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COVID-19 Devastated the Restaurant Industry, but Here’s Where It’s Most Likely to Recover

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The restaurant industry was one of the hardest hit by the coronavirus pandemic. U.S. Bureau of Labor Statistics (BLS) data shows that the number of people working in leisure and hospitality — including food services — fell by nearly 50% between February and April 2020.

And June 2021 data shows a full recovery hasn’t yet been made. There were 14.7 million leisure and hospitality workers in June, down from 16.9 million in February 2020 just before the crisis.

But some U.S. metros seem more likely to recover than others. LendingTree researchers examined five metrics across the 50 largest metros with available data to find where the restaurant industry is most likely to turn the corner.

Key findings

The restaurant industry is most likely to recover in 2021 in Oklahoma City. The metro leads the list thanks to a strong employment recovery and a sizable pool of restaurant workers.
Southern metros tend to rank the best. Five of the top 10 metros in the LendingTree study — Oklahoma City; Tampa, Fla.; Tulsa, Okla.; El Paso, Texas; and Jacksonville, Fla. — are in the South.
The restaurant industry is least likely to recover in 2021 in Washington, D.C. The nation’s capital is near the bottom in nearly all the metrics examined. Specifically, consumer spending at restaurants and hotels and time spent away from home at retail and restaurants are both second-to-last in D.C. among the 50 metros.
The most expensive metros tend to have the worst scores. Cost of living in the U.S. is highest in San Francisco and San Jose, Calif., which come in at No. 49 and No. 47, respectively, for restaurant industry recovery potential. New York, which has the third-highest cost of living, comes in at No. 40.

Southern metros, led by Oklahoma City, dominate top of rankings

Southern metros may lead the restaurant recovery charge, with half of the 10 top-ranked metros in the South — and Oklahoma City (OKC) as the front-runner.

A 22% uptick in leisure and hospitality job postings from January 2020 and June 2021 and a decent amount of restaurant workers compared to the national average help move OKC to the top of the rankings. Consumer spending at restaurants and hotels also increased 11% in June 2021 relative to January 2020 — nearly triple the average across the largest metros.

Runner-up Boise, Idaho, may be enticing restaurateurs, as leisure and hospitality-related job postings more than doubled since January 2020. The 116% boost in job postings here is second-best across all ranked metros (behind Chicago at 121%).

Even the 1% jump in Boise in time spent away from home at retail and restaurants stands out among the rankings at No. 5. In fact, the fourth and fifth metros in the overall rankings — Omaha, Neb., and Tulsa, Okla. — are the only others in the top 10 to see positive growth in this metric.

No. 3 Tampa, Fla., records the same growth in consumer spending as Boise and beats Oklahoma City in leisure and entertainment job postings, recording a 43% gain. Though Tampa is home to a large share of restaurant workers, a 5% drop in employment since 2020 — regardless of industry — may be hampering a quicker recovery.

10 metros where restaurants are most likely to recover in 2021
Rank	Metro	Consumer spending at restaurants, hotels	Job postings in leisure, hospitality	Employment	Time spent away from home at retail, restaurants	Density of restaurant workers
1	Oklahoma City, OK	11%	22%	-3%	-4%	1.24
2	Boise, ID	10%	116%	-7%	1%	0.97
3	Tampa, FL	10%	43%	-5%	-11%	1.11
4	Omaha, NE	-1%	16%	-2%	4%	1.01
5	Tulsa, OK	15%	12%	-10%	5%	1.11
6	El Paso, TX	6%	16%	13%	-12%	1.20
7	San Diego, CA	12%	29%	-9%	-13%	1.12
8	Fresno, CA	2%	30%	-2%	-4%	0.91
9	Jacksonville, FL	15%	-3%	-5%	-5%	1.07
10	Detroit, MI	7%	113%	-7%	-7%	0.88

Expensive metros spell slower restaurant recovery

Many have speculated that big cities are shrinking as citizens leave for the suburbs. While that exodus appears to have been overstated, some of the biggest metros still may be struggling to recover, as Washington, D.C., San Francisco and San Jose, Calif., all appear among the bottom 10 metros where restaurants are most likely to recover in 2021.

LendingTree chief credit analyst Matt Schulz notes that areas like San Francisco and New York — where competition and expenses run high — make it even tougher for restaurants to thrive.

