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Measures used to limit the spread of COVID-19 — such as encouraging social distancing and prohibiting the assembly of large groups — are having severe impacts on restaurants and lodging establishments. These businesses, collectively known as the hospitality industry, experienced a 47 percent decline in U.S. employment from February to April of 2020, according to data from the U.S. Bureau of Labor Statistics. Despite a similar-sized 47 percent jump from April to June, employment in the U.S. hospitality sector was still 26 percent lower in June compared with the same month last year.
In response to a request from Hospitality Maine, we examined the impacts of COVID-19 on restaurants and lodging establishments in Maine. Bureau of Labor statistics show that, similar to the trends observed nationwide, Maine’s hospitality sector saw a 56 percent decline in employment from February to April, followed by a one-month increase of 39 percent from April to May. (June employment numbers were not available at the time this column was written. They were released Friday and can be found here.)
In May, hospitality employment in Maine was about 50 percent lower compared with the same month in 2019, according to our analysis using U.S.Bureau of Labor Statistics data.
Although it will be a few months until employment and taxable sales data are available for this summer, it appears that conditions in Maine’s hospitality sector are rebounding ever so slightly relative to the impacts felt during April of this year. The Opportunity Insights project, which tracks the daily impacts of COVID-19, shows that Maine consumer spending at restaurants and lodging establishments was 26 percent below normal as of July 1. This is still quite low, but an improvement over the 65 percent and 51 percent reductions on April 1 and May 1, respectively.
The hospitality sector’s performance over the critical summer tourism season will, in large part, determine its picture for all of 2020. In a typical year, the months of July and August account for about 30 percent of annual hospitality sales. In 2019, hospitality industry employment was 1.52 times higher in July (the state’s busiest month) compared with February (the state’s slowest month). Relative to this February’s pre-COVID employment of 50,400 workers, Maine’s restaurants and lodging establishments would need to reach 76,800 workers by this month to match last year’s trend, according to our calculations using Bureau of Labor Statistics data. As of May, employment stood at 30,600 workers.
So, the $4.3 billion (this was Maine’s hospitality sales in 2019) question is: What’s the sector’s economic contribution going to look like for all of 2020?
Based on a variety of scenarios for how the rest of the year might play out, we estimate that hospitality businesses in Maine will generate between $2.5 billion and $2.8 billion in sales this year, which is 35 percent to 42 percent lower than in 2019. Of course, this projection is based on uncertainty about (among other things) how COVID-19 cases might change in Maine and elsewhere, the actions that government and industry officials might take to limit the virus’ spread, and — perhaps most importantly — the behavior of businesses and households.
Our analysis of daily COVID-19 impacts in Maine shows that consumer spending at restaurants and lodging establishments began to fall well in advance of Maine’s stay-at-home order issued on March 31 and that the daily impacts actually got a little bit smaller during the lockdown. These trends suggest that people stopped eating in restaurants and staying in hotels before they were told to “stay at home” and that some businesses — particularly restaurants — found innovative ways to operate during the pandemic.
Moving forward, it’s likely that people might be slow to resume their normal spending at restaurants and lodging establishments and hospitality businesses will differ in their ability to operate under the “new normal.” We expect that Maine’s hotels, motels and inns will face a much steeper hill than its restaurants, which can operate outside (at least during the summer) and bring food to your car and home.
Todd Gabe is a professor in the School of Economics at the University of Maine, and author of “The Pursuit of Economic Development: Growing Good Jobs in U.S. Cities and States.” Andrew Crawley is an assistant professor in UMaine’s School of Economics. These are their views and do not reflect those of the University of Maine System or the University of Maine.