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Here’s How COVID-19 Has Affected The Restaurant & Hospitality Industry
It’s no secret that COVID-19 has wreaked havoc on the restaurant and hospitality industry. But just how bad have things become? What’s the impact on the industry overall here in the US? And what does opening back up look like for hotels and restaurants?
We’re going to take a deep dive using available data from studies and credible publications to give you an outlook on how bad things have gotten and whether or not there is reason for optimism as the country reopens to dining in and traveling out.
Impact On Revenue & The Hospitality Workforce
The hotel industry has been one of the first and worst industries affected by COVID-19 shutdowns. Unfortunately, data shows that it will also be one of the last to recover.
Travel is slowly working its way back, but the hotel industry remains precariously close to collapse. Here are some stats on COVID-19s impact on the hotel industry.
Unprecedented hotel cancellations have hit the American hotel industry. This has led to significant layoffs and furloughs of hotel staff.
Overall Job Loss
According to the Bureau of Labor Statistics, 7.5 million leisure and hospitality jobs have been lost since February. Months later, the leisure and hospitality sector is still down 4.3 million jobs, meaning 38% of employees remain out of work compared to the national average of 10.2%. Many of those still working have seen their hours and wages reduced.
Source: EHL Insights
Lost Earnings & Revenue
The more than half of direct hotel employees laid off or furloughed amounts to a loss of over $1.7 billion in earnings for hotel workers each week. This is a pace of $2.8 billion in lost room revenue per week (based on current occupancy rates and revenue trends.) US hotels have lost more than $46 billion in room revenue since mid-February.
The total revenue losses project to over 50% for 2020.
The National Restaurant Association says the restaurant industry lost more than $120 billion during the first three months of COVID-19. (Source: National Restaurant Association)
Occupancy Rates At Historic, Unsustainable Lows
At its worst, hotel occupancy was at a historic low of 24.5% in April. An occupancy rate below 35% is thought to be unsustainable, which puts 33,000 small businesses at risk of closure. 65% of hotels remain at or below 50% occupancy, still below the threshold at which most hotels can break even and pay debt. Urban hotels, which are major employers due to their size, have been particularly hard hit. Their current occupancy rate is just 38%, well below the national average. These jobs are unlikely to return without a dramatic increase in occupancy and/or Congressional action.
Hotels On The Brink, Thousands Of Restaurants Closing
Since March 1, 163,735 businesses have closed on Yelp.
- Mid-June - 57,000 businesses listed on the site had closed permanently since the onset of COVID-19.
- July 10, the number rose to 72,842.
- August 31 - 163,735 (up 23% since July 10)
- 32,109 closures (as of Aug. 31)
- 61% of those restaurants that shut down completely during the pandemic had marked those closures as permanent. (19,590)
- Overall, 11% of all restaurants in the US have been forced to close.
Number of businesses close per 1,000 since March 1
- 56.8 breakfast and brunch
- 56.0 burgers
- 55.3 sandwiches
- 28.1 food trucks
- 25.8 pizza restaurants
Hardest Hit Cities
Metro Area Permanent Closures Temporary Closures
- Los Angeles: 7500 permanent closures / 7500 temporary closures
- New York City: 7100 permanent closures / 4100 temporary closures
- San Francisco: 2900 permanent closures / 3300 temporary closures
- Chicago: 3200 permanent closures / 1800 temporary closures
- Dallas: 2700 permanent closures / 1400 temporary closures
Are Americans Ready To Dine Out & Travel?
A study from the Journal of Hospitality Marketing & Management finds that diners are hesitant to return to eating out.
Are People Dining Out & Staying In Hotels?
Only around a quarter of the customers have already dined in a restaurant. Over 50% are not willing to dine in at a restaurant immediately. 25% say they will only feel comfortable going out to eat when testing and data has significantly improved. 14% of customers will only feel comfortable at a sit-down restaurant when a vaccine becomes available.
Just 33% of Americans say they have traveled overnight for vacation or leisure since March. More than 50% also are not willing to travel or stay in a hotel room any time soon. 18% will only travel to a destination with a low number of cases and the ability to test, trace, and isolate COVID-19 cases. 17% say the will only stay in a hotel when a vaccine becomes available.
Restaurant Owners Hesitant, Too
Eater surveyed more than 330 restaurant owners and found that many restaurants did not expect to be fully operational during the first few months of reopening.
Over 90% said their establishments were currently closed or offering severely reduced services. Nearly 65% said they believe it will take three months to a year before they can return to normal operations.
The concerns of restaurant owners can be confirmed by a survey by BentoBox, which found that more than 80% of restaurant customers intend to continue ordering delivery or pickup after restaurants reopen. 60% said they would not dine at a restaurant where staff didn’t wear masks and gloves. 60% also cited a lack of personal protective equipment and being seated too close to other guests as concerns.
Evolving Plans For Reopening
The problem in the hospitality industry is that high operating costs create a high break even point for these businesses to be profitable. Survival, therefore, depends on increasing demand. The question for the restaurant and hospitality industry is… How do they get people to come back?
⅓ of restaurant customers and 40% of hotel customers are willing to pay more for increased safety precautions. This shows that some people are willing to dine or stay in hotels if they know added safety measures are in place, however, more still needs to be known about how well these precautions even work.
The Rise of Hands-free Technology
A majority of restaurant customers (64.71%) and hotel customers (70.42%) believe that the use of technology will be necessary to minimize human-to-human contact.
- service robots
- contactless payment such as Apple pay or contactless bank cards
- digital menus that can be viewed on personal mobile devices via QR codes
- contactless digital payments
- keyless entry
- touchless elevators
This suggests that the restaurant and hospitality industry will likely become more heavily reliant on technology in order to move forward.