The corona crisis is challenging especially for those industries that rely on constant visitor streams and fans such as mountain railways, sports clubs, and cinemas. Companies in these industries need to come up with new and creative ways to keep their business running and get back on track.
We spoke with 3 industry insiders to get their perspective and advice on the current trends in ski, sports, and cinema, respectively:
- Prof Philipp Lütolf of Lucerne University of Applied Sciences. In addition to consulting and further education offers for mountain railways, Philipp Lütolf is the author of various studies on the financial situation of mountain railways and the handbook Bergbahnfinanzierung.
- Claus Horstmann of HORSTMANN Consulting is the former managing director of 1. FC Köln, the chairman of the supervisory board of the handball club VfL Gummersbach and managing director at Centerparks Germany. He has more than 20 years management experience in the sports and entertainment industries.
- A major film distributor who wishes to remain anonymous.
- Mountain railways in Europe might benefit from the corona impact, if long-distance travel shrinks and Europeans go to their local ski resorts. The best way to react to lower demand is through unique offers and experiences, not cutting prices.
- The more dependent a sports club is on direct spectator revenues and donations at the event, the more difficult the recovery phase will be. Open, direct and honest communication is the key to success and the existing trend towards digitalisation of business processes will be a much higher priority.
- The cinema business will reflect a ‘flight to quality’ with major blockbusters increasingly consuming a larger portion of the box office pie. Those that continue to market their theatrical releases as ‘events’ will do the best. Cinemas should provide steam-cleaned seats/carpets and require facemasks on all staff to show a commitment to hygiene and safety.
Once the crisis is over, how do you think your industry will respond?
The reactions for mountain railways will depend on the duration and severity of the crisis, which it is too early to accurately assess.
Scenario 1: The number of Corona cases flattens strongly and remains at a low level.
The locals are allowed and willing to enter the mountain railways and tourist resorts. If the weather is good, some mountain railways could come away with a black eye. Important is how strong and how long the capacity remains limited due to social distancing. Companies with a high proportion of intercontinental guests will lose the most. However, these are the mountain railway companies with the strongest financial positions, which makes it possible to absorb losses. If there is no threat of a second wave in winter and the snow is also suitable, then at best no major reactions would be necessary. In some cases, investment projects will be postponed due to the lack of income in March/April and the uncertain outlook. Many resorts will probably take losses for March/April 2020.
Scenario 2: Corona remains an issue in summer, locals hesitate to visit the mountain railways.
It is possible that with Corona remaining a threat few guests would choose to take trips. For some mountain railways, summer is as important as winter. If there is a significant drop in attendance then the lifts will take a loss for summer. Nervousness and uncertainty would be high for the next winter. Resorts will probably fight for guests with generous discounts even though everyone knows this is not a good idea.
Scenario 3: Corona remains a very serious issue and a severe second wave hits in late autumn/early winter.
This will lead to restrictions in cable car operations or at least to significantly less demand, even potentially extending over Christmas. It would probably endanger the existence of many mountain railways. Then there will be even greater demand for public money. In most cases this support will probably come.
The business model of professional sports is fundamentally successful and has broken sales record after sales record over the last few years. This means there will be no significant change. But there will be adjustments on both the revenue and the cost side, and digitization in particular will make processes more efficient at a significantly different speed than before. In the short term, revenues from sponsoring and ticketing will decline, making the available budgets smaller. The associations and clubs will react to this, in particular by adjusting salaries and in team sports with smaller squads as well as reducing investments in infrastructure. At the same time, the focus on digital innovations and optimisation will be increased, sponsoring will have more digital facets (e-sports) and the 360-degree view of the fan and the corresponding commercial use will be pushed.
Major film distributor:
The cinema business will reflect a ‘flight to quality’ – the best cinemas in the best retail/food environments will excel. The overall volume of theatrical releases will shrink as smaller/specialized titles release on straight-to-home platforms. Local films will take time to recover in many countries as will independent film which relies on pre-sales and film markets. Major blockbusters will increasingly consume a larger portion of the box office pie.
What different scenarios could you see developing?
That depends, of course, on the aforementioned scenarios. There is speculation in various media about whether the Corona crisis will noticeably change people’s travel behaviour. In the short and medium term, there will certainly be a strong effect. Personally, I don’t think so in the long term. However, if there is less long-distance travel, the mountain railways could be among the winners of the development. The Swiss would stay more at home. Europeans are more likely to stay in Europe. And the Asians will react less than the Europeans, because they are already much better used to viruses. In the long term the Asian guests will certainly visit Switzerland again. The problem is whether the politics and the population (e.g. in Lucerne or Interlaken) react even more sensitively to mass tourism.
Many airline representatives are currently making statements such as “It will never be the same again” or “We will have to halve the fleet in the future”. I am not sure whether these statements are being dramatised with a view to the most generous state aid possible, but most mountain railways would benefit if there were fewer flights and air fares were to rise.
The question is, of course, inseparably linked to when events can take place again with spectators. The more dependent a sport is on direct spectator revenues and donations at the event, the more difficult the recovery phase will be and the greater the cost-cuttings will be. The higher the media share of the revenues, the easier and faster it will be to get out of the current crisis. Professional football therefore has much better starting conditions in most European countries compared to other team sports. However, there will definitely also be reduced revenues in football and all professional sports in the short and medium term.
Major film distributor:
I can’t handicap the business but scenarios range from a return to prior box office levels by 2021, a reduction of 10% worldwide, or even worse. What is likely is that it won’t be uniform – some cities/territories will sustain the cinema business better than others as will genres of film which target young adults (the most likely demographic to actively seek out-of-home entertainment).
What reactions and best practices have you seen so far?
