Santa Barbara’s summer travel season is “likely to be decimated” and the local tourism market is expected to take several years to fully recover from the COVID-19 pandemic.
Those revelations were shared by Kathy Janega-Dykes, president and CEO of Visit Santa Barbara, Thursday afternoon on the first-ever webinar hosted by the UCSB Economic Forecast Project. The video call examined the pandemic’s impact on local tourism, hospitality and business lending, and provided a number of sobering statistics.
In a typical year, visitor spending injects about $2 billion into the local economy and generates upwards of $56 million in tax revenues while supporting more than 13,500 jobs, Ms. Jandega-Dykes said.
On a national level, the U.S. Travel Association has projected the global pandemic will be seven times more devastating to the country’s economic output than the 9-11 terrorist attacks, she added.
In California, travel spending dropped to $425 million two weeks ago, down from $3 billion for the same week last year — representing an 86% drop. Since March 1, travel spending losses have already totaled over $9 billion.
“Certainly locally Santa Barabra has been greatly impacted by the lost revenues and jobs and we’re really mirroring what we’re seeing on a state level and also on a national scale,” she said. “Since travel basically came to a standstill effective March 15, hotel occupancies have ranged between 10 to 15%. It’s also worth noting that this is the absolute worst time of the year for the industry because balance sheets are very thin after the winter and all of our hospitality industry operators rely on a robust summer to carry them through the winter. Given certainly the uncertainty with how long these restrictions will be in place, the summer travel season — which is so critical to our industry’s bottom line — is likely to be decimated, along with the spring.”
The Santa Barbara Municipal Airport is continuing its scheduled services, though overall traffic at the local airport has decreased by 95%, which could impact future non-stop air services.
The official destination marketing organization for the South Coast has also been significantly impacted, cutting all its operational costs — which includes layoffs and decreases to staff wages, Ms. Janega-Dykes said.
“But in spite of these painful impacts to our economy, as we’ve all said this crisis will end. But realistically, it’s going to take several years for a full recovery, and to ensure that happens, we need to work together to really support our workforce and promote our destination again,” she said.
The organization is looking at national traveler sentiment studies, which has shown that 70% of postponed trips have not been rescheduled and a high number of people won’t consider re-booking until August or beyond. On a positive note, projects indicate that seven out of 10 American travelers report wanting to get out and travel again after the outbreak, with more people interested in beach resort destinations and smaller cities.
“Santa Barbara’s appeal is so unique and enduring and is truly an iconic destination in California, so once these restrictions are lifted our region will be particularly well positioned to attract that drive market such as the L.A. resident who initially will be interested in getaways closer to home,” she said.
Sherry Villanueava, founder and managing partner with Acme Hospitality which operates eight food and beverage locations in Santa Barbara, has been forced to furlough 347 of its 350 employees. The company typically does about $17 million in sales in an average year, but is now in a zero revenue situation.
Ms. Villanueava explained that not only do restaurants represent a large number of jobs in the community, they are also connected to a diverse network — fishermen, delivery service workers, distributors and beverage suppliers.
“To give you a feel for wages for restaurant workers for the county, $103-104 million in wages — all of that supporting not only those workers but how they participate in the rest of our local economy. The lack of wages for all of those folks is a really big impact in the local economy here,” she said.
According to the California Restaurant Association, 30% of all restaurants will not reopen when the crisis is over, Ms. Villanueava said.
She went on to explain that most restaurants are being faced with a “money-losing proposition” by shifting solely to take-out or delivery services.
“We’re in the business of bringing people in for a social experience. That’s how restaurants say alive, that’s how restaurants make money, that’s how restaurant employees stay employed,” she said, adding that purchasing gift cards really just kicks the cans down the road. “Those are still goods and services that have to be provided for in the future. There’s conversations around discounts, and again, restaurants — their margins are so thin and the business has been hurt so badly that they literally cannot take any more of that burden.”
While the U.S. Small Business Administration announced Thursday it had run out of funding for the Paycheck Protection Program and Economic Injury Disaster Loan programs, Montecito Bank and Trust is among the various banks nationwide waiting for the second tranche of funding to come through, said President and COO George Leis.
As the local bank began limiting in-office contact, it transitioned its Hollister Avenue branch to a call center and Mr. Leis said he couldn’t believe the call volume.
“I’ve worked at Bank of America and I’ve worked at Wells Fargo, and the incoming volume of phone calls from our community were absolutely overwhelming,” he said. “It was both heart-wrenching to hear the needs, the fear, the misinformation, just the general life-line that was needed. (I’ve) never experienced something like that.”
