COVID-19's Effect on Memphis Tourism

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- The economic impact of COVID on local tourism, entertainment, restaurants and much more, tonight on Behind the Headlines.

[intense orchestral music] - I'm Eric Barnes with The Daily Memphian and thanks for joining us as we continue to do the show remotely.

We are joined tonight by Kevin Kane, President, CEO of Memphis Tourism.

Kevin, thanks for joining us.

- Thank you, Eric.

Deni Reilly is chair of the Downtown Memphis Commission, as well as owner of the downtown restaurant The Majestic.

Deni, thanks for being here.

- My pleasure.

- Along with Bill Dries, reporter with The Daily Memphian.

Let me start, and Deni, you're wearing a couple hats today and I'm going to start with you.

You're also chair of a Welcome Memphis, which is a nonprofit arm of the Memphis Tourism, and you can talk a little bit about that as well, but from whichever hat you want to wear, how bad has this last year been?

- It's been awful.

It has been, downtown has just been, you know, decimated.

We have about five, you know, five or six different revenue sources and all but one of them are residents, which is about 26,000 people, have been pretty much nonexistent.

We have, and the residents are usually our cream on the top.

So, it's been tough.

It's been tough, you know.

Just to give you an example, our GM came to us with the December numbers a few months ago, and the whole month of December was $2000 short of our best day in December, last year.

- Right and that is tourists, that is convention business, that is office workers, all of that.

- Yeah, yeah, The Orpheum, we can't discount all of the the event-driven business that we get between Grizzlies games and Orpheum and AutoZone Park and concerts.

Missing those has really impacted all the downtown businesses.

- From your, and we won't dwell entirely on the negative today, so those who just don't want to hear this, I do understand but I do want to set up, and partly, I think, we're doing the show and there is some light on the horizon as the vaccine distribution ramps up and as we begin to look ahead.

Again, it's not tomorrow, it's not even necessarily next month, but we're looking ahead and that's, I won't dwell on the negative, but one more question to you Kevin, and I think you were, we were talking about this before.

We started, one of the last shows we did in the studio, some 40-something shows ago, we talked about how bad this could get and how, I think I remember you saying a third of employees, employment in the whole state of Tennessee is in one way or another tourism or entertainment or related.

We'll start with a negative.

How bad has it been?

I mean, what are the numbers you look at when you look at the next year, last year?

- You know, it's been tough.

I mean, it's been very tough on the state of Tennessee because the governor and the state administration realized just how much tax revenue that tourism and hospitality generates for the state.

As a result of that, they did a $25 million CARES program in the fourth quarter of 2020 directed towards tourism bureaus, us and Nashville getting the largest amount.

We got $2.5 million that we had to spend by the end of the year and totally advertising to try to get people to come back into the state.

In our case, to come back into Memphis and Shelby County, and we succeeded at that.

We drove the meter.

Hotel occupancies went up.

Restaurant tabs got better.

As Deni said, still a long way from where we were, especially in downtown.

But you know, I'm encouraged of what I'm seeing right now.

And let me just say that Shelby County suffered, as bad as we've suffered, we've suffered less than the national average.

If you look at the National Restaurant Association numbers, I think it's about 17% of restaurants, one out of six or seven have closed permanently.

We're nowhere close to that in Shelby County.

And hotels, occupancies across the country, where we're exceeding the national average and we've done quite well.

Mainly because we're dominated by limited-service hotels, and limited-service hotels did a little better than obviously your big full-service meeting and convention hotels that are all over downtown Nashville and downtown Atlanta and other cities.

We only have a handful of those in Shelby County.

So, while we've suffered, we didn't suffer as bad as some other places did.

- We'll switch, so I'll stay with you Kevin.

I mean looking ahead now again with vaccine distribution, despite its many issues which is a whole show unto itself.

It is ramping up.

It's ramping up nationally, it's ramping up locally.

