Recovery positions

No industry sector has been more affected by the Covid-19 pandemic than aviation. What As the world begins to adjust from the initial shock and critical lockdown restrictions driven by the Covid crisis, what do asset managers and brands need to consider as we enter the next stage of managing resilience and the road to recovery?

Safety and Security
What was until recently a basic threshold component and an operational `given', has now become the first hurdle that all brands and businesses need to overcome. 

Beyond complying with government and local authority restrictions and regulations, all businesses will need to focus on ensuring that both employees and customers feel safe and protected, recognising that there will be significant differences in opinion and perception.

Measures considered over-the-top for some, will be a minimum threshold for others, and it is important to consider the needs and perceptions of those most at risk and anxious, beyond simply taking the easiest path that accommodates the unconcerned.  This will impact both the way in which physical assets are managed, across dimensions such as social distancing, contact-less customer journeys, and back-of-house operations, as well as the way in which companies communicate to ensure a clear awareness and understanding of specific processes and procedures, as restrictions are gradually lifted.  Promoting a feeling of safety and security will be paramount.

Sustainability
One of the defining features of the crisis has been its all-encompassing nature, impacting every country around the world, and every industry with devasting speed. However, the medium and longer term impact will be markedly different – for countries, depending on levels of infection and government policy; for customers, depending on age, underlying health, life stage, and employment status; for product categories, depending on customer need and affordability; and for individual companies, depending on proposition, digital maturity, and strength of the balance sheet.

As such, for brands it will become more important to understand the underlying sustainability and differences in demand across customer segments, product categories, and regional markets.  For asset managers, there will be a greater need to understand the business models of their tenants and occupiers, how their sales and operations have been affected, and what levels of rent are sustainable.

Whilst the variations across product categories may be obvious – such as the resilience of grocery and healthcare vs. the contraction of eating out and fashion – the nuances within sub-categories may be less apparent, but just as pronounced.  For instance, evidence from China suggests that as consumer spending moves beyond simply essentials-driven grocery towards discretionary, within the fashion category spending on footwear is recovering at a faster rate than jewellery.  Equally, for F&B brands, those with a strong quick-serve and take-out proposition have the capacity to recover faster than slow-format casual dining.

Success
For all companies, it is an opportunity to re-assess what defines success for the new world.  The parameters have changed, customer and stakeholder priorities are evolving, and conventional norms have been shattered.  Are physical store sales the best measure of asset performance when increasing proportions of sales are executed online? Should rent maximisation be the primary goal for every unit in a centre, when the role of physical space is evolving? What will be an acceptable level of sales per square foot, when social distancing constrains footfall volumes?

Beyond maximising sales and minimising costs, and particularly at a time when the pure pursuit of operational profit is challenged, there is the potential for companies to succeed through enhancing purpose and positive impact.

Identifying initiatives and measures to drive positive impact for employees, supplier partners, customers, local communities, and the environment will ultimately deliver success and long-term viability. It will help to focus attention and resources on aspects that enhance purpose, and provide a measure and demonstration of positive progress – a shining light when so many of the conventional metrics seem to be in reverse.

Alex Avery