Restaurant industry continues pandemic struggles: high debt and worker shortage

From the earliest days of the pandemic, it’s been clear that the hospitality industry has been hardest hit. Even as the economy continues its jobs recovery, restaurants face serious ongoing struggles.

The Puget Sound Business Journal reports restaurant owners now face mounting debt loads

The average restaurant in Washington state is $160,000 in debt after closures and lockdowns brought on by Covid-19, Washington Hospitality Association head Anthony Anton told reporters last week.

With a typical profit margin, that’s an amount that could take three years to pay off, he said.

In total, hospitality businesses saw a $5.4 billion loss in sales during the first year of the pandemic compared with 2019. For restaurants and bars, business dropped 54% from the year prior. While sales for many have improved dramatically in the last six months, it may not be enough to repay landlords and keep doors open.

“That’s going to be a major challenge for us in the next few years,” Anton said. “You are going to see some of your favorite businesses open and jammed on Saturday night and then drive by them on a Tuesday and say, ‘What happened?’ The reality is the people that they owe money to … are saying enough is enough.”

Moreover, while jobs are coming back in many sectors – and the work-from-home world meant a lot of industries faced relatively small job losses – restaurant workers remain in short supply. 

Paul Robers, Seattle Times business reporter, writes,

Overall hiring continues to steadily improve, with the state adding 14,000 jobs, or around half a percent, in December. Layoffs and unemployment claims are down: New, or “initial,” claims for jobless benefits plunged 52% last week versus the prior week, according to data posted Thursday by the state Employment Security Department.

It’s a different story for the state’s leisure and hospitality sector, most of which is restaurants and bars. After seeing a modest hiring spree in October and November, the industry suffered a net loss of 2,200 jobs, or 0.7% of its already undersized workforce, the ESD reported.

“Leisure and hospitality had been looking good in Washington as recently as November, but now that’s flipped around again,” said Jacob Vigdor, an economist with the University of Washington Evans School of Public Policy who has studied state and local job markets.

That squares with the PSBJ report.

“We were actually having a good start to the holiday, but that really dropped off at the end of December, and that had a major impact on the industry,” Anton said. “That should have been the time, those last two weeks, for a lot of (businesses) to get healthy and they went exactly the other way. That kind of business doesn’t come back the following week. Christmas parties tend to stay canceled.”

Meanwhile, the trade group’s most recent data shows hospitality is still short 30,000 workers — 12% short of what’s needed to operate fully. To make matters worse, the current high rate of Covid transmission is forcing another 15% to 20% of the workforce to call out sick with the virus, Anton said.

The Seattle Times story explores some of the reasons for the shortage – retirements, pandemic restrictions that make the jobs less attractive and less lucrative, and opportunities in other sectors. Even with recovery, the employment landscape for restaurants may have changed long-term.

…some in the restaurant business expect, or hope, that the positive hiring trend will resume once omicron peaks — at which point, many restaurants will find themselves once again scrambling to find enough workers.

That will mean competing for labor “not just with the restaurant across the street,” said Anton, but with “your big box store … Amazon … warehouses” and all the other businesses that vacuumed up laid-off restaurants workers earlier in the pandemic.

Even with recovery, the economic hangover for hospitality may linger.