When we start talking about the economic impact of the pandemic, the first question is most often: “Well, who has been hit the hardest?” Therefore, let’s look at the industries that have suffered the most as a result of the COVID-19 pandemic.
According to an article from USA Today, the industries that have been seriously affected are airlines, film production and movie theatres, live sports, gambling (both casinos, as well bookmakers, which is linked to before mentioned live sports), shipping and cruises, hotels, automakers, oil and gas, retail, tech, conventions, food service, theme parks, gyms, construction and transportation. Let’s look at each of them in more detail.
Obviously, with the travel bans being imposed in all countries, the airline companies are unable to perform flights, loosing millions in the process. The International Air Transport Association projected that the U.S. and Canadian airline industry could lose as much as $21.1 billion in revenue. The worldwide industry could see a decline in passenger revenue of nearly 20% under the extensive spread scenario, which would result in an estimated $113 billion in lost revenue. The CAPA – Centre for Aviation said most airlines in the world will likely go bankrupt by the end of May 2020. In UK, Virgin Atlantic has indicated that it intends to ask for a government bailout worth hundreds of millions of pounds.
Film Production & Movie Theatres
Due to bans on mass gatherings, the filmings of various movies and TV shows were postponed, while the movies that were supposed to release in cinemas (e.g. “Mulan,”, “Fast 9,” the latest James Bond film, “No Time to Die”, etc.) are now are moved to later dates, as pretty much all movie theatres are now closed, meaning huge losses for all parties involved. U.S. box office revenue for the weekend of March 13-15 came in at just over $54 million, the lowest since September 2000.
All major sporting championships/leagues have been postponed, leaving teams and organisations with empty stadiums and huge salaries to pay to their players/employees. FiveThirtyEight estimates that, since about 21% of the NBA season remained when games were halted, the league stands to lose $350 million-$450 million from ticket sales alone if those games are not played – and that does not even include lost playoff revenues. The league could also lose up to $200 million in non-ticket revenue, from sources like parking, concessions, merchandise, and more. Still, many NBA franchises – along with their owners and star players – have committed millions of dollars to ensure that arena staff hourly workers are paid during the pandemic.
Speaking of lockdowns in live sports, this has also directly another industry – gambling. Sports books in Las Vegas typically handle $500 million worth of bets in a given month. Joe Asher, CEO of sports bookmaker William Hill, told Sports Illustrated that the entire sports betting industry will have “pretty much zero revenue” until sporting events resume. However, gambling also includes casinos, which are also suffering, as in Las Vegas, Atlantic City, and other major gaming destinations they have been closed, and some staff members have been furloughed or laid off.
Shipping & Cruises
After a luxury Diamond Princess ship became the first large outbreak cluster outside China, with at least 634 confirmed COVID-19 infections among passengers and crew and two deaths, the cruise industry has taken a huge hit. Shares of three major cruise companies – Royal Caribbean, Carnival Corp., and Norwegian Cruise Line Holdings – dropped over 50% in the wake of the COVID-19 pandemic. This also affected the shipping industry, as COVID-19 has forced China (one of the world’s foremost shipping hubs) to close ports and send factory workers home. The International Chamber of Shipping said the pandemic has cost the worldwide industry around $350 million per week. Those suspending their passenger services include P&O Ferries, which carries about 15% of the UK’s imported goods, including food and medicines. It is furloughing more than 1,000 staff, using the government’s job retention scheme. P&O Ferries told the BBC that the company needs £257m to keep going. The BBC understands the company wants £150m of that to come from the government.
As people are forced to stay home, demand for hotels has declined sharply. In the first week of March, there was an 11.6% decline in revenue per room available in U.S. hotels compared to the same week of 2019, according to hotel research firm STR. In response, hotels in New York City, Seattle, Knoxville, Tennessee, and more have begun to lay off dozens of workers.
As the COVID-19 pandemic lingers, the demand for cars is decreasing. Workers who are concerned about their job security and try to save their money for emergency use are less likely to buy a car. Researchers have predicted that American auto sales could decline year-over-year by as much as 20% in 2020. The shares of General Motors, Ford, and Fiat Chrysler have all lost over 25% of their value since the beginning of March.
