2008 reminded the New Zealand cleaning industry that it was reasonably recession-proof, especially larger contractors.

This was primarily since it was the larger operators who held state sector contracts, health care, large enterprises (including significant transport and aviation clients) and a sizable education clientele. Of course, things are not even near to comparable this time around…

What was then termed a ‘global financial crisis’ pales in comparison to the current outlook. There were health concerns that brought the importance of cleaning to the fore back in ‘08 and ‘09, but it is hardly arguable that the ‘swine flu’/H1N1 scare bears anything but the most basic perceptual similarity to the impact of the COVID-19 pandemic.

However, more importantly for the purposes of this commentary, the recession-proof features of the contract cleaning sector in New Zealand in 2008 had – as its cornerstone – the aviation industry.

Given this has now faulted – a vast revenue gap in large and specialist businesses has now occurred – requiring those operators to adopt an aggressive stance towards smaller and less cohesive markets.

Smaller and less cohesive markets are the lifeblood of mid-sized facilities services businesses, who have enamoured clients through exuding their client care and attention to detail credentials over their multi-national competitors.

Nominal price point differences have never really been a sole-significant factor in retention or contract acquisition amongst this market – but individualised care, coupled with the local customers’ innate dislike of multinational operators – has seen mid-sized service providers carve out a market for growth.

But the stakes are now enormously raised when it comes to cleanliness, hygiene, and property user’s responsibility. This new environment will see a heightened priority given to cleaning contractor appointments, with a focus on compliance, liability transfer and brand protection.

Old loyalties and preferences will be quickly wiped clean from the ledger. The drive to regain revenues in a shrinking market has the potential to displace many mid-sized facilities services operators, with them being overwhelmed by the brand message of larger contractors hungry for a parcel of smaller contracts in dispersed sectors.

Mid-sized operators will, in turn, focus their attention on larger volumes of smaller contracts, placing vast business development energy into regaining the market losses suffered to new entrants, smaller businesses and franchisees when they were in their formative years.

Although the hard yards of volume business development in smaller markets are back, it may well be that this scenario provides mid-sized operators with an opportunity to develop a genuine suite of facilities services…rather than just a fancy drop down menu on a website with a buy line to match.

This mid-sized grouping has long aspired to balancing cleaning revenues with other service streams and realising the goal of widespread multi-service contracting. Achieving this has often been dogged by specialised providers, with the economies of scale, knowledge and relationships geared towards retaining their work.

These specialist contractors are now more vulnerable than ever, with a cleaning focused provider a far more attractive proposition if their service bundle includes competitive pricing for those additional facilities services needs.

Not only can real service diversification at this time assist in revenue generation, but it could be a useful strategy to minimise the yo-yo effect of being again ousted by smaller operators and franchisees when price-point supersedes concerns regarding quality and liability transfer. It is an absolute inevitability that this re-prioritisation will again occur, but what remains the great unknown is when.

Accepting the reasonable assumption that the industries’ future does hold a return to some reflection of the past, when the aviation industry reinvigorates, swiftly followed by tourism and education, the moment of the mid-sized multi-service operator to drive for greater market share will be ushered in.

Large operators will, as it their instinct, throw their entire weight behind high-trust large-format sectors (aviation and education, with continued competitiveness in governmental resurgence and health) and deliver to their smaller and less cohesive markets either the reality or perception of neglect.

Trust, attention to detail and a proven track record of delivery of other services in addition to cleaning will be a real boon for the mid-sized facilities services provider at this point, with sizable clientele ripe for the picking.

The successful mid-sized operators of the future will be the ones who right now move quickly to establish smaller market clientele with multi-service needs and compete head-on with the smaller specialists.

Given, however, the current environment and the unknowns regarding timings, it seems clear that later reward will require significant near-term risk.

Andre Reynolds is founder of Grow@ – a mobile app that connects businesses with available cleaners. He can be reached at andre@GrowAtApp.com

This article first appeared in the August issue of INCLEAN NZ magazine. 

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