Lessons from the Spill: How Small Businesses Can Survive Man-Made Disaster

April 20, 2010. It's a date that may be of little consequence to the average American. But for those who lived and ran businesses along the Gulf Coast, it's a day they remember all too well. 

"We didn’t quite realize at first the impact it was going to have," recalls Elizabeth McDougall, the executive director of the Louisiana Tourism Coastal Coalition (LTCC). "No one knew how big it was going to be, but as it kept going and going and going, you realized this is going to have a huge impact on the coastal way of living."

The incident that had McDougall and thousands of others in the coastal business community scared was BP's Deepwater Horizon Rig explosion and subsequent oil spill. Occurring 50 miles off the coast of Louisiana, the explosion has become the worst man-made disaster in American history, leaving 11 workers dead and spewing 176 million gallons of crude oil into the Gulf of Mexico, according to government estimates. (BP, though not available for comment by press time, estimates it was 103 million gallons.)

"At that time we didn’t know where ultimately the oil was going to land, except we knew it was going to be going someplace along the Texas, Louisiana, Mississippi, [Alabama] or Florida coast," McDougall says.

That uncertainty was felt by business owners up and down the 1,631 mile stretch of U.S. coastline. The Gulf's economy relies heavily on its scenic coast and water. Tourism is the second largest industry in the region after oil, accounting for more than $100 billion annually, CNN reported after the spill. With wildlife threatened, commercial and recreational fishing shut down, and tar balls dotting the beaches, many business owners weren't sure how they were going to continue on as would-be tourists canceled their 2010 summer reservations.

Even as the four-year anniversary of the disaster approaches, man-made environmental disasters are still a near and present danger. Just about a month ago, 170,000 gallons of oil were spilled in Galveston Bay in Texas, closing down the surrounding beach for three weeks. For small businesses in affected areas, looking deeper into how the Gulf bounced back from the BP oil spill could serve as a playbook on how to survive.

Not Again ...

For Gulf-area small-business owners and community stakeholders, the BP oil spill brought a devastation that, while unique and unexpected, had a note of the all-too familiar. The Gulf coast is no stranger to hurricanes that threaten local businesses. Talking to a few people on the coast, it's an analogy they return to often.

"We unfortunately have a lot of experience dealing with natural disasters over the years, and we already had disaster plans in place," for operating and communicating during one, says Herb Malone, president and CEO of Gulf Shores and Orange Beach Tourism in Gulf Shores, Alabama. "So we have a pretty strong basis of how to deal with disasters.

"But the difference is with a natural disaster, we kind of know what to expect. Depending on the magnitude of the storm, we know how long it's going to take us to get back to business and get back to some sense of normalcy," Malone continues. "When this oil spill happened, we had no point of reference whatsoever as to how long this was going to impact us."

"I don't believe many people in the first three or four days felt like it was going to be that big of an impact because most of us expected [that] this is a man-made item that could be stopped," explains John Boller, president of Gulf Shore Rentals, a company that provides rental properties and entertainment along the coast in Gulf Shore, Alabama. "[We thought, 'It will happen for a few days, but they're going to stop this, they're going to clean it up and everything is going to be OK.'"

No Reservations

But, the Gulf was a long way from being OK. The impact to wildlife and fish was immediate, and though it took a month after the explosion for the first traces of oil to reach the coast of Louisiana, businesses across all the Gulf states were dealing with the perception that their businesses were covered in thick black crude, due to media coverage.

"Newspaper articles that came out around the very end of April, first of May, were saying things like oil will be on the beach this weekend," says Malone of Gulf Shores and Orange Beach Tourism. "We actually didn't have oil on the beach until the first weekend of June."

Photos of dead fish, birds and sea turtles blanketed in goopy oil and iridescent swirls in the water set off alarm bells in vacationers' minds.

"Everybody realized this was going to have a huge impact on us for the summer," says Boller of Gulf Shore Rentals. "That's the time our phones start ringing with people making reservations. Instead of the phone ringing with people making reservations, the phone was ringing with people canceling their reservations that they had for May, June and July.

"We were trying to convince people to not change their plans, to give it some time and think about it and see where we went," he continues. "Unfortunately, people were saying, 'Well, we understand that, but at the same time we can't wait two to three more weeks to find another place to go have a vacation.'"

Cancellation rates reportedly ballooned to 50 percent for many Gulf towns. The timing of the BP oil spill, right at the beginning of the tourism industry's high season, made those cancellations especially devastating. 

"[Summer] accounts for about two-thirds of annual revenue," Malone says. "You lose 50 percent of that, that's significant. For most small businesses, summer is when they make their profits and build up some reserves. In the slower seasons of fall and winter, they spend a lot of their reserve capital making improvements, and by mid-March get ready to take revenue again.

"This disrupted the annual revenue stream. It had a major impact on the capital liquidity of a lot of our small businesses."

Gulf Shore Rentals was one of those businesses, and owner John Boller broke it down in even grimmer detail.

"I was running about a 25 percent increase in reservations in April before the oil spill hit. Approximately 65 percent of income is generated in June, July and August. Eighty percent of the income is generated from the first of March to the 30th of September. Those six months," he stresses.

"When you lose the three months you generate 65 percent of your income in, and you only get 20 percent of that? You put those numbers together and it's a much larger impact."

Coming to Their Own Rescue

In the face of such jaw-dropping devastation, the Gulf community members did what they had done many times before during natural disasters: They came together. The community presence helped bolster those who, like Boller, were going through BP's seemingly byzantine claims process to make up for spill-related losses.

