Luxury Resort The Ranch Shares Its Playbook for Managing Through a Shutdown

Luxury Resort The Ranch Shares Its Playbook for Managing Through a Shutdown

By Ian McCue, commerce and retail reporter
7-minute read

In short:

  • The Ranch at Laguna Beach, a resort in Southern California, saw reservations fall off before it temporarily closed on March 20.

  • The resort had to lay off about 200 people, though it hopes to hire them back, and is down to just 11 employees.

  • The business plans to apply for some type of financial relief to make up for the money it will lose by being shut down through at least April.

 

In a matter of days, The Ranch at Laguna Beach, a picturesque resort situated along the Southern California coast, went from normal operations to completely shut down.

When California Gov. Gavin Newsom issued a statewide stay-at-home order on March 19, the resort immediately began closing down, asking a musician to stop playing mid-set and shuttering its outdoor balcony. 

Its 97 rooms were mostly empty -- only four rooms across the resort were occupied at that point, and those guests departed the morning of March 20. The Ranch had already closed two of its three restaurants on March 17, following other guidance from the California governor. (The business briefly kept its beachfront Lost Pier Cafe open for takeout until the City closed that beach.)

👉 Though the state government hasn’t mandated that hotels close, The Ranch has been shuttered since March 20. Most of its restaurants shut down days prior.

Though it could be operating as a hotel without breaking government guidance, The Ranch has stayed closed.

“We realized that just to do the right thing overall for the community and not encourage social gathering, doing the closure completely was important,” Kurt Bjorkman, general manager at The Ranch, said. “While there are other hotels open, we didn’t want to put our staff and team in a position of being exposed potentially.” 

“We realized that just to do the right thing overall for the community and not encourage social gathering, doing the closure completely was important." 

Nestled near the Pacific Ocean, The Ranch is situated in a box canyon with rock walls that climb as high as 600 feet. Bjorkman calls it “a sublime place.” The land was first used for a golf course, then expanded into a resort in the ‘60s. A new owner took over the property in 2013 and completely overhauled it into the luxury property it is today. The Ranch features hotel rooms and suites, a nine-hole golf course, a spa, meeting/banquet spaces and a nearby beach. The resort has been recognized among the best in California by Condé Nast, National Geographic and Travel + Leisure.

The Ranch had to move multiple weddings and about 35 group reservations in the weeks leading up to and after the closure. Almost all rescheduled rather than cancelling. The resort usually has a seven-day cancellation policy, but it waived any late cancellation fees for all guests.

“It would be easy to say, ‘Oh, this is the policy, you’re stuck,’ and some hotels did that,” Bjorkman said. “But they’re going to lose customers forever, and we didn’t want to be like that.”

👉 The resort rebooked dozens of weddings and group events due to the coronavirus; a small percentage cancelled altogether.

The Ranch rebooked dozens of event reservations on its picturesque property.

 

Managing a sudden closure

The Ranch first felt the impact of the coronavirus outbreak around the end of the first week of March. Corporate groups that had retreats or meetings booked began asking about the cancellation policy and alternate dates. Then things started moving extremely quickly – in just three days, nearly every group had rescheduled.

For a few days, individual guests continued to book new stays, but soon those cancellations started rolling in, too. 

In response, The Ranch started trimming expenses by asking any managers with purchasing power to only order essentials and minimize overtime pay for hourly employees. The hotel and spa also put any capital projects not already underway on hold. 

But the resort’s March 20 closure, which it expects will last until at least April 30, mandated much deeper cuts: The resort had to lay off about 200 people. The Ranch decided to lay off employees rather than furlough them because if employees are furloughed for more than one pay period, it becomes a technical layoff in California, according to Bjorkman. Layoffs also allowed workers to collect accrued vacation pay. The independent hotel is keeping employees on its health insurance plan.

👉 The resort laid off nearly 200 workers to allow them to receive payment for untaken vacation days, with hopes of re-hiring them in the future. 

The Ranch gave away about 75% of the food left in its kitchens to the employees it let go and donated the rest to Chefs to End Hunger, which redistributes leftover restaurant meals across the Southwest.

