As businesses in Texas and across the nation begin the process of reopening amid the ongoing new coronavirus or COVID-19 pandemic, many continue to struggle to regain a sense of normalcy. This is because some industries have been hit harder than others. While business interruption policies offer coverage for some, many will be hard pressed to find and receive helpful relief.
The Effect of COVID-19 on Businesses
COVID-19 has had an unprecedented effect on businesses around the world. The U.S. economy lost over 20 million jobs in April alone, resulting in the unemployment rate skyrocketing to just below 15%. In a single month, the virus wiped nearly all U.S. job gains since the great recession of 2007-2009. Certain industries have felt the impact more than others, primarily those companies in which people gather to eat, drink, and shop. While each state has sustained record job cuts, tourism and manufacturing have been among the most affected verticals.
Along with the major impact of job losses from COVID-19, the outbreak has forced businesses to rapidly adapt and change day-to-day tasks as reopening measures begin. A recent survey underlines key issues affecting businesses, including reduced access to new and current clientele, significant reductions in travel, and the delay or halting of new hires.
Industries Hit the Hardest by COVID-19
Hospitality, restaurants, and hotels
The pandemic’s impact on the hospitality industry as a whole has been huge and unpredictable. Decisions were made to shut down hotels, restaurants, theme parks, and cinemas, as the travel ecosystem was disrupted, all of which have had huge impacts on the economic outcomes of these industries.
Resorts and hotels that were once booked by excited vacationers and corporate conference-goers have had to postpone or cancel trips and events entirely, impacting their bottom lines in a big way. In fact, the impact of COVID-19 on travel has been nine times worse than following 9/11, with 2020 expected to be the worst year on record for hotel occupancy.
In mid-March, many restaurants across the nation were ordered to close their dining rooms under state-mandated executive orders. While take-out and delivery options were and are still are available at some eateries, wait staff and front-of-house employees were left unemployed. According to Homebase, the total number of hours worked in local food and drink businesses dropped 40% by March 17, while the number of hourly workers overall declined 45%.
Grocery stores and food distributors
COVID-19 has led to a major increase in demand for grocery stores and food manufacturers, as millions across the nation continue to shop for groceries regularly, often buying more than necessary. In fact, as of April 14, job postings for grocery stores had already jumped to 12% from 2019.
In addition to financial constraints, restaurant closures and stay-home orders make it even less likely that consumers will buy food at restaurants. This is a double whammy for the restaurant industry, but one that has a positive impact on grocery stores.
Food processors and distributors have been feeling the heat due to the increase in demand. According to Reuters, at least 10 meat processing plants, including three in Canada, have had to cease operations due to COVID-19 concerns. With these plants out of operation, certain items – primarily meats – have become scarce on grocery aisles.
Coronavirus has significantly impacted consumer behavior, product demand, and retail availability. Fashion, furniture, and electronics retailers have been hit the hardest as consumers forego discretionary purchases in favor of stocking up on necessities like food and household supplies. There have been spikes in digital sales, however, as many staying at home purchase their goods online.
E-commerce associated with brick and mortar retailers saw an average weekly growth rate increase in revenue of 52% and an 8.8% increase in conversion rates compared to 2019, while sellers of nonessential goods on Amazon have seen sales drop by 40% to 60%.
Real estate and lost rental income
Real estate and housing have also felt major effects from COVID-19. Historically low inventory and rock-bottom mortgage rates would normally set the stage for a highly competitive spring home buying season. While recessions normally have only a minor effect on the housing market, the coronavirus is making the market anything but normal, especially for renters.
The pandemic’s effects on the real estate market will vary by city, depending on local conditions and regulations. A report from ATTOM Data Solutions concluded that both the Northeast and Florida housing markets are most vulnerable at this time.
Renting, as opposed to home buying, during the pandemic has been difficult for many. While many states froze rent to help the unemployed and underemployed avoid eviction, this doesn’t provide assistance for landlords responsible for mortgage payments and other property-related expenses they need to pay with the rent monies normally received.
On the other hand, as several rent freezes are expected to expire in June, leaving many renters are left without a way to pay rent and bills. About one-third of the nation’s apartment residents were unable to pay rent in April.
Business Interruption Claims
Though business interruption claims resulting from coronavirus losses have been discussed at length, what is and isn’t covered with relation to COVID-19 remains murky. With the uncertainty surrounding the future of businesses and industries, one may assume insurance coverage would help; unfortunately, however, many business interruption policies contain virus-related exclusions leaving policyholders with no recourse. With this in mind, an experienced insurance attorney can help you navigate these roadblocks, allowing your businesses to get back to work without the fear of closing shop entirely.
COVID-19 Insurance Claims Attorneys
At Raizner Law, we have extensive experience thoroughly reviewing insurance policies to determine what coverage is available. When there is coverage, we help business owners hold insurance carriers accountable for delays, denials, or underpayments of valid claims. If your business has been impacted by COVID-19 and would like insight on your insurance options, contact the attorneys at Raizner Law today.