What will come back first, and I'll stay with you Kevin, and how long will it take to get back to the pre-pandemic levels, in terms of tourists and spending, and just give us a sense of what you're looking at in the short, medium and long term.

- People will go to restaurants first.

Leisure travel will follow that.

So, we'll see a strong uptick in leisure travel.

Conventions and meetings and trade shows will probably be the laggard of the group, and we got this beautiful, brand new, newly renovated Renesant Convention Center that just is on the finishing touches of the punch list, and we were gonna have a very busy 2021, and heck we've had everything canceled between now and September, and we may lose things for the rest of the year.

We've had some sporting events in there over the last few weeks and youth sports.

It was volleyball and then it was going to be gymnastics.

Gymnastics had to be cancelled because of water pressure issues.

And, so you know, the conventions and meetings will be the last to come back.

But you're going to see, you know, if you talk to the AEGs and the Live Nations and the people on Broadway that book shows, etc., they're all thinking fourth quarter they're going to be rolling again.

So, our industry is pushing towards a, you know, slowly middle of the summer things are getting better.

By September, we're hopefully rolling again.

- And to you Deni, and then I'll go to Bill, but to you Deni, both from the restaurant as a microcosm of what's going on, and what we're talking about but also downtown.

And we talk about, you know office workers, and we talk about tourism as, and visitors as Kevin did, but maybe focus on your, the restaurants downtown, and then the sense that you all have from Downtown Memphis Commission and that hat, of when office workers will start coming back, and what's your short, medium, long term, you know, vision of this?

- Sure, you know, it's, people are eager.

As Kevin says, restaurants will fill up first.

You know we've all been cooped up in our house for a year.

We're sick of our spouses.

We want to get out and see people, and you know, bump into people.

- Patrick does watch the show, Deni.

I just want to say.

[Deni laughs] - Oh he's sick of me too, so.

But people want to get out, and you know, restaurants, you know, and people know how safe restaurants are too.

I mean, we practice health and hygiene standards higher than most places, outside of doctor's offices, so they feel safe, they feel comfortable in restaurants.

So, we're seeing an uptick in that.

We're encouraged.

We're reopening The Majestic Grill the first week in April.

We're going to start with lunch and dinner-- with dinner and brunch on the weekends, and then move towards lunches as the offices come back.

To talk about the offices, the Downtown Memphis Commission has has been doing polls all along of residents inside downtown and outside, as well as you know regional, people that come into Memphis to dine and for entertainment, and we just completed one a week and a half ago, and this was the first time that we have seen a major uptick in people stating that they're going to be comfortable coming to a restaurant, they're going to be comfortable coming to our museums, going to an indoor Grizzlies game, or maybe a concert, definitely visiting our parks.

So, people are starting to come back, and in that also, they said they're more willing to come back to their offices, which I think is so important.

You know, you look at somebody like Henry Turley Company.

They have spent the whole year retrofitting their buildings with HEPA filters and hands-free devices, so I think people will start coming back.

With the big announcement just now from the Biden administration that they've got enough vaccines to get us all vaccinated by May, that is huge.

I was hearing August, September dates for office workers returning.

I am hoping that with that announcement, instead we'll be hearing May, June.

- Yeah, let's bring Bill in here.

- Kevin, a deeper dive from the national figures that we've been swimming in.

Obviously, Memphis is bordered by two other states.

Is there a kind of race or competition among different localities, different areas to, in effect, get the lights all back on first in this?

- Well Bill, that's a great question.

I mean, the state of Mississippi and northern Mississippi, Southaven etc., have already beat us to the punch.

You know, they were late to impose strict sanctions and they were followed by Texas this week, and being the second state or one of the first few states to really relax capacities, and masking, and so on so forth, whether you think that's a good thing or a bad thing is irrelevant.

The reality of it is they're getting a lot of Shelby County dollars that are flowing down there for people to go out to eat, to go to a movie, to do various things that, you know, that may be a little more challenging in Memphis.