“High rent is part of it, no question, but the sheer amount of restaurant options that are available in those areas plays a big role, too,” Schulz says. “That’s true even in the best of times. Factor in a pandemic, and it all just gets exponentially more difficult.”

At the bottom of the rankings, D.C. reports pretty dismal metrics across the board, including a:

33% loss in time spent away from home at retail and restaurants
24% drop in consumer spending at restaurants and hotels

The nation’s capital ranks close to last in each metric except for employment, where it ranks 39th with a 12% decrease since January 2020.

San Francisco, in the penultimate slot, fares slightly worse in leisure and hospitality job postings, which declined 22%, and time spent away from home at retail and restaurants, which dropped 37% — both the worst among the 50 metros.

Nearby Oakland, Calif., seems slightly better poised for a comeback, with consumer spending at restaurants and hotels down just 4% since January 2020 — a fraction of the disparity in San Francisco and Washington, D.C. Oakland also is just one of four metros in the bottom 10 with an uptick in leisure and entertainment job postings, at 14%.

Of interest: Baltimore ranks as the seventh metro least likely to recover, but its 33% growth in consumer spending at restaurants and hotels ranks second-best across all metros.

10 metros where restaurants are least likely to recover in 2021
Rank	Metro	Consumer spending at restaurants, hotels	Job postings in leisure, hospitality	Employment	Time spent away from home at retail, restaurants	Density of restaurant workers
1	Washington, DC	-24%	-5%	-12%	-33%	0.82
2	San Francisco, CA	-23%	-22%	-18%	-37%	0.92
3	Oakland, CA	-4%	14%	-12%	-23%	0.92
4	San Jose, CA	1%	-1%	-8%	-23%	0.75
5	Miami, FL	-17%	-3%	-11%	-16%	1.07
6	Phoenix, AZ	-4%	2%	-11%	-17%	1.00
7	Baltimore, MD	33%	-2%	-12%	-17%	0.84
8	Sacramento, CA	-2%	3%	-8%	-14%	0.95
9	Atlanta, GA	1%	-1%	-9%	-15%	0.98
10	Portland, OR	-15%	62%	-14%	-13%	0.97

Looking to open a restaurant? Consider costs and COVID-19

At the time of publication, much of the South remains inundated with COVID-19 cases. The pandemic has proved fairly unpredictable, especially for long-term speculation as new variants — or perhaps improved research — could arise at any point and change the course of recovery.

It’s reasonable that many of the metros ranked most likely to recover are in those positions in part because they’re in states where restrictions on dining out have been more lax or nonexistent compared to states that virtually shut down restaurants for months on end.

Regardless of the current pandemic, picking the best location to open a restaurant can be tricky. Big metros might lure restaurateurs because reputation and a regular flow of tourists and citizens alike might help drive business. However, those factors may also hinder up-and-coming restaurants trying to stand out in already crowded markets.

“Restaurant competition is brutal, especially in the biggest cities, so it wouldn’t surprise me to see folks consider relocating,” Schulz says. “The lure of starting again in a smaller, lower-cost area where your restaurant might have the chance to stand out a bit more could be really appealing.”

Smaller metros come with risks and benefits as well. Rent and supply costs might be cheaper, but a new business might have to do a little more work to attract customers to a less popular destination. Those looking to open a restaurant or start a new business should carefully weigh the benefits and drawbacks of their location choices.

Methodology

To find the metros where the restaurant industry is most likely to recover in 2021, analysts looked at five metrics across the 50 largest U.S. metros for which full data was available:

Consumer spending at restaurants and hotels. This is the percentage change between January 2020 and June 2021. Opportunity Insights Economic Tracker.
Job postings in leisure and hospitality. This is the percentage change between January 2020 and June 2021. Opportunity Insights Economic Tracker.
Employment. This is the percentage change between January 2020 and June 2021. Opportunity Insights Economic Tracker. Industry-specific data was unavailable at the metro level.
Time spent away from home at retail and restaurants. This is the percentage change between January 2020 and June 2021. Opportunity Insights Economic Tracker.
Density of restaurant workers. This compares the number of restaurant workers in a local area relative to the national average. U.S. Bureau of Labor Statistics, May 2020.