COVID crisis takes bite out of business in Sussex

With bar seating allowed once again in the beach area beginning Sept. 4, patrons enjoy a meal at tables and the bar at Thompson Island near Rehoboth Beach. Social distancing restrictions still apply. (Special to the Delaware State News/Chuck Snyder)

If 2020 were a movie, an appropriate title might be “The Good, the Bad and the Ugly.”

Since COVID-19’s arrival in mid-March, business in Delaware has ridden a roller-coaster of sorts, punctuated by ups and downs of virus transmission and unemployment, a weeks-long shutdown for some industries, phases of reopening and quarantine demands of neighboring states. That ride remains an uncertain path for many.

The good news: Some businesses and trades survived relatively immune to the coronavirus or flourished by the unexpected conditions the pandemic created.

“We’re fortunate that in the eight towns we cover, we have some year-round communities that were less impacted than some of our coastal communities,” said Bethany/Fenwick Chamber of Commerce Executive Director Lauren Weaver. “There are some industries that have fared well. Outdoor activities were not impacted as much. Garden centers did great. Beverage companies did well … and grocers.”

The bad news: Other retailers have stomached financial blows but treaded water and remain in business.

Ms. Weaver pointed to gyms and fitness centers, operating under the same capacity as some businesses were allowed in the spring. “June 1, gyms were open at 30 percent, and here we are four months later, and gyms are still at 30 percent. I think a lot of people wouldn’t have opened if they had known there wasn’t going to be any progress,” she said.

Greater Georgetown Chamber of Commerce President Linda Price said, “When the pandemic first hit, only three restaurants closed and only one hotel closed” — noting the closure of The Counting House, Pizza Palace and Georgetown Family Restaurant as well as The Brick Hotel.

“Those close to the (Sussex County) Courthouse needed to rethink strategy because 75 percent of their business was lost. Many that were social media savvy, they were able to drive in business,” she said.

The chamber supported that effort through Facebook and email and the town aided by relaxing sign ordinances, allowing restaurants to designate pickup-only parking spaces and creating an outdoor dining area at the corner of Race and Market streets.

But the fallout looms ugly for those that may not survive.

“The ugly is still to come unfortunately. October to January is still going to be the reckoning,” said Ms. Weaver, whose chamber covers 58 restaurants. “We know of at least three businesses that will not be here with us next year.”

Judging by the numbers

Carrie Leishman, president of the Delaware Restaurant Association, says the situation will get much worse.

“We think that when all of this is said and done, we’ll lose 20 percent of our restaurants here in the state — 20 to 30 percent,” said Ms. Leishman. “They will permanently close.”

Through July, the restaurant sector was a lost cause, with most of the estimated pre-pandemic 2,000 restaurants reporting losses. Ms. Leishman said restaurant dining rooms in Delaware were mandated to close from March 16 to June 1 to help stop the spread of the coronavirus, and between February and April, Delaware lost 66% of its eating and drinking place jobs — approximately 23,000.

“In a usual time when we see an annual sales volume of $2.5 billion … we (DRA) have already lost $700 million,” said Ms. Leishman.

Rehoboth Beach/Dewey Beach Chamber of Commerce reached out to 76 representatives in various service categories to gauge the impact of the pandemic, estimating that those businesses lost over $205 million. (Submitted photo/Civil Air Patrol)

Carol Everhart, Rehoboth Beach/Dewey Beach Chamber of Commerce president and CEO, pegs the situation as dire.

“Yes, restaurants have taken a large hit,” said Ms. Everhart. “So has retail. So has personal services, hair salons, nails. Restaurants clearly are a very large employer so it jumps out at you, but it is across the board.”

In July, the Rehoboth Beach/Dewey Beach Chamber reached out to 76 representatives in various service categories to gauge impact.

“I didn’t ask for the profit lost, or percentage lost. I asked for revenue. Tell me how much revenue the 76 businesses lost. It was over $205 million — $205,745,000. That was 76 of our approximately 1,300 members,” said Ms. Everhart. “It is only going to be the tip of the iceberg.”

Ms. Everhart noted some businesses have been able to adjust to Phase 2 of Gov. John Carney’s reopening plan, while others cannot.

“If you are a small restaurant, your space is your table space. You can’t move them away unless you move the walls,” she said. “So, occupancy was a big problem. Some could do takeout easily and make it work. But not everyone could do that. And the regulations were costly to implement.”

Ms. Leighman predicts the economic downturn will continue.

“If you look at the data, 81 percent of our members say they will still be operating at a loss in six months. Restaurants will continue to lose money through the end of the year at a minimum. They have to; they were completely shut down. So, their debt mounted. When they opened up, they are not at a 100 percent capacity,” she said.

“In Sussex County, they were limited to not being able to sit at the bar, which is where they also made money. So yeah, they will be operating at probably about 50 percent of a loss.”