You know, I went to a restaurant in east Memphis the other night and there wasn't hardly anybody in the restaurant but there was a hour and 30 minute wait, and there were empty tables everywhere, and you know, when the health department last week, made the announcement we're lifting all capacity controls, but you have to social distance.

We're still at 50 or 60%.

You can't, if you social distance six feet, in most of our restaurants, you have cut their seating by 50%, and then to say, well we're going to open bars, but you have to be, two people can sit together but the next person has to be six feet away.

You know the size of bars around most establishments.

That means you got three or four people maybe sitting at a bar if you're lucky.

So, it really didn't accomplish a whole lot.

It sounded good, people got excited, but it really nothing changes until social distancing gets relaxed, because if you got to stay six feet apart, I mean Liberty Bowl Stadium, 60,000 seats, when you're six feet apart, it turns it into a 12,000 seat arena.

So, you know, just do the math from there with the Orpheum Theater, AutoZone Park, FedExForum, etc, movie theaters, whatever, the social distancing and hopefully that was going to be relaxed as more and more people get vaccined and people feel safe, and I will tell you people that get that first shot feel safe, and they get the second shot and they feel bulletproof, whether they are or they aren't, and it is having a, certainly it is having a psychological positive impact in getting people moving again.

- So Deni, to take this to a business by business equation, the restaurants come back first, but are people going to come back if there are still some measure of social distancing standards in there?

Are they waiting for it to open up unconditionally do you think?

- I don't think so.

We are seeing, we're getting lots of inquiries, especially about, you know, when are you reopening The Majestic?

People have been loving Cocozza, our pop-up, but we are seeing a lot of, even our older regulars are saying we're ready.

We've gotten our two doses of our vaccine and we're ready to to come out, and we're also hearing, you know, they're comfortable coming to a place like ours, or a place like, you know, Tsunami, or a place like you know Felicia's, where they know that we are practicing safe practices, you know.

They're gonna come to the local establishments first because they know we're doing the right thing.

So, they're there.

We're hearing that they're not just going to go out for the sake of going out, but they want to patronize the restaurants to support us because they know it's been such a hard year, but they also feel comfortable with us.

They know that we're going to be taking care of them, and that we're taking care of our staff as well.

So, that's a big thing, and I think we'll see-- my parents went out for the first time to dinner last weekend.

They have, I haven't heard such joy.

[laughing] My mom was like, "I had a martini!"

because she's excited.

I think that there, I think people are just desperate but they want to support local.

They want to, they want to go places they're comfortable.

- Kevin when we talked at the outset of this on the show, we also talked about what was likely to happen with the tourism and hospitality workforce as a whole, and there was some thought that possibly you could see some shifts in that employment.

You could see people leave the industry and not come back.

Where do you think we are with that workforce at this point?

- Very challenged.

Great question.

I'll look at the hotels first because they employ a lot of people, as do restaurants.

But, I mean hotels have lots of employees.

Like Peabody, I think at one point had close to 600 employees.

You know when they're calling people back, they've moved on to other industries that in some cases may be paying higher wages or better benefits.

So, it's been it's been a challenge.

It's unbelievable.

We got over 10 million unemployed people in America, but when you start trying to get people to come to work, it's not as easy as it sounds.

I mean it's, you got to make a lot of phone calls to get people back, and so I mean we'll get there.

I mean this is a high employment industry, restaurants and hotels especially are high employment, and it probably leads the state of Tennessee on unemployment rolls right now.

It's probably still our industry, but we have lost some of those employees for good.

They've gone to other industries, FedEx, Amazon.

You just start naming different people that were hiring extensively during this pandemic and you know some people have moved on to other industries.

So, we'll have to build that workforce back, but we'll get them back.

And, hey it's going to be the Roaring 20s.

People want to get out.