I have only had contact with a few mountain railways in the last weeks. Most personnel are on short-time work. Marketing is still preparing campaigns for when they reopen. The biggest challenge will be adjusting operations and staff levels to the number of guests. (e.g. in the catering trade) The reasonably good or successful businesses have received support from the capital providers to finance the upcoming investments.
In my view, it is particularly important that professional sport shows its social responsibility alongside all the challenges of the crisis. Many clubs have done this in an excellent way in recent weeks, and I have been particularly impressed by FC Augsburg with its quick and comprehensive response. The focus of all those responsible is of course on securing liquidity and compensating for the lack of revenues. There have been many creative approaches in ticketing and merchandise. Both virtual tickets (Lok Leipzig with the 1 € ticket or Hansa Rostock with the doubling of the proceeds by the investor) and new merchandising products / offers (VfL Bochum with the Back in Black jersey, many clubs with special shirts) were successful.
Major film distributor:
Vigilant hygiene and social distancing are likely to remain with us for an extended period, so those cinema chains who have embraced this in their operations and can effectively communicate such commitment to their patrons will outperform. In terms of film distributors, those that continue to market their theatrical releases as ‘events’ will do the best, considering the breadth of online entertainment now available.
Do you expect a change in the willingness to pay in the short term and long term?
After the financial and economic crisis in 2008 there were hardly any negative effects on skiing activities. In Switzerland, the crisis only impacted finance activities and not unemployment or disposable income, where in Southern Europe and Ireland the impacts were greater. In Germany and Austria it was probably similar to Switzerland. However, there is now a chance that unemployment and job insecurity could become a much bigger issue in the important countries of Switzerland, Germany and the Benelux. It is not yet possible to estimate how long and how severe the recession will be. I have the feeling that the Swiss will not primarily save on leisure activities, but rather on buying new cars or furniture. In this respect, I wouldn’t assume that demand and willingness to pay will change significantly. I would temporarily assume a slightly negative effect on demand and willingness to pay.
Overall ski tickets make up a small part of the expenditure around a ski vacation. In my opinion, weather and shifts in exchange rates are more important factors than the state of the economy. For the Swiss ski resorts, the exchange rate to the euro must be kept in mind. The Swiss Franc could possibly become more expensive again. Is Italy threatened with a national bankruptcy? Are Germany and Co. prepared to finance out? The debt in the EU will become extremely high? Will the euro survive?
Due to a temporary reduction in solvency, there will also be a lower willingness to pay. The proportion of donations and the absolute amount for “leisure/events/sport” will be lower. Nevertheless, I believe that “long-term-spendings” will continue to be achievable with attractive bonuses. The discount on a season ticket or other exclusive additional services will of course have a positive effect on the willingness to pay.
Major film distributor:
Yes and no – I suspect there will be a knee-jerk reaction among exhibitors to discount tickets to get audiences in post-opening. This will be aggravated in mall situations where a large number of tenants have closed with no new tenants to absorb the spare retail occupancy. I don’t think discounting will influence filmgoers concerned about safety or those only willing to see a film theatrically if it suits their taste. In other words, audiences will flock to see specific titles that require big-screen presentation vs. casually ‘going to the movies’ to kill time. I believe there’s an opportunity to intelligently manage pricing during this ramp-up period to generate promotional excitement, but new releases in prime-viewing time slots should not be touched.
What is your advice for keeping customers’ loyalty?
Not about the price. The best way is through unique offers and experiences. Otherwise, respond to the needs of the guests and be flexible. I can give you an example. We were in Davos over the last Christmas. Great weather all the time. The Parsennbahnen decided to start at 7.45 a.m. (when it is still almost dark at the end of December). This made it possible to ski for about one or two hours in the morning with only a few people on perfectly prepared slopes. I know of other ski resorts that stubbornly wait until 08.30, no matter how many people are there. I think such small experiences can not be neglected.
In my opinion, open, direct and honest communication is the key to success. Members, season ticket holders and fans must feel that they are part of the “big picture” and that the club needs them and is there for them. A small example of this – even if tickets already purchased could be legally compensated with a voucher, clubs must offer their fans the option of a refund if the money is urgently needed.
The same applies to sponsors, of course. Here, clubs and associations must respond to the concerns of their partners as individually as possible and at the same time continue to offer you a platform. In both areas, individual communication and the credible use of social media with an expansion of community management is the right way to increase loyalty.
Major film distributor:
Keep communications lines open without overwhelming loyal customers. Once they come back, consider value-added extras such as (in the case of one exhibitor I’ve spoken to) free popcorn and/or free combo upgrades. Cinemas should be freshly painted where possible, with steam-cleaned seats/carpets, and facemasks on all staff to show a commitment to hygiene and safety.
What innovations and trends do you think are likely to be the next “big thing”?
Within the company: automation with the aim of saving personnel. On the guest side: adaptation to probably unavoidable climate change. Winter guests who do not ski but still want to get up the mountain could become an important topic. It is advisable to earn money with these guests. At the same time, however, prevent skiers from switching to non-ski activities. In other words, not replacing skiers, but attracting more guests.
It is already clearly visible that e-sports will become much more important and relevant. In addition, the existing trend towards digitalisation of business processes will be given a much higher priority – for the associations and clubs in particular digital sponsoring on the one hand and – also referring to the question of loyalty – the entire business area CRM, the winning and commercial use of fan-related data.
Major film distributor:
Nothing actually – normally, in times of financial pressure, the ‘keep it simple’ approach is the most responsible. Not only as a means for exhibitors to conserve cash but we as an industry should first stabilize the business before trying too hard to introduce new concepts, especially if they come with a price premium. CRM and social media outreach will be the exhibitors’ best tools to keep customers updated on upcoming releases and internal promotions – assuming, of course, that these communications are targeted and measured and not so frequent that customers unsubscribe.