University of Arkansas researchers offer early estimates of COVID-19 impact to NWA economy

Sales in the leisure and hospitality, recreation and personal care services industries in Northwest Arkansas’ four largest cities are estimated to decline by almost 20% this year as a result of various measures initiated to contain the spread of COVID-19 (coronavirus).

That’s one estimate included in new analysis released this week by researchers from the Center for Business and Economic Research (CBER) in the Sam M. Walton College of Business at the University of Arkansas. The study covers the restaurant and food service industry, bars and clubs, gyms and other recreation services, and personal care services.

Arkansas Gov. Asa Hutchinson has issued several directives related to business, including closing restaurants and bars for dine-in service. Also closed are gyms, barbershops, beauty salons, nail salons, tattoo parlors, and massage therapy locations.

“With uncertainty over how long some of these measures will be in place, small businesses in these industries may permanently close, prolonging the path to recovery from this temporary economic crisis,” CBER director Mervin Jebaraj wrote in the report. “It is imperative that federal, state and local elected officials put together a package of grants and loans to help these businesses survive the temporary closures and loss of customers.”

Jebaraj wrote that employment in the leisure and hospitality industries has been an area of strength for the Arkansas economy over the past decade. The permanent closure of these businesses would leave a lot of Arkansans unemployed. Three of Northwest Arkansas’ largest hospitality assets have already suspended operations indefinitely.

Potential impacts of COVID-19 on cities in Northwest Arkansas, according to the report, are:

• The sales from the leisure and hospitality, recreation and personal care services industries in the four largest cities in Northwest Arkansas (Bentonville, Fayetteville, Rogers and Springdale) are estimated to decline by 19.3% in 2020 as a result of COVID-19 measures when compared to what might have been a year where sales were similar to 2019.
• 2020 sales from these industries are expected to decline by $202.2 million in the four cities and sales tax collections from these industries are expected to decline by $4.0 million.
• Restaurant and foodservice sales account for 74.4% of the decline in sales or about $150.5 million. Fayetteville accounts for $54.6 million of the lost sales from the restaurant sector, followed by Rogers with $43.7 million.
• Hotels and other traveler accommodations account for 18.1% of the overall lost sales or $36.5 million in the four cities in Northwest Arkansas. The losses in the hotel sector total $10.1 million in Bentonville, $10.5 million in Fayetteville, and nearly $10.9 million in Rogers.
• Sales at gyms and other recreation services are expected to decline by $9.4 million in 2020.
• Bar and club sales are expected to decline by $4 million across the four cities with nearly half the loss accounted for by bars and clubs in Fayetteville.
• Personal care services can expect to see a decline of $1.7 million in sales.

COVID-19 cases in Arkansas rose from 218 on Tuesday to 280 as of early afternoon on Wednesday (March 25). There were two deaths reported Tuesday, but none on Wednesday. As of Wednesday at 1 p.m., there were 461,167 U.S. cases and 827 deaths. Globally, there were around 451,355 cases and more than 20,499 deaths.