D.C.'s Hospitality and Tourism Industry and COVID: Where Do Small Businesses Stand?

The hospitality and tourism industry are one of D.C.'s strongest sectors. The three primary sub-sectors in D.C. are food services/restaurants, accommodations, and arts/entertainment. Traditionally, these have been a major driver of employment, accounting for roughly 80,000 jobs, including many positions for people without college degrees.

Until COVID-19.

Once the coronavirus pandemic shut the nation down last year, unlike the tech sector, D.C.'s tourism and hospitality sector was brought to a standstill. Let us take a look at how local small businesses in the hospitality and tourism sector have performed before, during, and what they will likely look like after the pandemic.

Booming before COVID-19

Every year millions of people flock to D.C. and spend their vacation dollars at small businesses, especially since the District has evolved into a hotspot known for its restaurant and nightlife scenes. Prior to the pandemic, Washington, D.C., landed at the top of the New York Times' global list of "52 places to go in 2020."

The Washington, D.C., metro area is a magnet for tourists to see famous landmarks found throughout the city and its Maryland and Virginia suburbs. Unfortunately, the COVID-19 pandemic arrived right as the cherry blossoms on the National Mall were about to hit peak bloom—an extremely busy season for hospitality and tourism. Small businesses flourish during this time and lost substantial revenue.

The D.C. Policy Center reports approximately 25 percent of jobs in D.C.'s leisure and hospitality industry are employed by businesses with fewer than 50 employees. The COVID-19 pandemic almost instantly devastated the industry overnight.

During the pandemic

Because the hospitality and tourism industry is highly sensitive to economic decline, it took a huge blow, especially because operations involve heavy in-person contact. With no one traveling and local employees either laid off or sent to remote status, small businesses had few, if any, customers to serve. Employees and small business owners were sent home with no alternative work options since the entire industry was impacted.

The D.C. Policy Center reported in April 2020, "National data suggests that employment losses have been most severe so far for small businesses in retail, food services, personal services, arts and entertainment, and hospitality-all key sectors of D.C.'s economy." As 2020 unfolded, it only got worse and those remaining operational had to pivot to survive. For instance, numerous mom and pop restaurants flipped to takeout menus and delivery services.

Small inns and B&Bs faced unique challenges. With low room inventory and small staff, pivoting proved difficult. These small businesses do not readily have touchless processes, such as mobile apps, like the big industry hospitality giants use. With smaller facilities, it is also harder for them to block out rooms to accommodate social distancing or leave rooms empty 24-48 hours after guests depart.

Across all industries, 235 D.C. small businesses closed permanently since the pandemic upset the local economy, many of them restaurants and bars. As the pandemic raged on, some businesses remaining open lost tens of thousands of dollars a month, especially those offering hospitality and leisure services. In March 2021, sales for these businesses are reportedly still down 80 to 85 percent.

Looking beyond COVID-19

Small hospitality businesses found it tough to weather the pandemic. Will economic conditions force remaining smaller mom and pop establishments to be “pushed out” and replaced by chains? Time will tell if the local economy scales back jobs or adds new ones in upcoming months. Much depends on how quickly normalization occurs.

In September 2020, Washington Business Journal reported industry experts said full recovery "could be years [half a decade] away." Small businesses have much work ahead to recover positive ground they had made over the past decade. Until restrictions loosen, small businesses will have difficulty receiving the substantial foot traffic they heavily rely upon. 

But there are bright spots in this gloomy forecast. On May 1, D.C. entered Phase Two of reopening which loosens restrictions that could benefit small businesses. Several neighborhood hangouts reopened this spring. People are getting vaccinated. Domestic travel to D.C. may increase. Potentially other industry workers get recalled to the office, and regular busy happy hours follow. Now that warm weather has arrived, hospitality businesses may be able to partially shift operations outdoors to generate more business.

Any of which give much-needed boosts to small businesses.

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