Jul 8

Jul 8 Wednesday Wisdom: Concessioner Fiscal Sustainability

Providing ideas and insight that can inform agency and partner strategies for improvement of park, recreation and hospitality operations and assets

How are Your Concession/Permit Partners Doing?

One month ago, CHMGS blogged on the importance of understanding how your concession/permit partners were performing and their ability to operate through the summer season and beyond. We used the U.S. Census Bureau’s Small Business Pulse Survey (“the Pulse survey”) as an indicator of a typical operators’ financial condition.

Based on our review of the results of the 6/27 update of the Pulse survey, CHMGS suggests public land managers consider two questions of relevance to the industries representing most public land concession/permittees, and indicate the financial sustainability of a small business.

1. How many days of operations will your cash on hand cover (including PPP cash)?

The data indicate that up to 47 percent of recreation and hospitality industry businesses do not have enough cash on hand to operate through the end of the summer. Without regaining full operating capacity – unlikely with COVID-19 conditions – these businesses have only the equivalent of 3 to 4 weeks of cash required to sustain operations.

Action: Have you discussed with your operator changing the scope of the services they provide to allow them to preserve cash and continue operations through the summer?

2. When do you think this business returns to pre-COVID levels?

Between 57 and 59 percent of recreation and hospitality industry survey respondents indicated a time frame of longer than 6 months to regain previous levels of profitability. These figures represent a 3 percent increase in respondents who believe this in a slower delay as compared to the prior month (5/27).

Action: Have you assessed your portfolio of operators’ financial positions and do you know how many will be able to return next summer?

CHMGS recognizes that these survey results reflect macro, national data sources, and that every county, state, and federal recreation unit has different demand patterns and seasonality. However, this type of data should support your own in-depth analysis of the financial sustainability of your concession/permit partners.

Here are some action items for you to consider this month:

1. Review month-over-month revenue reports of your concession/permittees and evaluate how they are trending?

If positive: check in and ask how they are managing the costs of staffing, cleanliness, and social distancing?
If negative: ask them about their levels of working capital (cash-on-hand)?

2. Talk to them about their challenges (e.g. visitor management, staffing, closures, marketing) and identify if there are any strategies of support your organization can offer (e.g., signage, website presence, visitor management strategies).

Understanding your concession/permittee operations’ opportunities and constraints, will go a long way in determining how this business relationship will continue.

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