We are in uncharted territory. The global coronavirus pandemic has had an impact that has not been seen for a hundred years.
The SARS outbreak in 2003-4 was significant, but it only affected 26 countries, saw 8,000 cases, and just under 800 deaths. It had a peak impact of around 3 months, yet during that time it caused a 2% drop in East Asian regional GDP and a 10% drop in the volume of global international tourist arrivals in 2003.
This impact was particularly strongly felt in Taiwan, Hong Kong and Malaysia where arrivals fell by as much as 25% against 2002 figures. However, once the countries were clear and trade resumed, the number of visitors bounced back in 2004, and by 2006 the tourist volumes achieved were at the same level that they would have been as if the virus had not occurred.
However, this COVID-19 pandemic is of a scale not seen since 1918, when Spanish Flu spread around the world. That is estimated to have affected a third of the world’s population and killed between 20 and 50 million people.
As today, schools and businesses were closed and citizens placed in lockdown. The measures taken then were the same as being used currently and they served to slow the virus, however where the lockdown ended too early second and third waves of infection occurred. In many cases the lockdowns lasted for around 5 months and it took almost two years for the pandemic to be halted.
Studies by the Federal Reserve Bank of St Louis in 2007 reviewed the impacts of Spanish Flu and considered the potential impacts of similar pandemic on modern society. They estimated that it could result in a loss global GDP of around 5% and the potential to trigger a global recession.
While these are scary implications, they are not unrealistic and with different parts of the world on different stages of virus control it could be that the lockdown restrictions last for a good few months and the reduced contact guidelines are in force for many months more.
What is certain is that we will get through it; but the question remains what will the impacts be, particularly for the out-of-home leisure market?
In the short term there will be casualties. Companies with high leveraging are most at risk and we have already seen Carluccio’s and Debenhams in the UK, along with Apax Parks in US, filing for bankruptcy. Airlines and other transport providers typically carry high levels of debt and are therefore also of concern, as are many small leisure and entertainment providers that operate on low margins but carry high overheads.
Sadly, a number of businesses will fail to make it through the next few months but for those that survive what will the next couple of years look like?
A recent survey among consumers in the USA indicated that a significant proportion of people will be less likely to visit theme parks, cinemas and other public gatherings in future as a result of the virus. However, news reports from China of huge crowds at attractions and public areas the first weekend after the lockdown was eased shows the high level of frustrated demand and the sort of behaviour patterns that is of most concern to the authorities, which is why any easing of restrictions will be gradual.
Even once people are allowed to go out there will be continued restrictions and limitations. We have already seen these put into place in the Asian theme parks that have reopened. These include: advance booking, more security, temperature checks for guests, more regular cleaning & disinfecting, limitations on guest numbers, monitoring of guest distance in queue lines, cancellation or reduction in the number of shows, indoor areas being closed or strictly limited, no cash payments, restaurant areas being closed, and an increased use of technology to monitor guest movements.
These measures will be essential for public safety but will result in higher operating costs and lower revenues. However, they could also lead to a transformation of park and attraction operations and the guest experience.
Guests have always complained about long queue lines that result from greater levels of demand than the rides and attractions can accommodate. In the new operating model, where the number of guests in a park are limited to between 25% and 40% of full capacity, there will be shorter queue lines and a better guest experience.
While rides will need to run at a reduced capacity as well, to ensure social distancing, this could lead to guests enjoying more rides per hour and a better experience than they would on a normal busy day. At Plopsaland de Panne, management feel that this model would allow them to run two admission shifts per day.
Operating with a limited capacity would require advance booking by guests. This will provide attractions with far greater information on their guests than they currently possess. Furthermore, it will serve to even out some of the typical demand peaks and troughs of attraction operations and would also bring advance admission revenue for the attractions. It also raises a question on pricing levels.
With a lower volume of guests and hopefully an improved guest experience is there an opportunity to increase price, or would this be seen as trying to cash in on the situation? If not, there is certainly an opportunity to reduce the level of discounting that has been seen at some attractions and improve admission yield.
Moving to cashless payment will serve to speed up transactions on-site, and has been seen in other sectors, result in higher per capita spending on F&B, merchandise and other activities, where these can be offered.
For indoor attractions, museums and cultural institutions there will be similar challenges with a need to limit guest numbers. As many museums have a number of must-see artefacts and exhibits managing flow and guest distance will be the most challenging issue that will require additional staff and monitoring. Linear-flow attractions will have an advantage over free-flow ones in this regard, and it may be that large museums will need to close galleries or create linear routes within the attraction for a period of time.
In time the pandemic will be over. While we may not be fully clear for a year or more, life will slowly return to normal and crowds will be allowed back to events and attractions. Those operators that use the current situation to adapt their operations, systems and communication tools will be well placed to benefit from and manage the surge in demand that is building up.