The resorts that go broke in a slump are usually not the unluckiest ones. They are the ones that spent everything during the boom.
Learning objectives. After this week you can (1) tell countercyclical from procyclical behavior; (2) tell automatic stabilizers from discretionary policy and its three lags; and (3) compute your break-even visits.
Remember this: build the cushion in the boom. You can't build it in the bust.
1) Smoothing the cycle
Countercyclical policy leans against the cycle: stimulate in busts, restrain in booms. Procyclical behavior does the opposite: spending every boom dollar and slashing in the bust, which amplifies what it should absorb. Smooth the cycle, don't chase it: plan for the trough, not the average day. Cutting maintenance in a bust is the classic procyclical mistake: your decision form warns the backlog builds into downtime and incidents, just when cash is short.
2) Your break-even line
Revenue per Visit = Revenue ÷ Visits
Break-even Visits = Expenses ÷ Revenue per Visit
A day with $72,600 of revenue on 600 visits earns $121 a visit. With $55,000 of expenses, break-even is 55,000 ÷ 121 ≈ 455 visits. A bust is any stretch spent below that line. Underfund the core and it gets worse: the form warns that too little lift staff or patrol can keep you from opening, and too little insurance shrinks operations. A PARTIAL DAY on your report can also bring refunds, listed in its notes. An emergency closure means no revenue but still some fixed costs.
3) Automatic stabilizers vs. discretionary policy
Automatic stabilizers, like unemployment insurance and progressive taxes, act with no new decision: incomes fall, support flows at once. Discretionary policy, like a stimulus bill or a rate cut, must clear three lags: recognition (seeing the downturn in noisy data), decision (agreeing what to do) and impact (waiting for it to work). Policy that lands after a shock has started to fade can overshoot. That is Milton Friedman's critique of fine-tuning. Your resort's automatic stabilizers are the bank cash and unused borrowing room you built earlier: they absorb a shock the day it lands.
4) The boom half
Stabilization is symmetric, and the boom half is harder because nothing feels wrong. Countercyclical behavior in a boom looks like repaying debt, banking cash and clearing the maintenance backlog. Your weekly grade combines profitability, satisfaction, safety and asset health, not profit alone.
Quick self-check
(a) Revenue $66,000 on 550 visits, expenses $48,000. Break-even visits? (b) Name the three lags. (c) Is unemployment insurance automatic or discretionary? (Answers: $120 a visit, so 400 visits; recognition, decision, impact; automatic.)
Common mistakes
- Cutting maintenance in a bust. It invites downtime when you can least afford it.
- Spending your borrowing room in the boom. It is recession insurance.
- Treating every dip as permanent. Many shocks fade on their own.
This week in the arena
From one report, compute your revenue per visit and your break-even visits. Then find your worst day this week: how far below the line was it, and what cushion carried you through it?