"If there's a scale of 1 to 10, with 10 being easy and 1 being frustrating, it was more in the negative 10," Boller says now with an amenable chuckle. Boller described in detail the ups and downs it took for him to get checks to keep Gulf Shore Rentals going, including promises of overnight checks that never appeared, reams of documents sent to adjusters and BP appealing settlements without providing insight as to why they no longer wanted to issue a check. Though he's received three separate settlements, one associated with his company still hasn't been settled. (A court recently ruled that BP must continue to pay out its $9.2 billion settlement with oil spill victims after the company temporarily halted payments in December 2013, Bloomberg reports.)

The Gulf Shore and Orange Beach Tourism group, along with several other local institutions, created a "business support center" for small-business owners going through that process, and for those trying to figure out what was next after the spill. "[It brought] together knowledge of state and federal agency assistance that might be available and put some people in [touch with others] who knew how to help businesses survive in these times," Malone explains. "We created a task force, if you will—some people referred to it as a war room. We had the walls plastered with various strategy sessions that we held; we also used that as a way to internally communicate with one another."

In Louisiana, the spill inspired an entirely new way of communicating. Louisiana's 10 coastal parishes (or counties) rallied together to form the Louisiana Tourism Coastal Coalition. Before the spill, each parish "had their own campaigns and promoted their own individuality," recalls Elizabeth McDougall, LTCC's executive director. "But when this happened, the coastal parishes realized how much we actually had in common." The parishes, even those who hadn't been as affected by the spill, partnered to create a single brand that promoted all the riches Louisiana's coast had to offer for those seeking experiential nature travel, rather than focusing on their individual brands.

"For a long time it was kind of like this 'a-ha moment,'" McDougall recalls. "Why wasn't the coast doing this before? It was kind of a really cool thing that happened as a result [of the spill] when we came together as one brand with one message."

Changing the Narrative

This type of positive branding was especially important as coastal communities confronted public perception head on in an effort to attract worried tourists who were still seeing the oil spill's extremes.

"Because people kept seeing the negative images over and over, it really did for a long time taint the product," McDougall says.

Marketing and direct customer outreach became integral to small-business owners getting their customers back. Boller kept much of his staff to answer phone calls from worried customers, and started using social media and email to answer their questions. "We realized that the more information we can get out, the more secure people were," he says.

McDougall's LTCC received a $5 million grant from BP to spend entirely on marketing. "It sounds like a lot of money, but we had to spend it in two years because they wanted the [positive] message out there for their own public image," she says.

The LTCC used that money to build a website and hire an ad agency focused on finding the common thread between the 10 coastal parishes to create a strong, unified brand. They also used those funds to do extreme amounts of canvassing, which included attending 27 trade shows all over the country, producing "17 commercials placed in 21 markets reaching over 8 million in targeted markets," placing "84 print ads in 17 publications reaching over 16.5 million" and working with freelance travel writers for major publications. (The LTCC now finds itself in the position of finding the funds to continue its campaign now that the BP grant has been spent.)

"We're trying to get the message out nationally instead of just locally," McDougall says. "To say this is the kind of experiential adventure that you can have if you come to the Louisiana coast." 

But the coast wasn't slapping a pretty picture on the oil spill.

"We took an approach that we always take in crisis," says Malone, harkening back to hurricanes past. "Number one, nothing but honest, factual information. We try to take some of the sensationalism out of it that the media tends to do. We made a commitment to show the good, the bad and the ugly."

Using videos and pictures posted on its various social media channels, Gulf Shores and Orange Beach Tourism showed tourists what was really going on in the area. "We had our camera person out with a [spokesperson], and the days the oil came to the beach, we showed oil," Malone says. "The days the beach was being cleaned, we showed the beach being cleaned. We kept people updated with facts."

These coastal business communities needed these facts to be able to back up promises that it was truly safe to come back. Science and "the all clear" from environmental agencies, the Centers for Disease Control and scientists played a major role in marketing.

"We had to rely on the information that was being provided to us to be able to say to consumers, 'Yes, it is safe to come back,'" McDougall says. "When people want to spend their travel dollars, they don't necessarily want to spend it [on] not being sure."

The honesty and marketing has paid off. Customers who didn't want to risk their safety and vacation in 2010 promised to come back in the following years. And it seems to bear out. 

"As early as October, we started seeing a strong return of our traditional customers, 5 percent greater than they had been the year before," Malone says. Gulf Shores and Orange Beach exceeded 2009's gross lodging revenues, the last year before the spill, by 18 percent in 2011.

"We were a little concerned about if we could maintain that, [but] in 2012 we went up another 15 percent from what we did in 2011. This past year we went up about 8 percent, 2013 over 2012. In the three years since the spill, we’ve had back to back-to-back revenue [growth]."

The numbers look good to BP as well. Its page devoted to information on BP's Gulf efforts ticks off examples of record-breaking tourism growth in affected states like Florida, Louisiana and Mississippi as proof the coast is back on track after the disaster thanks to the millions it's pumped into tourism.

Though it's hard to know just how deep the effects of the BP oil spill will be in the coming decades, it seems, for now, that tourism has bounced back. Valuable lessons were learned from those affected businesses, not just on how to survive a man-made disaster, but what needs to be done to protect their environment and livelihoods from being compromised again.

"For years we’ve co-existed with the oil and gas industry," McDougall says. "It’s what all the coast states have; it’s our natural resource. But we have to learn how to co-exist and put safeguards in place so this will hopefully never happen again."

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Photos: Getty Images, Gulf Shore Rentals, Orange Beach Tourism