefit reductions should be the last resort. Luckily most lodges, camps and resorts are family operated so labor is often cheap. But if you do have a large amount of employees you may have to layoff staff and more work will have to be done by fewer people. Another option is for ownership and staff to meet and agree to mutual concessions, both to save the business and to save jobs. The concessions may include wage reductions and reduced benefits.
Implementing the actions above to COVID-19-proof your business will help ensure your fishing & hunting lodge, camp or resort survives these tough times and might even be able to profit from them. Lean on the various provincial industry associations for more information.