Hardest hit by COVID-19: Hospitality industry saw 40% of all excess unemployment

WASHINGTON (Sinclair Broadcast Group) — By far, workers in the leisure and hospitality industry took the biggest hit during the coronavirus pandemic and statewide lockdowns, accounting for over one-third of recent job losses.

Despite being just 11% of the pre-pandemic workforce, a full 40% of all excess unemployment was centered on the industry which includes restaurants, travel, entertainment and recreation, according to a new study published by the U.S. Travel Association.

Before the coronavirus hit, the industry employed roughly 17 million people. The lockdowns in March and April cut that number in half with more than 8 million job losses when people were instructed to stay at home to prevent the spread of the virus.

The employment picture has started to improve in recent months. Of the 9 million jobs added since May, roughly 1 in 4 were in leisure and hospitality. But job gains appeared to slow down over the past month and more than one-quarter of leisure and hospitality workers are still unemployed—double the next most hard-hit industry. Hourly earnings have declined in recent months as have the number of hours worked.

Many in the industry are looking to Congress for relief to bring back businesses, workers and consumers. "Forty percent of jobs lost from a broader economic perspective is truly devastating," said Tori Emerson Barnes, a top spokesperson for the U.S. Travel Association.

"Without having the right liability protections, the right relief and ultimately some stimulus to get folks moving in a healthy and safe way, we’re looking at a 2024 period for recovery," Barnes asserted. "And that assumes...a lot of folks don't make it."

It's not yet clear how many businesses have had to close permanently because of the coronavirus. Restaurants have been the hardest hit with the highest total business closures. Yelp reported that nearly 16,000 restaurants have closed permanently since the onset of the coronavirus pandemic. Close to 5,500 bars and nightclubs have closed permanently.

Amid mass closures, experts expect to see greater consolidation. Businesses that were able to adapt to touch-free service or those with more resources will be well-positioned to meet consumer demand when it returns. That includes some recipients of the Paycheck Protection Program, like P.F.Chang's, McDonald’s, Wendy’s and Taco Bell, each received millions of dollars in forgivable government loans.

"There will be a lot of consolidation that takes place," said Mahmood Khan, an expert in hospitality and tourism at Virginia Tech's Pamplin College of Business. "We'll most likely see a lot of joint ventures trying to combine because that is how they will be able to survive."

In other parts of the industry, the business has remained slow despite states lifting lockdown orders. The American Hotel And Lodging Association reported that hotels are staffed at less than half their pre-pandemic levels. At the height of the pandemic, 8 in 10 rooms were vacant.

Public health guidance in most parts of the country has made it impossible to gather for sporting events, concerts, trade shows, even the presidential nominating conventions. Even if the gatherings were allowed, polls suggest that few Americans would attend over concerns of catching the coronavirus.

"The creation of the jobs will also need the creation of consumer demand and consumer demand is very low," Khan explained. The jobs won't return until consumer demand returns and consumer demand won't return until people feel safe leaving their homes.

In the broader economy, employers are posting more open jobs than previous months, according to the Bureau of Labor Statistics. In June, employers advertised 5.9 million positions, a 9.6% increase from May but overall hiring fell.

"It's going to be a slow process," Khan said, noting that the uncertainties surrounding the pandemic have left many businesses hesitant to rehire or reopen. As of Thursday, the United States recorded more than 5.2 million COVID-19 cases and more than 161,000 deaths.

Like the rest of the country, business leaders are anxiously awaiting the development of a safe and effective vaccine. The hope is that a widely distributed vaccine and better treatment for the virus will restore confidence and people will return to their previous social habits, like attending events and travel for business or leisure.

"That's the beacon of light that everyone is looking towards," said Nathan Line a hospitality professor at Florida State University. If a vaccine comes, the outlook could change significantly for travel, leisure, entertainment and hospitality. "We’ll hold our breath and unfortunately put all our eggs in that basket for now until we hear otherwise."

The Trump administration and leading pharmaceutical companies are pushing for the delivery of up to 300 million vaccine doses by January 2021. Even when a vaccine is available, leading public health officials have said that social distancing requirements will still have to remain in effect.

Top U.S. immunologist Dr. Anthony Fauci has said a coronavirus vaccine might not be as effective as some are hoping and that social distancing measures will have to remain in place. "The chances of it being 98% are not great, which means you must never abandon the public-health approach," Fauci told a recent webinar, suggesting a vaccine is more likely to be 50% or 60% effective.

Despite the challenges ahead, the hospitality and leisure industry has proven to be resilient in past crises.

"Everyone is optimistic the industry can and will rebound," Line said. It has been hard-hit in the past, including in the aftermath of Sept. 11, 2001, when many Americans were afraid to travel and during the Great Recession, when disposable income evaporated.

According to the hotel asset management company hotelAVE, it took that industry roughly five years to recover profitability after 9/11. After the 2008 financial crisis, it took about four and a half years.

"The key to remember is each time hospitality adapted, innovated and came back," Line said.

The future of the hospitality industry is anything but certain, especially with pandemic fears heightened by skyrocketing numbers of infections. Many businesses are trying to appeal to customers with reassurances of safety, privacy and distance from other guests. A recent survey of travelers found 80% were willing to pay more for privacy and social distancing with added cleanliness protocols.

There are also hopes that pent-up demand in travel, leisure and entertainment will materialize in the next year. The same travel survey found three-quarters of respondents who said they expected to travel more in the next year after not being able to travel during the lockdown.