Minnesota’s Economic News – W/E 4/16/21
State and local taxes and spending Pine Journal: Minnesota budget battles ignite; court decision kicks lawmakers into action on rape law re-write Star Tribune: Minnesota Legislature’s budget plans differ on…
The corona virus has proven hard for the economy. But some industries have been hit harder than others. The hospitality industry is one of the hardest hit. This is due to the fact that customers are home bound and they cannot spend money on restaurants, hotels, casinos or amusement parks. While some businesses are opening up, it will be long before most of the businesses in this sector can open up.
Setting aside the fact that it will be long before the industry fully opens, there are some issues that present more acute issues to businesses specific in this sector. For instance the April employment numbers show the industry has had the highest loss of employment. This means it will be costly for businesses to rehire and let alone return to normal operating capacity or expand once they reopen. Businesses will also face issues attracting customers as well as complying with social distancing rules.
The hospitality industry has high losses of employment
The hospitality industry according to the Bureau of Labor statistics had the highest number of job losses. The industry lost 7.7 million jobs or 47% of all job losses for the month of April. Majority of job losses were in the food industry which is to be expected with the all around closure of dining places. A lot of other recreational places have had to also cut off employment as they have seen their revenues drop significantly as people are homebound.
Customers will not feel safe to go out for quite some time
One of the risks that businesses will face is the possibility that customers will be reluctant to go out even after businesses are open. This will be more so for the hospitality industry which has already has seen a huge drop in sales. Restaurants especially will have to go to extra measures to prove safety to consumers who are likely to stay avoid crowded places up until the risk of transmission is low or a vaccine becomes available.
In fact, 68% percent of Americans say they would feel uncomfortable eating at a restaurant, according to a late April survey from SAP’s Qualtrics, the employee management software company.
Social distancing rules
For most recreational places drawing huge crowds is what brings them revenue high enough to cover their costs and also to make profits. Social distancing measures may allow most of them to operate but at less than full capacity. For restaurants that might mean sitting in 50% less than the normal number of customers. For some places that will mean operating earning enough money to just break even, or worse operating at a loss.