A microscopic bug has halted life around the world as we know it, and we are once again forced to contend with the fact that at any time, despite all our advancements in technology, that Mother Nature still has a few tricks up her sleeve and can shut us down in an instant.
COVID-19 has emerged as the big story in 2020 and Mother Nature’s latest ace in the sleeve. It is highly contagious without a known cure (yet), and has forced the world into quarantine mode. Culture as we know it has changed, and social distancing may be a new normal for the unforeseeable future. These realities are having an effect on the global economy that may last for many years to come.
Below are my high level observations and thoughts on the state of a few industries in the midst of the COVID-19 pandemic (all subject to change in the future):
The CDCs restrictions on travel to China and Iran, followed up by the President banning incoming travel from a swathe of countries in Europe, and apprehensive consumer sentiments toward flying have all but crippled the airline industry. Truth be told I myself was supposed to board a connecting flight to Dubai then India, and had to cancel my business trip the night before due to COVID-19 concerns. Stories like mine have been on the rise: in the first week of April scheduled flights dropped 45% in the US, and by even higher rates in Europe and Asia:
With flights grounded, pilots flying empty planes, and agencies like the IATA projecting revenue losses of over $250 billion in 2020, these are grim times for the airline industry and every vertical connected to it. President Trump’s $2 trillion CARES recovery bill may serve as a cushion for workers in the industry, but it may be years before the airline industry can fully recover.
The car rental industry which is closely connected to the airline industry is having its share of challenges. Less people flying means less people renting cars, the main source of revenue for car rental powerhouses like Hertz. Work from home policies and general hesitance of consumers to be outside means less domestic rentals. These trends have taken their toll. The American Car Rental Association Group reported that car rentals have dropped by 80% since the Coronavirus outbreak. Depreciated demand means less cash flow for car rental companies to make fleet lease payments to banks and finance companies, and if these trends hold, car rental companies may have to sell their fleets to offset liabilities on their balance sheets.
Distance learning/homeschooling is a new normal, and this will present the opportunity for parents to really get involved and shape their children’s learning curriculum if they weren’t doing so already. On the flip side, this new norm may prove worse for children from low income families with parents who may not have the luxury of working from home, leaving the child without a structured environment to develop. School funding might also take a hit, and we may see extracurricular activities slashed especially in low income districts. From a commerce perspective, vendors that normally cater to schools (construction contractors, food, games, etc) will all be impacted by the Coronavirus and incur losses.
Most major banks are set to remain stable for the foreseeable future, examples being Bank of America and Citigroup pledging to retain their staff through 2020 even as retail branch locations across the country are forced to close. The Corona Pandemic is resulting in layoffs, and people are concerned about making mortgage and credit card payments (check out the below screenshot I pulled from from Google Trends that shows searches for “deferred payments” spike right around the time the President declared a national emergency:
People are concerned about staying afloat, so expect banks and financial service companies to prioritize solutions in this area. Digital banking solutions like mobile deposits, loan processing and transfers will also take center stage, as banking retail branches close. With increased digital activity and the uncertainty of this climate will inevitably come another threat: fraud. Events like the Coronavirus present lucrative opportunities for scammers (e.g. fake bank profiles, phishing emails, enticing business fraud schemes, etc). From a tech perspective, expect to see more banks and financial service companies tapping into AI based anomaly detection solutions in the fight against fraudsters.
The advertising industry was in a state of flux even before the Coronavirus pandemic began, as there was already a growing trend for companies to move services and talent in-house. The Coronavirus has only amplified this trend, and as companies slash marketing budgets to save face and overall ad revenues plummet, expect to see the advertising industry take a big hit. The net impact on agencies will vary by the industries they cater to, and if this pandemic holds out, expect the ad industry to incur more losses in personnel and accounts. Some agency executives are gambling that this trend will subside if the Coronavirus pandemic is resolved within the next few months, but that remains to be seen. This climate may have an interesting effect on office culture in an already competitive industry, as staff may compete to prove their worth and remain billable. From a client services perspective the smarter agencies will invest resources to understand current and upcoming shifts in consumer behavior, create out-of-the-box solutions and advise their clients on the best marketing mix and spend/budgets pre and post this new normal.
One hot topic in the insurance industry has been with small businesses trying to cash in on their “small business insurance coverage” for events like the Corona pandemic. This could have potentially put insurance companies in the red, but after the SARS outbreak (2002–2004) an amendment was made to the law that excludes insurance companies from paying small businesses for “losses or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.” This same theme may also carry over with respect to the Corona virus and Life Insurance policies. The number of confirmed cases from the Coronavirus in the United States as of the time of me writing this article stands at 434,856, and the death toll stands at 14,811 (these numbers change rapidly). While the rate of deaths is lower in the US than in other countries, the volume of deaths is astronomical, far exceeding the SARS outbreak and on a global scale currently outpacing the Ebola outbreak in deaths by a whopping 691% (78,125). The rise in Life Insurance applications across the US affirms consumer sentiment regarding death from the virus, and if death rates increase, insurers may start including corona exclusions on new policies as they may not be able to handle payouts on a wide scale. Another interesting trend to observe in the months to come will be the impact of the Corona virus on Auto Insurance products, as people are driving less and may seek discounts during this period (less driving means lower mileage use and less accidents claims). Some big name insurers are already discounting car insurance premiums. Others are offering options to pause payments and policy cancellations.