Through the end of July, 96% of restaurants in Delaware had lower total sales volumes, with an average loss of about 60%, Ms. Leishman said.

Among those that sustained huge financial hits were businesses catering to banquets and other large events, such as weddings.

“They are down 90 percent, and still not booking big parties and events like that,” she said. “If they are very small, they are really at a disadvantage. You’re looking at small restaurants in Dover that have limited outdoor space and restrictions of table spacing, so, of course, they are operating at a deficit.”

Such is the case in the Bethany and Fenwick area.

Ms. Weaver said, “Some didn’t have access to extending their outdoor dining. Some of them are small dining places, not anywhere near the 60 percent capacity” that is currently allowed under Phase 2 guidelines for eateries.

“Then on top of it, they lost their bar seating. Some of our smaller restaurants were kind of swept into the closure of the bars where many of them have high-end cocktails and a $30 plate in front of them. Obviously the eight weeks of closure and the limit of the seating capacity, that was one of the big things.”

The bar seating rules began in early July following an outbreak of COVID-19 in beach areas among hospitality workers and lifeguards in coastal Delaware and continued until Sept. 4. The mandate restricted bar seating and service in Lewes, Rehoboth Beach, Dewey Beach, Long Neck, Bethany Beach, South Bethany, Fenwick Island, West Fenwick Island, Ocean View, Millville and other adjacent areas.

While lifted, social distancing and other eatery guidelines still apply.

Scott Kammerer, president of SoDel Concepts which has 15 different operations, prefers to view the glass as half full, not empty.

Motorists look for parking on Rehoboth Avenue on Labor Day weekend. Business leaders say Delaware’s placement on quarantine lists of neighboring states has impacted visitation and the rental market at various times this summer. (Special to the Delaware State News/Chuck Snyder)

“I think everyone is adjusted to really pitch in and do their part and keep everybody safe and moving in the right direction. I’m excited as these restrictions keep getting lifted and things just keep getting better and better,” he said.

“We had a summer. It might not have been the summer everybody wanted, but we definitely had a summer. I’m proud of all the people that we work with, all the people in the restaurant business that they really stepped up and fed a lot of people this summer and did it in a safe manner. I think that the fall is going to be busier than usual because of the way schools are. I think it is shaping up to be the busiest fall probably ever at the beaches.

“We wouldn’t be in the restaurant business, if we weren’t eternally optimistic.”

Ms. Leishman emphasizes that restaurants have been proactive, employing safe public health measures in adherence with state regulations.

She says assessments and surveys support that “our restaurants are safe.”

The restaurant association, she said, hired outside safety experts “to go into 75 restaurants up and down the state to gauge their compliance with the regulations.”

“I am happy to say 92 percent of those people said they would go back to that restaurant to dine out because they felt safe,” Ms. Leishman added.

Public health and safety come with an additional cost. The association reports that 75% of Delaware restaurants spent between $1,000 and $10,000 on PPE (personal protective equipment), disposables and other COVID-related materials.

Looking at lodging

Factoring into the business-success equation, several times during the pandemic Delaware has been placed on travel quarantine lists of neighboring states. On Sept. 8, the First State was back on the 14-day quarantine lists of New Jersey, New York and Connecticut due to its percentage of positive tests rate.

“The rentals industry took a big hit with all the quarantines,” said Ms. Weaver, adding that every time Delaware has made the list, travelers and vacationers simply go down the road to Ocean City, Maryland. “The problem is that they can just go over the line. They go literally go one mile down to Ocean City. That has been so painful to watch all year long.”

Ms. Everhart echoed the impact brought by the quarantine designation, which she said, “I call it the Naughty List.”

“You made your reservation and all of sudden there is a change in another state. That for rentals was very devastating,” she said.

As the restaurant association report reflected the effect on its members, the lodging tax revenue is an indication of visitation.

And while the Delaware General Assembly in 2019 allowed more entities to impose and collect a higher local lodging tax, many aren’t getting that reward without hotels, motels and other rooms being occupied.

Georgetown, Seaford, Rehoboth Beach, and Dover were among the six municipalities, along with Sussex County, granted permission to impose the 3 percent lodging tax on top of the existing 8 percent state accommodations tax.

Rehoboth figures to bank about half of its projected lodging tax windfall.

“For the period April 1 to July 31, we have collected $210,060,” said Krys Johnson, of the city’s Communications Department. “Our fiscal year budget is $800,000 but we are projecting that we will collect about $375,000 to $400,000.”

In Sussex County, the lodging tax became effective Jan. 1 but it is currently on hold after Sussex County Council April 7 voted to suspend it “until further notice.”

“Therefore, we have only collected January and February for a total of $49,957.86,” said Gina Jennings, Sussex County Finance Director.

The town of Georgetown, whose fiscal year runs from May 1 through April 30, budgeted $75,000 for accommodations tax revenue.