His team handled hundreds of thousands of phone calls doing what Mr. Leis said the government didn’t — explain the “relatively simple, but awfully complex,” PPP.
“What we thought would be a small number, you know, $28, $29, $30 million in need — when the program closed (Wednesday) night, we did over $100 million of PPP loans for well over 300 clients — and that just scratched the surface of the needs,” he said.
Many clients are waiting for their applications to be processed, though Mr. Leis said the SBA was never designed to be a volume lender.
When the program was first announced, the Montecito lender joined a network of 60 other community banks across the country called Numerated. That platform distributed $7 billion in PPP over 60 banks and reported between 3 p.m. and 4 p.m. Wednesday it delivered $1 billion of PPP loans into the SBA.
“The level of information that we were getting to validate the requests that the clients were asking for — I have never seen so many disparate payroll systems. I’ve never seen as many clever ways of accounting for salaries, and I’ve been in banking for almost 40 years. The non-standard way the information has to be processed — it could not be more inefficient a way to get money out,” he said.
The bank has been in contact with Rep. Salud Carbajal and provided some insight on how to improve the program for the next wave of funding, with one improvement being more accessibility for information.
“We feel like we do a good job at the bank, but the government didn’t do a very good job and the SBA was really caught, in some ways, flat footed in trying to deliver this program,” Mr. Leis said.
When the program was launched, the bank had no insight on how this would affect the balance sheet of the bank, both from a liquidity perspective and a capital perspective.
“The Fed provided a source of liquidity so we don’t have to hammer our deposit base to fund these loans, but none of that was transmitted to us ahead of time, we had to do that on faith,” he said.
The SBA guidelines were also vague regarding loan forgiveness and what to do if a client can’t repay their loan, simply stating “To be determined,” he added.
“This is like an airplane that’s flying but still being built and all of the major systems are kind of still under development, but we feel like this is an extraordinary need and we want to be there and help everyone we possibly can,” Mr. Leis said. “We’re really gearing up with some additional technology so that when the next tranche does get funded we can hit it really hard.”
Dr. Peter Rupert, executive director of the UCSB Economic Forecast Project, explained that the national economic forecasts are all over the map. The Economic Policy Institute has estimated the pandemic could lead to the loss of 19.8 million jobs by June. The Federal Reserve Bank of St. Louis has projected a loss of 47 million jobs by June, with the national unemployment rate ranging between 10 and 40%.
“That’s a huge difference,” Dr. Rupert said. “Ten percent unemployment rates? We’ve seen that before. Forty percent unemployment rates? Never have we seen this in the past. The Great Depression, by the way, was about 25% unemployment and the Great Recession was more like 10 to 12%.”
Using the EPI projection for job losses, Santa Barbara County could lose up to 23,000 private sector jobs by June, 11,000 leisure and hospitality jobs and 7,000 retail jobs.
Using the St. Louis Fed model, Santa Barbara County could lose 54,000 private sector jobs, 26,000 leisure and hospitality jobs and 17,000 in retail.
As of Feb. 1, there were 5.8 million people unemployed in the U.S. According to the Bureau of Labor Statistics, the leisure and hospitality sector alone has fallen by 459,000 jobs in one month, Dr. Rupert said.
Over the past few weeks, some 20 million people have applied for initial unemployment claims. In terms of continued claims — which reflect those who continue to receive unemployment insurance — those figures are around 12 million, compared to roughly 6 million during the Great Recession.
“It’s just going to be massive and devastating given that all these people have to apply for unemployment insurance, try to get their jobs back and who knows what the loss is going to be for the businesses that employ them,” Dr. Rupert said.
The webinar also included an update from Dr. Lynn N. Fitzgibbons, infectious disease specialist with Cottage Hospital, who explained that the social distancing measures in place have saved lives. Dr. Fitzgibbons also said that because Santa Barbara took such aggressive measures there is a potential for a rebound.
“Most of the people in our community have not seen this virus yet, and once our social connections and our interactions restart, inevitably some of us who are not immune to this virus are going to probably bump into this virus,” she said. “Some of us will all get symptoms. Remember, the vast majority of people who are exposed to this virus do not develop moderate or severe disease. Most develop a mild illness — 80 to 85%. But as we’re relaxing our social distancing, it would be ideal if we do so in some sort of a deliberate manner.”