The Coronavirus and the ensuing international health crises has impacted the resort real estate industry in an unprecedented way. It is a time of uncertainty but I have learned from over a decade of experience in dealing with one of the world's most complex mixed-use projects in the Caribbean, there are answers and guiding principles which enable stakeholders to successfully navigate challenges.
In 2008, I was busily engaged in constructing a resort in the Caribbean when disaster struck. The financial crises crippled the company at a critical time in its development. As a result, the development stalled, then languished and was ultimately forced to shut down. Over 350 clients and creditors of the business were adversely impacted and the resulting anxiety was crippling. Tens of millions of investment dollars were on the brink of being lost and the good will that was generated to realize this island paradise was in grave jeopardy.
In the end, many like developments succumbed to the 2008-2009 financial crises. In retrospect, having found myself on the brink of an experience of a lifetime, I learned firsthand what it takes to lead a complex company through a crisis. We salvaged what we had and consequently completely turned around a company in the mixed-use hospitality industry.
5 Keys to Managing a Crisis in Mixed Use Real Estate:
While your natural reaction may be to get busy and dig in trying to find solutions, thinking you are showing your grit, Caution! You do this at your peril! If you do not communicate openly, your employees, clients and stakeholders will assume the worst. Be transparent and let everyone know what is going on; even if you cannot articulate a solution right now...you are working on it. Be transparent. Do not hide bad news because being transparent is ultimately an exercise in building trust and creating building blocks for future green shoots and growth. People can generally respect options given to them - even if they are suboptimal- if they are given a chance to understand the situation.
Invest time to reach out personally to your key investors and clients beyond a conference call or newsletter - these key people will appreciate it and will give you the vital support you will need. Taking time for personal phone calls to key people will pay off. In my project, I reached out to over 400 people individually. Communication cannot be more highly prioritized.
#2: Engage Stakeholders for Solutions
Engage clients to allow them to be part of the solution. You will likely involve hundreds of people all bringing their unique talents and viewpoints to bear. It won't be perfect, but your clients truly want to help you find a solution and will offer valuable ideas. Give them a platform and a stake in the outcome and you will be surprised at what can transpire.
In my project, I ended up renegotiating over 350 contracts in a creative way that was a win/win for both the developer and the client. This action resulted in the removal of over $30M in liabilities off the balance sheet and helped the company get back on track. Those 350 phone calls essentially saved both the company and clients millions of dollars and we eventually were able to finish the island resort. It was an innovative "team approach" and in the end, it was people working together that saved the project.
#3: Optimize Workforce and Expenses
You cannot afford to deal with team members that are anything less than 100% committed to helping the business and the clients. You and your employees need to be willing to do things never done before and not worry whether or not they were listed on the original job description. No executive is too important that they cannot reach out to clients as needed. In times of crisis a "servant / leader" philosophy is paramount in establishing trust and harnessing the contributions of stakeholders, creditors and clients.
After the initial fallout, all remaining executives at my project started working on different initiatives, many suggested by informed clients. In one instance, we pivoted from selling 2nd homes to a fully functional tourism entity. In another, we turned existing 2nd homes into fractional properties, thus relieving the burden from those clients who were suddenly cash strapped and were looking for alternatives.
#4: Pivot your marketing message to target your current challenge
You will need to redirect your marketing in a creative way. The initial focus should now be on employees, clients, creditors, partners and even on income streams you may not have previously considered.
Lean on the best communicators in the company. Leverage internal talent and get a tactical strategy. Keep communicating. At this point you are selling trust, confidence, patience and a new plan. Pivot and execute.
#5: There is a solution to every problem
Problems are not binary, there are ALWAYS myriads of solutions to evaluate and consider. In my experience of renegotiating 350 contracts, many of whom were sophisticated investors, no deal was the same and I constantly had to be flexible and creative. In the end, we created win/win solutions and restarted the company. Dig deep, there are solutions to be found.
Conclusion: every situation is different. Your competitors are likely feeling the same way you are right now. Separate yourself, be a leader and apply what you know. These are the times that define you as a person and a professional. It is amazing what can be accomplished with the right mindset.