The coronavirus harms much of the Southern California economy, but few areas as acutely as the Coachella Valley where hoteliers, Airbnb hosts, and hospitality workers depend on tourists’ dollars during what locals call “The Season” — before the summer desert heat sets in.
On Wednesday the Coachella Valley Music and Arts Festival and Stagecoach, Coachella’s accompanying country music festival, were postponed until October. The announcement came days after the BNP Paribas Open, better known as the Indian Wells tennis tournament, was canceled.
The announcements could be dire economically for the 45-mile arid lowland southeast of Los Angeles, which generates an estimated $800 million in revenue from these canceled and postponed events alone.
That makes up more than 10 percent of the area’s tourism dollars for the entire year, a region where every 1 in 4 workers are categorized as being in tourism and hospitality, according to Greater Palms Springs Convention and Visitors Bureau figures.
Workers clock many of their hours now before a summer season, when visitors shy away from daily highs of 120+ degrees Fahrenheit.
“Los Angeles, San Diego, San Francisco are year-round economies,” said Alan Reay, president of Irvine-based hotel brokerage Atlas Hospitality Group. “The Coachella Valley is not. When you take postponed festivals and a seasonal market combined, it’s going to be devastating.”
Reay called the current situation “unprecedented,” and said the only possible comparison is the New York and Washington D.C. travel economies after the Sept. 11, 2001 terrorist attacks.
Possible consequences, Reay speculated, include layoffs of hotel workers, plus banks that are financing new hotel construction in Coachella Valley freezing loans.
“March and April are our busiest months,” acknowledged Joyce Kiel, a spokeswoman at the Convention & Visitors Bureau.
The bureau’s own reports find the recently canceled events to be the area’s biggest economic windfalls.
The 2017 Indian Wells tennis tournament generated $406 million over its two-week duration, said one study. Another 2017 report stated that the three-day-long Coachella festival and three-day Stagecoach event combine to net $403 million.
In-house tourism studies can puff up such numbers, but Reay argued the Coachella number might be conservative. That’s because the event can draw ancillary activity like large estate properties briefly putting themselves on Airbnb and drawing up to $10,000 for a single weekend.
Response to the coronavirus is unfolding – and being readjusted – very quickly, but the visitor’s bureau is presently moving forward with an advertising campaign to bring automobile tourists from nearby L.A., Orange County, and San Diego to Palm Springs and other Coachella Valley cities with ads on IHeartRadio and Pandora.
“We’re changing our marketing initiatives,” Kiel said, noting the bureau nixed ads encouraging flights into Palm Springs.
The Convention and Visitors Bureau response comes as hotels hammer out cancellation policies.
Hotels reached Thursday such as the Indian Wells Resort Hotel, which has slashed prices roughly 30 percent in the past week, said it is providing full refunds to all guests, or credits toward stays for the rescheduled Coachella and Stagecoach festivals. According to one source, Hilton’s Miramonte Indian Wells Resort & Spa suffered 300 cancellations in one day.
There are 140 hotels and 15,000 hotel rooms in the Coachella Valley, according to a 2018 report by Waterbury, New York-headquartered consulting firm HVN, inventory that was expected to increase 10 percent by this year’s end.
The HVN report painted a picture of a thriving Coachella Valley hotel market pre-Coronavirus. “Considering the market has experienced an increase in demand of nearly 50% since the last recession of 2009,” the report reads. “It is safe to assume that any future supply increases will have minimal impact on the market’s performance.”
If hotels are moving toward refunds, Airbnb, the dominant market leader in short-term home and apartment rentals, has deferred that decision to individual hosts.
Asked whether guests will be able to cancel stays made to attend the music festivals, company spokesman Mattie Zazueta replied, “Since the events have been postponed, we recommend guests talk to their hosts to see if they are willing to alter the reservation to take place at a later date.”
Zazueta declined to say how coronavirus has affected Airbnb’s outlook in Southern California or nationally. The San Francisco-headquartered company previously floated making an initial public offering later this year.