The race to develop a vaccine and cure for COVID-19 largely sits within the pharmaceutical industry, and whichever company makes that breakthrough first will make alot of money. With human testing already underway with some companies and over 20 vaccines in development, it may not be long before breakthroughs are seen in this area. It is encouraging that progress has been made in the race to develop a vaccine, but even then, with many people around the world still not observing social distancing (outside of the general populace, think of institutions like prisons where social distancing may be tougher to uphold) and with all the protocols that will have to happen to ensure vaccines are efficiently served to the public, realistically it may be years before all strands of the virus are fully contained. Alot of pharma companies are using government funding to support vaccine research, and as it stands pharma companies may have exclusive rights to set prices and market the vaccines produced with taxpayer dollars once they are ready. These will likely become hot topics in the months to come.
As if Kobe Bryant’s passing wasn’t bad enough (miss you, Kobe), the sports world was dealt another painful blow in the form of COVID-19. Without even looking at other channels, broadcasting advertising revenue is projected to incur losses of at least $1 billion across the NBA, NHL and MLB. The cancellation of March Madness (a tournament that generated $933 million in 2019) and other college tournaments within conferences will be felt across campuses. The NFL may have temporarily dodged the bullet as their season ended in February, but if quarantines extend till September, they too might feel COVID-19s wrath. In combat sports, the UFC has received its share of criticism for how they are handling the pandemic. UFC 249 is scheduled to happen in a closed arena (it doesn’t have to follow state mandates to shut down because its happening on Tachi Yokut tribal land), but it is very likely that Dana White may be forced to cancel that event if public outcries from California Senators like Dianne Feinstein gain momentum. I’m not going to lie to you, on a personal note I was REALLY looking forward to watching the Khabib vs Ferguson fight, but I respect Khabib’s decision to pull out of the fight for COVID-19 reasons.
- This is a good time to own stocks in the cleaning and disinfectant industry. Clorox stocks are projected to report YOY growth of 6% with earnings per share in May. Who would have thought there would be a time in America when Lysol cleaning wipes would would be hard to find in grocery stores?
- The entertainment industry is going through a stressful period: SXSW canceled back in March, an event that drew in $355 million for Austin Texas in 2019. Multiple film premiere’s have been postponed. “Uncharted” a movie I was personally looking forward to watching will be released next year along with other movies from Sony Pictures. Production for movies like Mission Impossible 7 and The Matrix 4 have all been halted. Broadway is practically a zombieland, with theater shutdowns now extended through June.
An uncertain future with lots of questions
What is the world going to look like post this pandemic? How will the industries most affected by this pandemic recover? What sort of legislation battles will we see in the future? What will become of the thousands of restaurants, gyms and brick and mortar stores that may have to shut down? Will we slip into another major recession? If we are already in a recession, how long will it hold? What will happen to the nations debt if layoffs continue and confidence is not restored? What will happen to the concept of religious worship in churches, mosques and synagogues? Will memberships and participation wane if worship goes online for an extended period of time? What will happen to the standard of education? Will homeschooling become a new normal? How will that affect single parents and the family dynamic? How will this pandemic affect the income-inequality gap? How will this pandemic change how humans engage with the online world en masse? What will happen to how the United States approaches medical care (will it ever change from a profit first based model)? What will happen to the concept of targeting in marketing? Will we see new targeting segments emerge as a result of this pandemic? How will this situation affect heavy topics like suicide rates and mental health?
There are so many unanswered questions about the future that there are currently no answers for as industries and individuals alike adjust to this new normal.
These are certainly interesting times. There are winners and losers across each industry, and as this pandemic drags along, the companies, organizations and individuals that adapt, remain disciplined, have the right perspective and come up with out-of-the-box solutions will emerge as the winners. There will be positive innovations that will come out of this experience. New technologies, products, services and processes will be developed. We will learn more about ourselves. But there will also be pain and a reckoning with some harsh realities. People are dying. People are losing jobs. Segments of society which have had to deal with discrimination are being disproportionately affected by this pandemic. Legacies are being lost.
The world is literally being put through a forced reset. Hopefully on aggregate we will come out of this better than where we were before.
About the Author
This article was written by Ben Hinson, creator of the GOAT Index, Gorgeous!™ cases and Hickam’s Dictum. Learn more at www.benhinson.com