Restaurants and bars gained 286,000 workers in February following several months of losing jobs, the latest sign that the industry’s recovery is on the horizon after a long, cold winter.
Freezing temperatures, coupled with a resurgence of new Covid-19 cases, hurt eateries at the end of 2020 and into the new year.
“So far in 2021, I would say that it looks worse than what it looked like in October, November,” said Rabobank senior analyst Amit Sharma.
But after harsh winter storms, warmer temperatures are starting to hit some parts of the country. Vaccine distribution, which started off sluggish, has rapidly picked up steam in the last month. More than 54 million Americans — about 16% of the total population — have received at least one dose as of Thursday morning, according to data from the Centers for Disease Control and Prevention. The approval of the Johnson & Johnson vaccine, which is being distributed with help from Merck, will further accelerate those numbers.
“If you look at our forecast going forward, a big piece of how we look at the rest of 2021 and even into 2022, is the speed with which that vaccine is rolled out,” said Technomic Senior Principal David Henkes.
In response to accelerating vaccine distribution, states have begun relaxing or even preparing to eliminate capacity limits in restaurants and other venues, although Centers for Disease Control and Prevention officials have recommended slowing down the rollback of restrictions. Since the start of March, at least 35 states have eased restrictions in some way. Connecticut, for example, is planning on allowing restaurants to operate at full capacity by the end of March.
But a recent industry poll showed palpable signs of pain. The National Restaurant Association surveyed 3,000 restaurant operators between Feb. 2 and 10. Respondents were pessimistic about the industry’s recovery efforts. About a third said it would take seven to 12 months for business conditions to return to normal at their restaurant, and 29% said it would take at least a year.
Just weeks later, the mood feels a bit lighter, in part because of the progress on approving the latest stimulus package. If passed, the bill would put $1,400 in the bank accounts of many consumers, who may choose to spend at least some of that money eating out while they still feel uncomfortable traveling. Democrats are working to approve the plan by March 14.
“What we’ve seen when those have been issued is that restaurants have been a beneficiary,” Henkes said. “There’s a pent-up demand from consumers.”
Moreover, the stimulus bill includes a program to give restaurants grants of up to $10 million if they lost money last year. Those funds could help independent eateries pay off bills, rehire employees and stay afloat, just in time for spring’s warmer temperatures. Fourteen percent of the NRA survey respondents said that they would probably or definitely close their doors within the next three months if they didn’t receive any federal aid.
Even with another stimulus package, Sharma isn’t expecting the restaurant industry to snap back immediately once everyone has access to the Covid-19 vaccine, based on Australia’s recovery.
“After their cases went to single digits in July, August, it’s taken them another six months for their total food service sales to get closer to pre-pandemic levels,” he said. “Cases — as vaccines pick up — will go down, and there’s pent-up demand and enthusiasm, but it takes some time for consumers to get back to their pre-pandemic habits.”
Technomic’s latest forecast predicts that restaurants and bars’ compound annual growth rate will shrink just 3.6% between 2019 and 2021.
Based on calls with restaurant operators, Sharma is expecting that the second quarter of this year will show the highest year-over-year growth. Not only was it the hardest hit quarter last year due to lockdowns, but stimulus checks and vaccine distribution should lift sales.
Henkes said that he is looking to the Fourth of July as the inflection point marking when the restaurant industry’s recovery will really start to accelerate.
For now, trends are still looking lopsided. Fast-food restaurants bounced back more quickly than full-service restaurants, thanks to their lower prices and takeout expertise. Full-service restaurants have also been battered by indoor dining restrictions and fewer outdoor dining customers during the winter. Additionally, chains have outperformed independent eateries and grabbed market share as mom-and-pops close their doors permanently.
By the time most U.S. consumers are ready to resume their pre-pandemic routines, the landscape of the U.S. restaurant industry could look very different.