“Through July 31 (three months of the fiscal year) we have collected $30,388 (or 41 percent of the budgeted amount),” said Georgetown Town Manager Eugene Dvornick, noting that information for August was not available and remittance is not due until Sept. 15.

The City of Seaford at a May 12 council session suspended its 3 percent tax for June through August, said Seaford City Manager Charles Anderson, but “It did start back up on Sept. 1.”

From January through May of this year, Seaford collected $41,000. The city’s FY2021 budget includes $75,000 in projected lodging tax collection.

“As far as the amount of money we lost, we can’t really 100 percent say, because it just got enacted Jan. 1 of this year,” said Mr. Anderson. “We didn’t have a lot of year over year history of the collection.”

Speaking from a countywide perspective as Southern Delaware Tourism Executive Director, Scott Thomas said early indications from the summer show that tax revenue is down approximately around 30 percent.

“It certainly could be a lot worse, but it certainly could be better. We’re hoping for still an active fall season with a lot of pent-up demand for drive-to destinations like Sussex County,” he said.

That means marketing road trips.

“Certainly, road trips are going to be the preferred method of travel. A lot of people are still hesitant to fly. I think that hopefully is going to serve for an active tourism season here in the fall, barring any public health setbacks,” said Mr. Thomas. “So, we are actively promoting open places and open spaces throughout Sussex County to our visitors and potential visitors; kind of the two- to three-hour drive from markets like Pennsylvania, Maryland and Virginia. We’re advertising a little closer than we normally would be. It will be interesting to see.”

Loss of festivals, events

One by one, the pandemic has wiped out virtually all major celebrations and events. The cancellation list, which is now beginning to creep into the December holiday season, includes Sea Witch in Rehoboth Beach, Apple-Scrapple Festival in Bridgeville, Wings & Wheels in Georgetown, Nanticoke Powwow in Millsboro and Sussex County Return Day in Georgetown.

This year’s Sea Witch Festival has been canceled due to the pandemic. (Submitted photo/Portraits in the Sand)

“It is a long list,” said Mr. Thomas. “Really, the idea as far as promoting Sussex County as a destination, we’re trying to augment a lot of those cancellations with again the open places and open spaces, of getting people here, being comfortable while you are here. The fact that we have from our beaches, parks, bike trails, those added outdoor attractions, with plenty of space and less concentrated crowds, those are the things we are highlighting right now.”

Ms. Everhart, who created Rehoboth’s Sea Witch festival, said, “This year is going to be a challenge. Most of the events have had to cancel; you just can’t comply with the regulations the way they are.”

Ms. Price lamented the impact on Georgetown museums and its events.

“Our two largest events (Wings & Wheels and Return Day) canceled when we hoped the influx of people would have had some hope for some small help at the end of the season,” she said.

But the crisis has spawned unity among Georgetown’s business sector and community.

“What I did notice is that Georgetown, its businesses and the community came together to help each other out. There were people in the community working together to help drive business to the smaller businesses or find ways to help bring in income to others,” she said. “The chamber got help this way, since we too were affected with inability to do events to bring in income.”

Looking to the future

There is growing frustration within chamber membership, the DRA and others regarding the delay in progressing to Phase 3 of Delaware’s rolling reopening, which would increase capacity and theoretically enhance business.

“I think we need to get to Phase 3 very quickly. I think that now that we are in the offseason in Sussex County, we need to have the same regulations at the bars as they have in Kent and New Castle County. We’ll be working on that,” said Ms. Leishman. “My fear is although the governor and legislature have expanded the ability for a restaurant to have outdoor dining and alcohol to-go, pretty soon the weather is not going to permit for that. We need the governor to continue and legislature to carry that forward when they go into session.”

Ms. Leishman noted that according to recent James Beard data, over 75% of restaurant owners nationwide have taken on debt of over $50,000 to help sustain their business.

“We mean so much to our community and it’s not just economically,” said Ms. Leishman. “In a little town like Seaford those restaurants offer valuable opportunities, like teenagers who need first jobs, coming out of Seaford High School for example. Restaurants give back to their communities. They are community town halls. Restaurants are important to society. Without them, our communities lose in many more ways than economically. We need to do everything we can to ensure the success of our largest small business employer in the state, and that is restaurants.”

Ms. Everhart said of the Rehoboth and Dewey area, “I think we are working on a marketing plan to reach out to both local residents as well as visitors. Whether they are near or far, we want them to come. We are staying hopeful. But there is a lot to make up.”

“And not all are going to make it,” she said.

Georgetown’s Ms. Price said, “Many businesses are trying their best to survive.”

Helpful Coronavirus links

Delaware Division of Health Coronavirus Page
CDC: About the Coronavirus Disease 2019
CDC: What to do if You Are Sick
Johns Hopkins Coronavirus Resource Center
AP News Coronavirus Coverage
Reopening Delaware: Resources for Businesses
Delaware Phase 2 guidance

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