With coronavirus continuing to spread Tuesday, more Chicago businesses and organizations considered whether to cut upcoming travel and meetings, dealing a potential blow to the local economy and a city budget that relies heavily on visitors’ spending.
The concern was most acute in the convention industry, a cash cow for construction jobs, restaurants, hotels and other sectors. Organizers of upcoming events said they were monitoring health developments and will decide if they need to cancel, reschedule or move events online.
Monday, the International Housewares Association canceled this year’s annual convention at McCormick Place, a four-day gathering this month that was expected to draw 56,000 people and account for 47,000 room nights at Chicago hotels.
“We’re always worried about empty hotel rooms. We want heads in bed. That’s always a concern. But it’s something that we hope, related to coronavirus, only has a short-term impact,” said Michael Jacobson, president and CEO of the Illinois Hotel and Lodging Association.
“Yesterday was a disappointment for our hotels. But, we’re hopeful that the situation gets under control very quickly and that the concern doesn’t continue to spread.”
Attention now is shifting to such upcoming events as the Bank of America Shamrock Shuffle on March 22, an 8K run with a three-day health and fitness show at McCormick Place. The event is still scheduled, but Alex Sawyer, communications director for the event, said organizers “will continue to follow the situation carefully.”
Similarly, the American College of Cardiology, due at McCormick Place March 28-30, said its event is on for now. The expected attendance is 18,000. The organization said it “continues to closely monitor health and safety updates and recommendations issued by the World Health Organization and the Centers for Disease Control and Prevention, as well as state and local health organizations.”
Jacobson stressed that hotels are “taking every precaution that we can take” to protect patrons and employees. He can only hope that business and leisure travelers don’t panic, cancel their plans and hunker down.
“One of the dangers in cases like this sometimes is overreaction,” he said. “Not to discredit the very serious nature of the virus and the terrible loss of life throughout the world. But at the same time, there is no current indication or guidance to change travel habits within the United States.”
A spokeswoman for Navy Pier said it had only one canceled event as of Tuesday, and that was an offshoot of the housewares show. The Chicago Council on Global Affairs, which regularly hosts programs with overseas visitors, said it has contingency plans to postpone some or move them online but hasn’t implemented them yet.
A 2017 study for McCormick Place, completed before the recent expansion of its campus to include a new hotel and the Wintrust Arena, estimated that it generated $1.5 billion in annual economic activity and more than $112 million in state and local taxes each year.
Many other business meetings around the country, especially those on the West Coast, were being canceled and companies were restricting travel to the most essential reasons. One of them was Ford, which reported that two of its employees in China have contracted the virus.
Chicago’s city finances need a lift from tourism. A reduction in the number of visitors and an overall economic slowdown due to the virus could have an outsized effect on a city budget that Mayor Lori Lightfoot cobbled together with onetime or questionable revenue sources.
Civic Federation President Laurence Msall said neither the city, the county nor the state has “adequate reserves to address an unexpected drop in economic activity” tied to the coronavirus.
“The city of Chicago — all government leaders — need to be addressing what is the Plan B if revenues don’t continue to grow as projected before the coronavirus came onto the horizon and began to affect business activities and tourism and travel,” Msall said.
Noting that there would be no letup in the demand for essential city services, Msall urged the city to plan for a worst-case scenario where the virus “continues to grow” and travel, work, school and entertainment patterns are interrupted.
“If it gets to the level where city, county and state residents are being told not to come to work or not to go to gathering places, that would have a precipitous impact. All tourism-related revenue, including restaurant taxes, sales taxes, hotel taxes, McCormick Place taxes, fare recovery at the CTA and Metra could be impacted,” he said.
In December, a Wall Street ratings agency that stands alone in rating Chicago bonds as junk concluded that Chicago and Detroit are the U.S. cities least prepared to weather the storm of another recession because of “extraordinarily high” fixed costs and crushing pension obligations.
Moody’s evaluated the nation’s 25 largest cities for their ability to “handle a recession of similar magnitude” to the economic downturn a decade ago “without a material adverse credit impact.” Chicago and Detroit ranked dead last.
”Chicago’s extraordinarily high fixed costs, coupled with its escalating pension liabilities, make it one of the cities least prepared for a near-term recession,” Moody’s wrote.
Lightfoot’s own three-year financial analysis forecasts a “worst case” shortfall of $1.74 billion in 2022 if the economy takes a nose-dive and a $799 million shortfall, even in the best-case scenario of a rosy economy.
Her $11.6 billion budget was precariously balanced with one-time revenues that include: A $300 million tax increment financing surplus that’s the largest in Chicago history; a $1.5 billion refinancing, with all $210 million in savings claimed up-front; and a $93 million clawback from the Chicago Public Schools for pension and security costs the city used to pay for.
The mayor is also counting on $163 million from raising ambulance fees paid by private insurers and getting federal approval for reimbursements administered by the state for ambulance transports for low-income patients on Medicaid.
That hasn’t happened yet — nearly five months after the mayor said that approval was “imminent.” Lightfoot has said repeatedly she remains “very confident” the feds will green-light the ambulance plan, despite her repeated attacks on President Donald Trump.