They want to go, and when I go to restaurants, the ones that are open, they're blowing and going, and when I made the comment earlier about going to a restaurant where there was a lot of empty tables because of social distancing, but I also said they had an hour and a half wait because people wanted to go there to eat.

So, people want to go out and eat, and they want to start moving again, and hopefully we're only a few months away from getting back to somewhat we feel is kind of a normalcy.

- Deni, let me go, put your Downtown Memphis Commission hat on and then I'll come back to Kevin on this question too.

A lot of the downtown redevelopment and expansion over the last decade, two decades, they are a number of new hotels that have opened, or about to open just during this pandemic.

I mean big projects, a lot of it is various forms of tax incentives, including the TDZ, the Tourism Development Zone Obviously, I mean as we've talked about tourism is way way down, and that TDZ picks up a lot of different kind of sales tax it's not, but how, from a Downtown Memphis Commission point of view, how concerned are you all about the financial state of these many many millions, billions of dollars in projects that you all have helped facilitate through tax incentives and such?

- We're positive.

We are very positive.

Obviously, we look at the numbers every day, hourly.

The biggest challenge right now is just financing from, you know, from the banks.

They're cautious, but they're optimistic.

I mean we obviously speak with our partners all the time, and you know all the projects are moving forward.

You know, for people that haven't been downtown in a while, when you come back downtown your head's gonna spin, you know.

You look at 1 Beale, the Hyatt Centric is just about completed.

They, all their apartments are moving along.

There's a lot of projects that are coming along.

We have been so busy at the DMC.

We have new projects rolling through all the time.

The phones have not stopped.

We are positive about it.

The tax that probably has affected downtown most, and Kevin can talk to this, is the hotel tax, which you know, funds Memphis Tourism.

That's probably, he's probably seen that right?

But we're positive.

We're still moving forward.

The phone's still ringing, developers are still interested.

You know, I think when you look to us, you look at the history of pandemics in downtowns and after crises like this, downtowns boom.

And we're positive.

- Kevin, let's talk about that.

The hotel tax obviously is taking a huge hit.

There's also, I mentioned, the TDZ, the Tourism Development Zone downtown, which I think I'm right in saying does some of the funding of the convention center.

Are you concerned?

I mean what kind of budget hit have you taken, and how long I guess we've talked about this turning around, that it's going to take some time.

Are you worried about a real financial crunch, given this fall off in tax revenue?

- Well, there has been a falloff in tax revenue.

Our budget's down about 25%.

We were able to make some of that up because we received some state federal CARES dollars.

We were not allowed to participate, just like the Chamber of Commerce was not allowed to participate, in the first round of PPP, 501(c)(6)s, which is our designation, not-for-profit corporation.

We're excluded from the first round of PPP.

We're in the second round of PPP, which will bring us some additional resources to us hopefully, and we're excited about that.

But, as I said earlier, in Malaysia, well I didn't say this earlier, in Malaysia, when they had SARS they thought it would take three years for tourism, hospitality, restaurants to really get back to where they were pre-SARS.

It took three months.

So, you know, a year ago people were saying, "Oh, we won't get back to 2019 levels until 2024, 2025."

Those numbers are being adjusted drastically, and hopefully we're going to be generating that revenue to feed the TDZ, the hotel tax and other mechanisms that help fuel downtown.

As Deni said, downtown has gone through a major transformation.

Construction was a deemed an essential business, and it didn't stop.

You've got the Carlisle project, which is spectacular.

You've got the Renesant Convention Center, which is unbelievable.

We've talked about that on previous shows.

You got a number of hotels that have opened or are gonna open.

Got new restaurants that have opened during this time.

So, we're very excited about the future, and Memphis will be a destination because we serve so many different types of visitors that we will come back faster and stronger than most markets.

It's going to be very competitive because everybody wants that tourism dollar, but we're going to, we're going to win.

- Let's bring in Bill.

