As the coronavirus continues to spread in the United States, theater productions on Broadway will be closed until April 12. With major events canceled and tourism curtailed, the situation for restaurants, bars, and other businesses in the hospitality and tourism fields may soon become dire.
Photo by Michael Loccisano/Getty ImagesThe hospitality industry is notoriously precarious in the best of times. With the coronavirus pandemic now spreading widely across the United States and the world, the situation for restaurants, bars, and other businesses in the hospitality and tourism fields may soon become dire.
The impact has already been felt in the cities and regions where COVID-19 has struck first, and as the situation continues to rapidly evolve, there’s strong potential that many of these businesses will suffer a devastating blow.
Fallout on the Frontlines
The Seattle area experienced an earlier arrival of COVID-19 than most of the U.S., and the effect on the hospitality field there is already taking shape. Numerous restaurants have already closed down permanently in the face of the crisis. Meanwhile, chef and restaurateur Tom Douglas, one of the most well known in the region, announced he was temporarily shuttering 12 of his 13 restaurants for an expected timeframe of between eight and 12 weeks.
The same measures haven’t yet proven necessary in Portland, Ore., though nobody knows how long that will be the case. “It’s been business as usual for us, keeping the same high cleanliness standards we always have. If team members are feeling sick, stay home," says Kiley Delgado, owner of beer and cocktail bar The 649. “We have had a few large corporate groups cancel reservations because it’s against their company’s protocols to gather in large groups during the outbreak.”
Across the country in Portland, Maine, business is falling even as the area hasn’t faced many confirmed cases. “We have already seen a shift with the last two weeks being slower than they should be,” says Briana Volk, owner and creative director of the Portland Hunt + Alpine Club. “We're probably down around 30%, and that’s as a business that was up from years prior a month ago and until [Thursday] we had zero confirmed cases.”
In New York, one prominent bar owner requested anonymity to avoid stoking fears in his investors and partners. “Across the board I would expect to see cuts in operations and expendable operating cost, and that is going to start with labor and go down the line,” he says.
His business has suspended hours and overall operating schedule to both cut cost and limit exposure. “Small businesses are going to hurt the most and the more travel bans and social distancing we are going to need to follow, the less we will be capable of operating and weathering the economic downfall this is incurring on restaurants and bars,” the bar owner continued. “I think some neighborhood places will do better than those that thrive in high volume and high rent markets.”
On Thursday, New York made a major announcement: Effective as of Friday at 5 p.m., all New York state bars and restaurants will need to operate under enforced half capacity.
Simon Kim, owner of the Michelin-starred Korean steakhouse Cote in New York, says business has slowed down a tick thus far, and he’s taken steps such as waiving reservation cancelation fees so that customers can more easily choose to stay at home, whether out of preference or need.
“In the unlikely event New Yorkers are told to stay home to self-quarantine, Cote may or may not close,” Kim says. “New Yorkers are a strong-willed bunch of people who may decide to continue to go to safe places to enjoy a meal. We would have to see how the situation presents itself and make decisions based on our customers’ demand and the security of our staff.”
Now, under the new 50% restriction, a restaurant with seating for 120, such as Cote, will only be able to operate with up to 60 guests.
Kim believes Cote will be able to “weather the challenges, including a possible closure, for however long is necessary. Overall, the safety and well-being of the customers and the team is our biggest priority. In the worst case scenario of closing, we are exploring options to upkeep our employees’ livelihood.”
Not every business owner will feasibly be able to do the same. “Right now we could support our staff and pay our fixed costs for 30 days if the doors shut tomorrow,” Delgado says. “If we wanted to dig ourselves into debt we could sustain for a six month closure while paying staff and fixed expenses.”
Travel Downturn
It’s not just small businesses that are suffering, as major events across the hospitality, entertainment and sports industries have been canceled, postponed, or suspended. That includes festivals such as South by Southwest and Coachella, St. Patrick’s Day parades in cities such as Dublin and New York, and a growing list of others. Of course, when these major events fall by the wayside, local businesses who rely upon them for traffic and sales suffer, too. Particularly in major cities, many restaurants and bars also depend on tourists. And with travel decreasing, it’s another source of turmoil for the hospitality field at large.
Airlines have already made substantial cuts to service with more likely on the way as well. Delta is cutting international flights by 20%-25% and domestic flights by 10%-15%; American is cutting international service by 10% and domestic service by 10%; and United is cutting international service by 20% and domestic service by 10%.
Tour operator Intrepid Travel says that while it’s seen decline in obvious places, such as Italy, their customers are thus far simply seeking out different destinations.
One peek at what could transpire is unfolding in Italy, one of the most heavily touristed destinations on the planet. The country is moving to shutter all businesses beyond those providing essential services. The lasting impact on the country’s innumerable trattorias and osterias is yet to be seen.
Strategies for Business Survival
In a thread on Twitter, Jonathan Downey of London’s Milk & Honey outlined his concerns, with one essential point being the need to receive support from the government. That’s something that was seen in Singapore, where the restaurant and bar scene is a major driver of its tourism and overall economy, and the government stepped in to provide assistance to these businesses as they began enforcing strict protocols to shut down the spread of COVID-19. The government’s efforts are seen as some of the most successful for any country thus far, and they made efforts to assist businesses at the same time.
“If the situation should deteriorate and negatively impact the dining industry in the city, the National Restaurant Association would advocate strongly on our behalf, perhaps lobbying for state or federal subsidies, tax relief, and the like,” Kim says. “Right now, Governor Cuomo is offering a $75,000 interest-free loan, and I believe that since this is a global pandemic, the government will continue to offer additional relief as needed.”
Volk has begun reaching out to state and national organizations to find ways to gain support for both business owners, as well as staff members. Both groups are going to face challenges and will be vulnerable in the current climate. “To plan for scenarios we have been talking with local and national organizations on how we can reduce budgets, get debt relief, and support our staff, who are going to be hit the hardest,” she says.
Kim says Cote offers all employees, including salaried and hourly employees, paid sick leave. “We genuinely embody the fact that our staff is our family, and especially in this time of chaos, we believe in their wellbeing,” he says.
There are steps the individual consumer can take as well to support their local establishments as well. “If people don't feel comfortable going out, buy gift cards to the businesses they love,” Volk says. Consider ordering takeout and delivery, and going directly through the restaurant to do so whenever possible.
She adds: “Tip! With less people going out, staff are making less tips.”
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March 14, 2020 at 12:56AM
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Hospitality Industry Facing Potentially Devastating Coronavirus Impact - Barron's
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