By Travis Bary, Chief Operating Officer, Capital Vacations

With the unprecedented onset of the COVID-19 pandemic and the resulting expansive federal and state government travel and work restrictions, the vacation-ownership industry has experienced a precipitous and material economic impact.

Although we all hope that travel and resort demand will bounce back quickly after the world defeats COVID-19, you must plan for the economic impact and corresponding reduction in consumer liquidity to last for an extended period, posing a substantial risk to resort revenues and operating budgets.

You need to implement a long-term strategy that ameliorates these issues and manages cash flow for the foreseeable future. As Benjamin Franklin said, “By failing to prepare, you are preparing to fail.”

A multi-faceted approach

Behind every resort are the owners and guests who enjoy their vacations, and the dedicated staff who make it all happen. Your first and foremost priority is to ensure that all owners, guests, and employees are protected.

Once health and safety are addressed, turn your attention to the financial health of your resort’s owners’ Association. This is a trying period for our industry and the travel community at large, but you can get through it with careful attention to your budget and the bottom line.  Adopt a multi-faceted approach that includes four key components:

• Long-term planning
• Cash-flow analysis and reforecasting
• Current and future delinquency assessment
• Rental reforecasting

Your board must keep accurate track of cash on hand and upcoming expenses for the balance of the year. If your resort uses future years’ maintenance fees to cover fourth-quarter expenses, understand how this will affect your cash flow in 2020 and beyond. Make specific plans for what steps to take to maintain your operations at the pre-COVID-19 level.

Furthermore, you should expect a sharp increase in maintenance-fee delinquency due to the current economic volatility, rising unemployment rate, and loss of investment income. Any budgeted 2020 maintenance fees not yet collected are at significant risk. For 2021, the collection rate could be reduced by as much as 10 percent. Further depressing collections will be the activities of unscrupulous third-party timeshare exit companies attempting to prey on the current economic and health fears, so vigorously encourage your owners to resist such efforts.