“We continue to provide [former employees] with resources as they’re coming out -- literally there’s updates sometimes twice a day from state and federal on what these programs are, with The CARE Act and the Families First Act,” said Bjorkman, who’s spent 30 years in the hospitality industry.

Bjorkman hopes consistent communication with those laid off employees will increase the chances the resort can rehire them in the future. However, he worries that the steep cost of living in Southern California will lead some workers to move to other, cheaper parts of the country.

👉 The Ranch staff donated excess food from its restaurants and stays in touch with laid-off employees, giving them updates on how to get government aid.

The current staff consists of just 11 people, all of whom have taken pay cuts, responsible for maintaining the property and communicating with guests.

With three dining venues, The Ranch laid off nearly 200 workers due to coronavirus.

 

Finding more ways to cut costs

In mid-April, The Ranch is supposed to cut the city of Laguna Beach a check worth several hundred thousand dollars for transient occupancy taxes, or hotel taxes. These rates -- or whether they exist at all -- vary by city and state. The tax rate in Laguna Beach is 12.2% and accounts for 20% of the city’s annual budget. 

The resort, along with other nearby hotels, is asking the City to forgive these taxes for the first quarter of 2020. The local government has not yet agreed to do that, but Bjorkman is hopeful it will offer temporary relief. 

“Most of the city council is on board [with forgiving taxes], some of the city staff, the financial people … are fighting it, I think for the right reasons,” he said. “Everyone’s scared of what the resources are going to be in a few months, so we’re working on that. But we feel like it’s the right thing for the city to do, especially for hotels like us that are independent and smaller.”

👉 Along with other local hotels, The Ranch is petitioning its city government to forgive taxes this quarter.

The Ranch has benefitted from breaks from other partners. Food suppliers U.S. Foods and Sysco have been very flexible on prices, Bjorkman said. Cox Cable, which provides internet and cable for the resort, has given it a 50% discount, and the water company is considering a discount.

👉 The resort has received price breaks from food, internet and cable suppliers.

The Ranch has been able to save money on amenities in currently unused guest rooms.


Seeking financial relief

The winter months are the slowest time of year for The Ranch, so cash flow is always lighter from December through February. This left the business in a tough financial spot heading into this sudden disruption, and Bjorkman says The Ranch will lose millions just by shutting its doors through the end of April.

The resort is evaluating different options to inject cash into the business, like a Small Business Association (SBA) Economic Injury Disaster Loan, a traditional loan through its bank or personal funds from the ownership group. The SBA loan may be partially forgiven, which would make it more appealing.

👉 The resort is evaluating different options to inject cash into the business, like an SBA Economic Injury Disaster Loan, a traditional bank loan or funds from the owners.

“I’m not sure which direction we’re going to go there; [those are] ongoing conversations with the owners,” he said. “The speed of that money is important as well, because we’re sitting on a stack of invoices we need to pay, and a lot of these invoices are small companies relying on income [from us] as well.”

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Bouncing back quickly

Even now, guests and groups are booking stays for June and later. Even with the closure, the venue plans to host 40 weddings this year. That makes Bjorkman optimistic The Ranch will bounce back quickly once the government lifts social distancing restrictions. He thinks “pent-up travel demand” and the fact that many visitors drive, rather than fly, to the resort will work in its favor. 

Since The Ranch is a smaller resort, resuming operations should not require a Herculean effort. It continues to maintain its rooms, golf course and other facilities so it’s ready for guests whenever it can safely reopen.

“As soon as we know we’re going to open, we want to be ready and have the right rates out there, the right marketing out there, the right people ready to go once we turn the switch back on,” Bjorkman said. “It’ll probably be more like a faucet that will get turned on rather than a switch … slowly turning that tap, but the quicker that can happen, the better.” 

“As soon as we know we’re going to open, we want to be ready." 

Though some hotels remain open – and largely vacant – Bjorkman encourages his industry peers to close their doors to do their part in preventing the spread of the coronavirus.

 “Most people are doing the right thing in the hospitality world, but there’s still some people trying to encourage social gatherings,” he said. “I would just say as an operator, this hurts right now, but we have to listen to government authorities and do the right thing and follow the laws and be aware of what our impact could be.”


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