The pandemic is damaging the economic ecosystems around universities

October 30, 2020, 4:30 PM UTC

Spring break is being canceled months in advance, and that’s just the beginning of the challenges facing thousands of businesses that rely on America’s college economy.

Dozens of colleges and universities, including many of the nation’s largest, have canceled the spring breaks that would normally occur next March or April. Texas A&M and Ohio State, both with over 60,000 students, have canceled the break, as have other giants including Penn State and the University of Michigan. The University of Central Florida, also with over 60,000 students, has moved the break to mid-April and told students not to return; classes will be entirely remote for the rest of the semester.

Those schools hope to avoid a repeat of last spring’s disaster, when hundreds of thousands of undergrads defied the pleas of public health officials and reveled as usual, then brought COVID-19 back to their campuses. But at least the local businesses of Daytona Beach, Fla., South Padre Island, Texas, and other spring break venues got some of their accustomed shot of March financial madness, as inebriated students spent with abandon.

No one knows exactly how much money spring breakers spend, but it’s billions. For some locales, the revenue is significant. Ten to 20 years ago, the little town of Panama City Beach, Fla. (population back then: 5,000), attracted some 500,000 spring breakers a year. Those crowds have since thinned—in 2016 the town banned drinking on the beach during the month of March—but Florida and Texas total tourism revenue kept booming until this year, and in Florida, March is normally the busiest month.

Prudence suggests that merchants should brace for an even grimmer spring 2021 than the academic calendars suggest. Two of America’s biggest universities, the University of Texas at Austin and Arizona State University, each with over 50,000 students, are still scheduling spring breaks, as are many other schools. Yet it’s virtually inconceivable that a vaccine will be widely distributed by early spring and equally inconceivable that college students on break will observe CDC guidelines for avoiding COVID-19. Bottom line: Expect more spring break cancellations.

The larger issue is that the pandemic is damaging the economic ecosystems around universities, with effects that could be long term. Enrollments are down; prospective students and their parents hesitate to pay today’s high costs for a socially distanced or online experience, and with unemployment still high, money is tight for many families. State governments, also strapped, are cutting back support for state schools. In response, universities are shutting down departments and firing staff.

The direct effects on a college town and surrounding region are obvious and bad. With fewer students—or no students in the case of schools that have gone online only—stores and restaurants are closing and struggling. A far larger effect is one step removed. Universities increase human capital and innovation in the surrounding region, accelerating regional GDP per capita, says a massive 2016 study by researchers at the London School of Economics and MIT. As universities cut back, regional prosperity weakens over the long term. Businesses around big, famous schools probably needn’t worry—those schools will likely bounce back after the pandemic—but some schools may struggle for years or may even close, damaging surrounding businesses for decades.

The guidance for businesses in the college economy is to be brutally realistic about the pandemic and its future. Are the effects on your business likely to be fleeting or lasting? Even if they’re temporary, how long can you hold out? The natural human tendency is to be too optimistic.

At the same time, be on the lookout for new opportunities. When Panama City Beach dialed down spring break, which had become chaotic and even violent, hotel occupancy tax revenue fell 41% the following year. But arrests during March fell the same amount, and by 2019 that tax revenue was right back where it had been. Just as important, the town had recast itself as a family destination. It’s a potential model for college-dependent businesses and locales nationwide that are having to reinvent themselves fast.

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