Jul 12, 2020

As hard as it gets, the show must go on

written by Lisa Eason

In February, I sent a copy of what I thought was an excellent management book, The Experience Economy, to a number of colleagues and partners. The thesis is that brands can capture customers’ attention by making their operations into theatrical experiences — companies ranging from Disney to Lego to Starbucks win loyalty by making every visit a “high-touch” outing. I felt that businesses I’m involved with, including Gail’s bakeries, Brighton Pier and All Star Lanes bowling, could benefit from the advice.

Unfortunately, my message and timing were spectacularly bad: a magnificent contra-indicator, you might say. Within weeks, the coronavirus had struck, lockdown was triggered — and the experience economy went to hell.

So where does it go from here? The authorities would like us to maintain a largely zero-touch society, but I hope the vast majority of people do not want that inhuman existence to become the new normal. I walk across a deserted central London every day to and from my office, and if it is representative, cities remain desolate and in deep trouble. The only group who have increased their presence, sadly, are rough sleepers.

While public transport functions at barely 20% of usual levels, most commuters, shoppers, tourists or those going out for an evening’s entertainment cannot travel. And with a frightened populace, and public gatherings largely still forbidden, “experience” offerings ranging from theme parks to cruise trips will struggle to operate.

Possibly the most threatened element of the experience economy is business travel and hospitality, and the convention, conference, exhibition and trade show sector. Lots of companies have realised just how much money and time they can save by having meetings online using software such as Zoom. Traditional exhibitors are likely to reduce marketing spending by skipping events. Of course, video conferencing is a much lower quality experience than face-to-face communication. But, in these challenging times, I can imagine that many boards will find the financial savings irresistible.

Airlines, car rental companies and hotels and restaurants that rely on commercial traffic are the most vulnerable to this shift. Unfortunately, many suppliers depend on the premium spending and juicy margins derived from expense-account clients — high-end dining, first-class aircraft seats and so forth. Longer term, I think consumers will still want to go abroad on holiday and will continue to eat and drink out — these sorts of businesses should recover. But I suspect companies may well make permanent cuts in their travel and entertainment budgets. The economics of trade travel and business events have deteriorated badly thanks to lockdown. This slump may not be cyclical but enduring if habits change for good.

Currently, the frictional costs and inherent inefficiencies of social distancing mean a large proportion of experiential businesses cannot make money even if they are permitted to reopen. Businesses such as restaurants, hotels, visitor attractions, gyms, casinos, pubs, performance venues, festivals and so on have high operational gearing and high fixed property and people costs. Even trading at two-thirds of normal levels is likely to drive many bankrupt. Virtually all have reduced their running expenses, but many have also drained their reserves while closed. Will the customers return in sufficient numbers to allow these businesses to recover?

Sectors such as hospitality, the creative industries, tourism and leisure are significant employers, and tend to be dominated by smaller operators. Many will have been unable to recapitalise themselves and may fail or downsize.

The hundreds of thousands of lost jobs will lead to long-term scarring from the lockdown, but I remain confident that humans want face-to-face interaction and entertainment: they want to travel, play games, eat and drink away from home and see live theatre, music and comedy. Virtual simulations via screens will always be poor substitutes, just as Zoom meetings lack nuance, humour, visual cues and the same level of engagement that is possible if you are in the room with people.

A powerful and vocal lobby group has formed insisting that schools should open to all pupils from early September, and that every subject is taught properly. I hope this means that social distancing is, essentially, abandoned by then — not just in education, but across society. All experiential activities — including places such as theatres, music venues and gyms — should then be able to open and function properly. For our culture, our economy, our sanity and our wellbeing, I hope leaders from every walk of life insist we can never carry out a mass lockdown again.