Tourism, Hospitality and Entertainment business cannot afford to do the “Right Thing.”
Spring Break is around the corner! Hamilton is coming to Hollywood! Baseball season starts on March 26th, just two weeks from now! March Madness tips off in under a week. I’m personally very much looking forward to the beginning of Renaissance Fair season, starting April 11th in Los Angeles.
Should any of these events still be happening?
Coachella postponed their annual festival until October. Emerald City Comic Con, the first major convention of “Con Season” has been postponed until July. Santa Clara County has ordered the sheriff to break up any gatherings of more than 1,000 people. San Francisco followed suit. (Update: The NCAA has announced that all Men’s and Women’s tournament games will be spectatorless)
American consumer culture is at an impasse.
It’s very easy to say these events are reckless. It’s much harder to cancel them. The San Jose Sharks have said they will comply with Santa Clara County orders, that means hundreds of hourly and contract workers are going to be out of work. What about the XFL? Relaunched this year, the league has been getting good reviews from a small fan base. If the league is required to shut its doors to fans, it’s hard to imagine it returning for another season.
Not every amusement park is Disneyland. Seasonal parks¹, usually open from late March until Labor Day or the end of October, rely on the limited months of operation to continue from year-to-year, and can be major employers in their areas. Can they afford to stay closed? Can they afford the risks of opening?
Movie theaters have been struggling to figure out how to consistently attract audiences. AMC recently launched it’s A-List program to retain customers with a monthly pass. It’s hard to imagine those customers keeping the money flowing while being told to avoid crowds, especially with major film releases being postponed. A downturn could doom struggling theaters.
As COVID-19 spread pushes numerous economic indicators towards recession, is it time to start talking about bailouts? What would those bailouts look like?
The perception is the bailouts by the United States saved the auto industry. It’s a near certainty that the entertainment, tourism and hospitality industries are going to suffer greatly from COVID-19. Tourists are being warned against traveling on cruise ships and told to avoid airports. This is going to inevitably affect hotels and restaurants that depend on tourist dollars right as Spring Break season is beginning.
It’s important to discuss who is actually affected by these industries shutting down. The hospitality industry is staffed by largely low-paid hourly employees. When customers stop coming, hours are reduced and jobs are cut. Many of these people will lose their health insurance in the middle of a health crisis. These are individuals least likely to be able to weather the storm.
President Trump is already indicating a willingness to step in to save businesses. But these efforts are being characterized as tax cuts. If the goal is to stabilize the economy, money needs to be spent keeping actual consumers spending. This means saving jobs, not just companies. Any bailout needs to be aimed at the costs of staying open: payroll subsidies and benefits incentives. Restaurants should be encouraged to follow Darden’s lead in guaranteeing sick leave to their employees. Target recently guaranteed their employees would be paid for up to 14 days of “quarantine pay” if they have to stay home.² Any incentives need to go towards keeping these workers employed and providing these sorts of benefits.
Entertainment and Hospitality oriented businesses depend on seasonal operation to continue from year to year and that peak season is starting right now. These industries are going to be heavily impacted if these businesses act as good social citizens and close their doors to “flatten the curve” of COVID-19 infections. Many of these businesses will simply not survive, and the ones that do will suffer significant unemployment consequences. It’s critical that we address these job losses before they occur. Any hesitation to act will increase the rate of spread and risk overpowering our medical systems, taking what could be a manageable crisis into a serious tragedy. Encouraging these industries to do the right thing is going to require a promise that it won’t drive them to bankruptcy. This is a circumstance where social welfare is necessary to support public health and it needs to be done sooner rather than later.