UCSB Economic Forecast: Hospitality Industry Will Have Long Recovery

Santa Barbara’s hospitality industry will take a long time to recover after the loss of the majority of its workers because of the coronavirus shutdown, according to some local observers who spoke in an April 21 webinar. 

“Locally, we’re very hard hit — the two sectors that really get hit first in this regard are leisure and hospitality and retail,” said Peter Rupert, head of the UC Santa Barbara Economic Forecast Project. 

Tourism brings in some $56 million in annual tax revenues, and $1.9 billion in total visitor-related spending, according to data from Visit Santa Barbara. It also provides some 13,500 jobs. 

“It’s also worth noting that this is the absolute worst time of year, because balance sheets are very thin after the winter and all of our hospitality operators rely on a robust summer to carry them through the winter,” said Kathy Janega-Dykes, president and CEO of Visit Santa Barbara. 

“While South Coast hospitality operators have certainly learned how to weather the seasonal dips in business in normal times, the magnitude of this event is unprecedented, with an 81 percent drop in hotel demand, a low 15 percent absolute occupancy and a minus 47 percent change in hotel rates,” she said. 

“Typically, we’ll do about $17 million in sales in a typical year; we’re now at a zero-revenue situation,” said restaurateur Sherry Villanueva, of Acme Hospitality, parent company of restaurants The Lark, Paradise, Lucky Penny and Tyger Tyger and others. 

Restaurants have thin profit margins, just enough to keep them going for a week or so at a time. 

Eateries represent a large percentage of the available jobs in the community, they also are connected to fishermen, delivery people, distributors and other suppliers. 

“Tens upon tens of thousands of people” have jobs in the periphery of the restaurant industry in Santa Barbara, Villanueva said, pointing to estimates of a 60 to 80 percent job loss in a restaurant-related workforce of roughly 18,000 people in the county. 

“My guess is that early on when they shut down restaurants and bars, those were the first initial claims,” Rupert said. “The best data we have right now from the Bureau of Labor Statistics said that employment in the leisure and hospitality sector alone fell 459,000 in one month. This is just an incredible number, never seen before.” 

Rupert said projections vary on the future of leisure and hospitality employment in Santa Barbara County. The country has already surpassed the 19.8 million job loss the Economic Policy Institute predicted would occur by June. That would translate to about 165,000 jobs lost in California’s leisure and hospitality sector, 11,000 would come from Santa Barbara County, he said.

Mark Schniepp is head of the Goleta-based California Economic Forecast, an economic consulting firm that produces commentary and analysis on the U.S. and California economies. The firm specializes in economic forecasts and economic impact studies, and is available to make timely, compelling, informative and entertaining economic presentations to large or small groups.  

Posted April 21, 2020. 

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