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July 26, 2022

Part Two: What Should Cultural Attractions Do About the Current Economic Conditions?

Economic Outlook

By Paul Noland

In last week’s Community Conversation takeaways, we explored the U.S. economic outlook—the current state of the economy and its likely issues moving forward, with insights provided by Adam Sacks of Tourism Economics. If you haven’t yet read that post, click here.

This week, we shift our focus to the topics of fundraising and revenue and expense impacts and offer potential short-term and long-term solutions. We thank Elizabeth Kohler Knuppel of Skystone Partners, Dario Lareu of Temaiken Biopark, Paul Noland of RPN Associates, and Zachary Winfield of Zoo Advisors for their contributions to these topics.

Fundraising

Elizabeth discussed the environment for fundraising and current trends:

  • An annual research study by the publication Giving USA showed that overall philanthropic giving in the United States is at an historic high. In 2021 (most recent research available) total giving reached $484B.
  • Individuals were responsible, through direct donations and bequests, for 76% of that total.
  • Giving to environmental and animal charities, while representing only 3% of total giving, has seen considerable growth with year over year increases of donations increasing 10.6% and 11% in 2020 and 2021 respectively.
  • These large increases are believed to be fueled by the high visitation levels zoos are experiencing (Elizabeth calls it “give where you go”) as well as wanting to make sure that the animals are “taken care of” during the pandemic and the current post-quarantine phase.
  • It’s too early to understand what impacts, if any, the current economic conditions will have on charitable giving. However, the impacts on a historical basis show that, in general, a downturn in the economy or recession has little impact on total giving. An exception was the financial crises of 2008-2010. Here, total giving dropped significantly, but fully recovered by 2015. In short, a relatively mild recession should not have widespread impacts on charitable giving.
  • A few thoughts on what to concentrate on during more difficult times:
    • Focus on individuals—they represent 76% of giving
    • The least expensive dollars you can bring into your organization are renewal dollars—special focus here is warranted

Revenue and Expense Impacts

This section began with Zachary sharing how zoo and aquarium attendance has changed before, during, and after quarantine. This is based on a study of 207 AZA organizations. Some important observations:

  • No surprise, during the first part of the pandemic (2020-early 2021), both zoos and aquariums saw substantial declines in attendance. Aquariums saw steeper declines, likely attributable to being indoor facilities versus zoos being primarily outdoor facilities.
  • However, both zoos and aquariums saw rapid recoveries, beginning in the second quarter of 2021.  In total, aquariums have fully recovered their attendance whereas zoos are still slightly down in attendance versus 2019.

Paul and Zachary shared thoughts on pricing and promotion in this environment:

  • Now is an important time to look at pricing. It’s a significant way to offset some of what facilities are experiencing with staffing and other costs. Being in a period of high inflation gives organizations some “air cover” when taking a price increase.
  • Discounting is a bit of a double-edged sword. On the one hand, if demand is strong, why discount—especially if that creates pressure on staffing. But on the other hand, if inflation continues and the economy slows down, families will want to find good value wherever they can.
  • Given that, consider offering bundles where the guest receives value in a package deal (e.g. admission, parking, and food and beverage) versus an explicit discount on just admissions.
  • Another mitigation tool is to activate underutilized assets. By adding after hours parties, evening festivals, community and holiday events, you can “get more milage” out of your existing product offering—assuming you can handle the staffing requirements.

Regarding the cost side of the business, Dario discussed the situation in his home country of Argentina, a country that has been plagued by hyper high inflation for over a decade. Economists estimate that the inflation rate for Argentina for the full year 2022 will be 100%. To deal with that kind of inflation requires intense focus and action. Dario shared examples of how they cope:

  • They have formed three task forces made up of leaders from throughout the organization:
    • Inflation Task Force
    • Revenue/pricing Task Force
    • Supplier/vendor Task Force
  • Pricing receives continual attention as they’re forced to raise prices several times per year. In addition to “marque” pricing, they’re constantly reviewing discounts and eliminating offers that aren’t adding value.
  • Purchasing is also a weekly focus. They evaluate vendors and make changes where a better price is available on an ongoing basis.

All of this ongoing effort is paying dividends. In 2021, Temaiken Biopark lost $1.2M USD, but in 2022 they are projected to break even. This is a remarkable outcome given the underlying economy!

The webinar concluded with a few specific thoughts on steps to take to better control of a facility’s cost base:

  • For most zoos, staffing is, by far, the largest cost. The number one way to control staffing costs is to improve staff retention. Focus on the onboarding process—how can the organization make the first few weeks of an employee’s experience better? In addition, look at the overall employee experience and find ways to eliminate pain points in their day-to-day interactions while at work.
  • Be sure to know what you’re tracking. In other words, get very granular about tracking and understanding where and how costs are changing. This may require revisions to how costs are tracked and how goals are set for the team. 
  • Once costs growth is understood on a detailed level, proactively address these changes in your budgeting and forecasting. Make decisions around pricing, revenue, product offerings, etc. with a full recognition of the impact higher costs will have on the income statement.
  • How is your organization combatting these current economic conditions? We invite you to share your strategies and thoughts below.

Click here to view the full webinar recording.

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