Now that the coronavirus hits the fan, the crucial question for affected companies is "How long will it last?". It drives decisions on what solutions you propose to your guests, how you revise prices and revenue management policies, which expenses you must cut, and whom in your team you must fire. 😓
"Prediction is hard, especially when it is about the future". After the battle, everyone will be a general (Czech saying). And we have no crystal ball...but here are data that we gathered on the Net, and a few assumptions that we identified that can guide us. Obviously, your feedback and thoughts using the form at the end will be useful to put all minds and information together.
1. When the first cases are reported, it is only the tip of the iceberg, and it takes at least 8 weeks to unfold:
Best data and analysis I found is on https://medium.com/@tomaspueyo/coronavirus-act-today-or-people-will-die-f4d3d9cd99ca
I found this graph most revealing : taking into account the incubation period before symptoms, you can time the epidemic in countries that have experience:
And see some forecasts:
2. Then it seems like the evolution of the epidemic and the measures affecting travel and business depend on your country's politicians and preparedness:
We have all seen that graph relating treatment capacity, containment measures and fatalities:
Source: https://informationisbeautiful.net/visualizations/covid-19-coronavirus-infographic-datapack/ and Google News
Let's focus on the treatment capacity part and see a few parameters/ KPIs that you can check in your country, like the test capacity and number of masks available for doctors and nurses. We can take a few examples:
Clearly, if your country's prepared, they might manage to save both patients and the economy.
But if it is not prepared, politicians will have to choose to save lives sacrificing the economy- and travel will be the first baby thrown away with the infected bath. Like the Italian and the Czech do.
3. Even once the real risk gets lowered, it will take quite some time to get restrictions lifted and quite some time for people to get back in a safe travel mood:
here I like the graph provided by Thibault Masson on https://www.rentalscaleup.com/vacation-rental-data-and-charts-coronavirus-impact/ :
No, not that one, we're beyond that...:
The data from Keydata is good, but lines are easy to draw after a travel ban.
The one I like is that one:
So let's assume:
- 3 months of crisis, see above. That's 3 months at 0 to 15% occupancy
- 3 months of recovery. recovering step by step to 80%.
4. Your options during this phase will depend on your rentals' location and model
To make a long story short:
If you are in urban rentals in a European city, on fixed rents, and Spring is your highest season, bring all sails down - switch properties to monthly or long term rents for locals and find good activities/outplacements for your team.
If you are in a seaside destination, there is still hope left - see next point and tips
5. Scenarios: options, probabilities
One thing I remember from my McKinsey years is that confronted to such uncertainty, you should draw scenarios, estimate their probability, their NPV (Net Present Value).
That works pretty well if you are a financial institution with access to state/central bank funding. Or a corporation with access to huge market funding (though, looking at financial markets, there will be less of these now.)
If you are a small or medium vacation rental company with personal funding, once you have bet your house, you may find out that some of these options are not riskable for you, so NPV will not be your main criteria, but bearable risk and affordable financing will drive your property inventory, staffing, revenue management and availability choices. There it becomes essential to know better your costs including variable costs and value scenarios accordingly (including revenues, costs, risks...). https://blog.vrpartnership.world/why-you-cannot-do-good-yield-management-in-vacation-rentals-today-revpar-is-not-enough
6. Hope for the best and prepare the worst
- In these dark times, you might wonder what assumptions to put in the optimistic/hope for the best scenario. let's dream a little...the worst is not always certain.
A few pink scenarios to end the coronavirus crisis:
1. A cure is found. After all, some experiences seem to indicate existing medical drugs work on the virus. It sounds like magic, but it is the kind of magic science achieved for us for centuries.
2. A vaccine is developed. Yes, it seems it takes a year usually, but with the best scientists is the world working together on Coronavirus, one can hope.
3. Spring and summer heat ends the spread of the virus. We do not know about that, but the contrary is not proven either. That would save the summer season.
4. Politicians replace travel bans with providing masks to healthcare workers, making tests widely accessible, increase healthcare capacity etc. like in Taiwan, South Korea etc. Of course today that sounds unlikely, but to paraphrase Churchill maybe we can trust them to do the right thing- after they failed with every other solution.
7. After Spanish Influenza came the roaring twenties
One thing not illustrated in the crisis recovery graph above is the appetite for life that comes after deadly crises. Let's dream of it while we are confined at home : https://en.wikipedia.org/wiki/Roaring_Twenties
And that time will come, because in the grand scheme of things we are talking about a pandemic that made less victims than the yearly flu, and for which the best in class reduce mortality to 0.77% of the infected and reduce the infection likelihood:
So as much as we can feel sorry for the victims, afraid for our loved ones, and angry about our politicians, this is not the end of the world.
To be continued...we will try to post one tip a day.
Tip 2: Deal quickly and pro-actively with cancellations of those at risk, and try to re-rent fast
Tip 3: Replace foreign guests with locals
Tip 4 : Replace senior guests with young guests
Tip 5: Target safe regions
Tip 6: identify less Coronapanic-sensitive niches
Tip 7: Revise your prices
Tip 8 : Replace short -term rentals with medium or long-term rentals
Tip 9: Adapt all your mix, from cleaning
Tip 10: make your bets about how long the crisis will last- and adjust your options accordingly
The webinar is planned for Tuesday, March 17th at 16:30 CET (that is 11:30 AM Tuesday, Eastern Time (ET)). If you cannot attend, we will send you a recording.
You can vote below for which tip you would like to read first, we'll try to prioritize.