The past week was not only the most painful for US capital markets since the global financial crisis: it was also the week the US service economy finally died (at least until the coronavirus pandemic is finally under control).
One week ago, when predicting that a coronavirus recession could send the S&P500 to 2,450 by year end - a level that was almost breached last Thursday - Goldman showed that the the most important leisure sectors such as airlines, casino, hotels and cruises, had been clobbered in the market as fears of coronavirus put Americans in self-imposed, or otherwise, quarantine would lead to a hard stop for service providers.
One industry was missing from the chart above: restaurants, and for good reason - for all the panic about a viral pandemic, it appeared that nothing could stand between Americans and their favorite pastime: eating out.
Then everything changed last weekend when restaurant traffic suddenly imploded.
As online reservation website OpenTable Reservations writes on its blog, "reservations stayed stable in February with a big increase on Valentine’s Day. But March brought new health and safety concerns around the world. Looking at comprehensive data from restaurants on our platform — across online reservations, phone reservations, and walk-ins — we note sharp declines over the last week."
The data, which can be pulled here, is unprecedented and shows that starting around last Sunday, when the market crashed, restaurant traffic plunged both around the globe, with the world and US posting a historic 36% Y/Y drop in restaurant traffic...
... a collapse which was most notable among US "epicenter" cities such as Seattle and New York, which both saw traffic tumble more than 60%...
... although according to OpenTable not a single city around the developed world appeared to be spared.
A full breakdown of the ongoing collapse can be seen at the country-level
... state level...
... and most notably, city level, where traffic is a sea of red compared to last year
Keep in mind that changing human behaviors and long-running habits is extremely difficult, which is why it took this long for restaurant use to plunge. However, it will now be just as difficult for "eating out" to get back to normal, and is also why OpenTable, whose entire business model depends on a quick reversal of this collapse has a plea to everyone: please eat out more!
Please support your local restaurants during this turbulent time, as they are a vital part of our communities. Many operate on thin margins and fear staff layoffs and shut downs. Home delivery through the OpenTable app is a good alternative to dining out. Another option is to buy restaurant gift cards for future use.
OpenTable generously "offering" the use of its app as an alternative to dining out aside, the impact of the coronavirus on the already razor-thin margin restaurant industry will be absolutely devastating, and should the self-imposed quarantine last for several weeks, look for a wave of bankruptcies and shutterings as companies, already buried under a mountain of debt, suddenly find themselves with zero new cashflow, and absent a countrywide interest or debt payment moratorium, the US is about to be hit with a tidal wave of small business defaults.