Natural Resources’ Extraction (Oil & Gas)
As people continue to work from home and avoid travel, the demand for oil and gas has plummeted. The International Energy Agency projects a decline in demand of 90,000 barrels of oil in 2020 compared to 2019. The effects on the oil industry have been especially dire because China, the world’s top energy consumer, was the first to be hit as the source of the outbreak. The price of oil has been in an unprecedented freefall, selling for under $30 per barrel as of March 16.
The U.S. retail industry has been devastated by the coronavirus outbreak, and a number of stores have already had to close their doors. Apple has closed all stores outside of China until at least March 27, and other major retailers in fashion, sporting goods stores, and tech have made similar announcements, with more coming in every day. Thankfully for some employees in this sector, Urban Outfitters, Nike, and other companies have announced plans to pay workers at least in the short term for lost wages.
Many Chinese factories in locked-down areas have closed operations since late January. This has had a major impact on the ability of many American tech companies to continue producing their products regularly. Production of video game consoles, smartphones, and smartwatches are all predicted to drop by over 10%. Apple could lose as much as $67 billion because of an iPhone shortage. Graphics card producer Nvidia lowered its projected earnings for the first quarter of 2020 by $100 million, saying the pandemic is disrupting its supply chain.
Festivals, Exhibits & Conventions
As mass gatherings of people have been declared unsafe, many of the massive conventions, festivals, exhibits and concerts that draw thousands of attendees from across the globe have been canceled. This has a particularly strong effect on the more independent and small organisations and performers/artists, who do not posses enough finances to cover the costs of current inactivity. The cancellations of tech conferences like E3, SXSW, and more have likely cost local economies over $1.1 billion. This has actually affected me directly, as I have attended E3 (Electronic Entertainment Expo) in Los Angeles for the past two years, and I was planning to go again this year. The cancellation of the E3 conference has cost the video game industry its biggest week of the year. New games and consoles are often unveiled at the event, which usually hosts over 65,000 guests a year.
Nation’s Restaurant News reported that in Seattle, restaurants were expected to lose 20% of sales in the first week of March. By March 16, a dozen states had imposed restrictions on restaurants hosting dine-in customers. On the weekend of March 14, restaurants in most of America’s major cities reported a decline in occupancy of anywhere from 30%-64%. Research firm Challenger, Gray & Christmas reported that over 600 food service industry job cuts were directly related to the pandemic, and that 7.4 million jobs in the sector could either be cut or severely impacted.
Large theme parks have stopped welcoming guests in the wake of the coronavirus pandemic, closing a massive industry for the foreseeable future. Disney is by far the largest theme park operator in the world, with six parks – all of which were shuttered initially as the outbreak spread. Disney reported over $26.2 billion revenue from its parks in fiscal 2019. Dividing this evenly throughout the year would mean the company could lose revenue of around $500 million per week that its parks were closed, assuming the same earnings this year.
Construction & Transport
Smaller construction companies may have to lay off workers as their supply of equipment and parts from China is disrupted. There are an estimated 7.6 million Americans working in the construction sector who could be affected by these changes. Also, ride sharing companies like Uber and Lyft are seeing their potential ridership dissipate. Both companies announced they would stop letting different users share the same car. Many drivers are reporting 50% declines in income as fewer people use ride sharing services. Uber’s stock has also cratered, going from over $40 per share in February to less than $19 as of March 17. Same applies to goods transportation, as according to Andrew Howard, who owns Peterborough-based PC Howard, financial relief can’t come soon enough. He said that because non-essential shops had been closed, the firm was moving fewer goods. “We are now moving our lorries only partly loaded, typically two-thirds loaded,” he told the Today programme, “and that means we are losing money every single day, every time we send a vehicle out.”
The Smith Family
John Smith, being an owner of a car workshop and a car wash, will inevitable endure huge losses, as his business will be inactive for the period of quarantine. He will still have to pay for the utilities, inventory, possibly rent (if he rents the building), but no money will be generated. This may lead to very severe consequences for the Smith, as despite Jane working as well, John’s garage is the main source of the family’s income.
Questions for further study
- Do you think some of these industries can try to operate remotely and still be profitable during this time? If yes, which ones, and how?
- Can you come up with some other industries that have been hit very badly due to the pandemic?
- Did the problems in these industries directly affect you lives? For example, because pretty much all sport events are cancelled, I can’t watch them, which affected my usual weekly routine. This, of course, is a very minor example. Can you come up with something similar, or potentially more serious?