Tuesday Tactics: Concession/Permit Financial Sustainability
As the public health sector responds to the COVID-19 crisis, public park agencies are called to respond. The purpose of the Tuesday Blog is simple: to provide with strategies and knowledge that assist you, your agency and your partners with a mutually beneficial way forward.
Concession/Permit Partners: Time to Discuss Strategies for Sustainability
Twelve weeks ago, on March 25th, CHMGS launched this blog with a post on how public agencies should be thinking about their relationships with concession and permit partners. The summer season has begun, and many state and national parks are opening this month. By now you should have asked the following questions regarding your concession/permit partners:
Can your concession/permit partners survive this summer season?
What can you do to facilitate continued operations this summer season?
What is possible for public agencies to consider to create the conditions for financial sustainability during the concession/permit term?
To contextualize the world of concessioner and permittees, it is important to understand how the sectors that they represent are faring during this period. Luckily the U.S. Census Bureau has been tracking these industries and their response to COVID via a weekly survey of small businesses.
Most concession/permits relate to industries within the NAICS codes of 71 Arts, Entertainment, & Recreation, and 72 Accommodations and Food Service (referenced below as “recreation and hospitality” industries). CHMGS has evaluated responses to two of the U.S. Census Bureau’s small business survey questions that have relevance to the industries which represent most public land concession/permitees and speak to financial sustainability.
1. How many days of operations will your cash on hand cover (Including PPP cash)?
The data indicates that approximately 50 to 64 percent of recreation and hospitality industry businesses have enough cash on hand to operate through the end of the summer (e.g., 1-2 & 3-4 months). This implies that approximately half of these businesses will be unable to effectively operate through the summer (Memorial Day to Labor Day) without regaining full operating capacity, which is unlikely with COVID-19 operating conditions.
2. When do you think this business returns to Pre-COVID levels?
Between 53 and 56 percent of recreation and hospitality industry survey respondents indicated that it will take longer than 6 months to regain previous levels of profitability. More striking: between 12 and 19 percent of recreation and hospitality respondents said business will never return to previous levels. If your park system has a “summer only” season, your concession and permit partners are out of options to recover during this year.
CHMGS recognizes that these survey results reflect macro, national data sources, and that every state and federal park unit has different demand patterns and seasonality. However, this type of data should support your own in-depth analysis of the financial sustainability (e.g., have you looked at your concessioners income statement and balance sheet) of your concession/permit partners, and can be used to support your case with park leadership. Based upon these data and what we are hearing from concession/permit partners, CHMGS recommends public agencies consider some level of concession fee relief for this year and begin internally forecasting the possibility of a reduced level of fees for next year.
Assessing the need for concession fee changes and relief is something CHMGS has a depth of experience in. Contact us if you want to discuss issues regarding concessioner/permittees. We are here to help/advise.
