Many AZA member organizations have spent the better part of recent weeks scrambling to put out fires: applying for PPP loans; re-calibrating staffing; and planning to re-open under wildly challenging circumstances. But in seeing our way through this moment, it’s equally important to consider the longer-term implications and develop a plan for a sustainable financial recovery.
Last week, Zoo Advisors Vice President Zachary Winfield hosted the sixth in our series of weekly webinars titled “Planning Your Financial Recovery”. It was structured as a framework for discussing scenario planning and considerations when using our dynamic scenario modeling tool, available to download by clicking here.
The topics we covered included:
Considerations for attendance recovery
Impact on earned revenue
What will happen to contributed giving?
Will public revenue be impacted?
Considerations for Attendance Recovery
As our perspective of the situation evolves, we’ve come to understand that it’s possible (and perhaps likely) that future closings and lockdowns are possible as the virus reemerges. Zoos and aquariums need to plan accordingly.
While there has been substantial macro-level research released showing how and when constituent segments are likely to return to cultural organizations, localized research does not always show the same trends. It’s critical that organizations conduct their own research to accurately calibrate their financial scenario planning.
Harry Tomasides of Digonex Technologies talked about the importance of pricing flexibility and shared his perspectives on the various schools of thought on pricing strategies. One school of thought dictates that if you discount now, getting prices back to where they belong could be difficult. It’s much easier to move forward with targeted promotions rather than structural price changes. Alternatively, some organizations are focusing on aligning pricing with reduced guest experience value to avoid leaving a bad taste in their visitors’ mouths. Both perspectives have merit. “The Great Pricing Debate: What Should You Charge In A Post-COVID-19 World?” article, accessible here, provides industry-leading points of view on the polarizing topic of ticket pricing upon reopening discussed during Gateway Ticketing Systems’ recent webinar.
Earned Revenue Planning
Most AZA zoological facilities operate with three primary sources of revenue: earned, contributed, and public. Earned revenues are typically the largest single source, and unfortunately, they’re also being hit the hardest.
In their scenario modeling, we asked participants to consider how to be most effective in acquiring and renewing their members. Bill Moore of Zoo Miami Foundation noted that his organization has elected to delay their spring membership acquisition campaign, which is a critical annual effort in their program.
When forecasting financial performance, considerations to on-site experiences, as well as food/retail services revenue streams must include to what extent they can operate, if at all.
Lastly, we discussed special events. With so many organizations relying on summer and fall seasons for these events, participants need to be creative. Lynn Mento of Friends of the National Zoo noted that her organization is testing several innovative strategies, including Halloween programming that limits physical contact with pre-bagged treats, and a reimagined food festival that asks participants to take their meals home and login to a “virtual dinner party,” with small “tables” hosted by members of the Zoo’s staff.
Contributed revenues (individual giving, major gifts, corporate sponsorships, etc.) are also an important source of support for zoos and aquariums. The issue of economic uncertainty is a challenging one for non-profit organizations of all types as it relates to giving. Pamela Reed Sanchez of Seneca Park Zoo Society shared that her organization has experienced success in all three areas for the moment: an urgent appeal campaign that raised significant revenue; major donors have assured that their pledges will be fulfilled; and corporate sponsors have continued their support despite canceled events. Regardless of the economic climate, giving seems to be on track for the moment. The question is for how long?
Economic uncertainty is also a major concern for public support. Cash-strapped cities and counties may be looking to do belt-tightening, and zoos or aquariums that rely on property or sales tax receipts for their operational funding may be looking at meaningful reductions. Jeff Ettling of Sedgwick County Zoo shared that communication with his local officials has been key: by being in contact early, he was able to develop a plan to reduce his organization’s spending in a way that would keep it solvent, and was not caught off guard.
Revenues are only one half of the equation. Expenses are equally important. Here are some key things forecasters need to think about:
Cash Burn: What does it cost your organization every day simply to exist? Before even opening the doors to guests, what are you spending on personnel, utilities, and animal care?
Scaling Up: Once you do start letting guests through the gates, how do those expenses scale? How many more staff do you need on site to accommodate them?
Breaking Even: There are very real scenarios where the expense of opening does not generate enough revenue to be worth it. By doing this math, you can help answer some questions about what you need on the revenue side to make sure you stay whole and solvent over the long term.
A recent article from Forbes entitled “The Financial Formula for Reopening Theme Parks”, accessible here, discusses these issues at length and offers an easy-to-digest formula for understanding this concept:
“In order to decide whether to swing their gates open again, the bean counters at theme parks will divide their annual costs by 12 to calculate their monthly expenses. They will then divide this by the average spending per guest to determine how many people need to stream through the turnstiles to cover their costs.”
At this moment, we have more questions than answers. Over the next several months, the real-world experiences of organizations will help provide context to these questions, but for now forecasters and planners need to be cognizant of these unknowns and plan accordingly.
Click here to watch the full recording of this session and enter this password: 3N#XVnyj
Thanks again to all our participants for their comments, especially clients and colleagues from around the profession who shared their insights and experiences:
Harry Tomasides, Chief Revenue Officer at Digonex Technologies
Bill Moore, CEO of Zoo Miami Foundation
Lynn Mento, Executive Director of Friends of the National Zoo
Pamela Reed Sanchez, President and CEO of Seneca Park Zoo Society
Jeff Ettling, President and CEO of Sedgwick County Zoo