- Deni, in the industry that you work in, I've been interested to see that obviously times are hard, but yet there's been no shortage of people announcing that they've got an idea for a restaurant, and they're about to give it a try.

How do you explain that?

- Well, you kind of have to be a fool to be in the restaurant industry to start with.

[laughing] We'll start with that.

But, you know, I think people eat out.

You know, I think even if you look pre-pandemic, you know we were hitting record numbers that are, you know, we were personally in the industry was and you know you have most households are dual incomes with both parents working, you need restaurants.

People need to be able to eat out.

People aren't, you know, cooking at home every night.

So it's an essential business, and so the need is there.

And you know there's Good Fortune Company is opening up in the old SOB space.

You know, people are opening new restaurants.

There's capital to be had, you know.

And there are, well you know, Kevin mentioned earlier that we haven't seen the shuttering of restaurants like some other cities have, but we have seen some.

So there will be some spaces available and they'll be cheap.

There will be some deals to be had-- - And already renovated, in some cases.

- It will be turnkey businesses.

You can kind of go in and just change up your concept and the paint color and off you go.

So, there's going to be some real opportunity for some new restaurants out there.

- Kevin, how are tourists different, in your view, when this all comes back, or when this starts to come back?

- I think for the foreseeable future they want to feel safe and they want to go to destinations where they feel safe.

I'll tell you one of the reasons why we won is.

As good as we, as well as we performed this summer was because when a lot of the protests, social protests around the country were doing a lot of damage, there was damage that was taking place in certain markets, we didn't have that here.

We have very peaceful protests here, and Memphis never made any national news of, you know, burning buildings or whatever.

So people felt very safe coming here this summer, and we feel that they're gonna feel safe coming here in the future.

We're a great drive market.

We did an extensive amount of advertising in what we call the drive market six-hundred-mile radius of Memphis and Shelby County, and went beyond Atlanta, went beyond Houston, went beyond Chicago, and people came.

They got their cars and they drove here.

So, you know the tourist is a little bit different from the local, but because they're really gonna want to go, because they have choices.

They have choices on where they want to go visit.

They want to go to Memphis, they want to go to Nashville, they want to go to Little Rock, Jackson, Mississippi, Florida, whatever it might be.

But as I say, we're positioned for that.

We do a lot of research, and our research is we geofence people that even look at Memphis.

So we know what people are thinking and what their thoughts are about.

The potential visitor that's coming here.

You know, before all this started as Deni said we were having record setting records in Memphis and Shelby County in this industry and over close to 13 million tourists, and this past year we were about five and a half million, so cut it in more than half, but we really feel strongly those people will come back.

- Let me go to Deni here, just with, I can't.

I should know this before I ask you, but I don't.

Was DMC directly involved with the 100 North Main purchase, or was that purely through the city?

- No, it's a partnership with the city.

Yes, yes it's a partnership with the city.

- What are the extent, you nknow there are other blighted buildings downtown.

There are other buildings that people would like to redevelop.

Why this one, and why is this one that the city stepped in on and bought to, and is this a beginning of a wave of the city and DMC buying blighted buildings to redevelop them?

- To answer your last question first, I wouldn't see this as a trend.

[Deni laughs] But, 100 North Main is important for a lot of reasons.

To talk, you know, it's part of the Loews package.

You know, the Townhouse Management owns 100 North Main.

They were the original partners with Loews and their partnership fell apart.

Townhouse still owns that.

They have been unwilling to either sell it or make plans for it, and our feeling at the DMC, and Mayor Strickland's administration feel that this building is too important to let just sit empty as a blighted building.

The beautiful Renesant Convention Center that has just undergone this amazing renovation, it's right on the wall and it is just this giant eyesore.

It's right next to the DMC offices.

It is caddy corner from City Hall.

It is just on the main thoroughfare of all our visitors and it's got to it's got to be renovated.

- That is all the time we have this week.

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