PALM SPRINGS, Calif. — The cancellation of the BNP Paribas Open tennis tournament amid the global outbreak of the COVID-19 cornavirus puts more than $400 million in tourism-related business on the line and could deal a significant blow to California’s Coachella Valley hotels, restaurants and local governments in this seasonal destination.
All eyes in the entertainment business are now fixed on April’s Coachella Valley Music and Arts Festival and the Stagecoach Country Music Festival — the desert’s preeminent music events of the year — and whether they will still be held. Combined, those events are believed to generate at least another $400 million in local economic impact. The Ultra Music Festival in Miami and the music, film and tech conferences at South by Southwest (SXSW) in Austin, have been canceled.
One in four jobs in the Coachella Valley is supported by tourism, and the outbreak is happening during the highest-generating revenue months of the year: Beyond the tennis tournament and Coachella, March and April are jam-packed with marquee events including the LPGA ANA Inspiration golf tournament at the Mission Hills Country Club.
A 2017 report from the Greater Palm Springs Convention and Visitors Bureau said that year’s BNP Paribas Open tournament generated an economic impact of more than $406.6 million. In 2019, the event drew 475,000 attendees to the Indian Wells Tennis Garden.
Another study — paid for by the BNP Paribas Open and conducted by George Washington University in October 2017 — showed more than $262 million was spent by out-of-town visitors, vendors, sponsors and the tournament organization to businesses in the region.
How big of a hit the cancellation will cause remains to be seen — but it will be felt, experts say.
“It’s a loss for everybody,” said Tom Chang, an associate professor of finance and business economics at USC. “It’s absolutely brutal.”
Chang estimates that the tourism industry will take a significant immediate loss with the tournament’s cancellation. He said it will mostly affect hotels, restaurants, residents who rent their homes out, and particularly small businesses that rely on the seasonal economy.
Some big businesses that can absorb the revenue loss will move forward as usual, Chang predicted. But those that will be hurt significantly are those that do not have the financial buffer to withstand a bad month with unexpected losses. Some of those businesses could go under in those circumstances, Chang said.
“If you’re a deep-pocketed hotel, you survive the economic hit,” Change said. “It’s the little guys who might not be able to hold out for a year when these big events come back that are going to be most affected. The small businesses that rely on these events to make it into the black for the year.”
A spokesman from the tennis tournament reached on Monday said that he would not comment on the cancellation beyond the event’s initial statement.
In Palm Springs, some hotels have already taken a hit from other coronavirus-related cancellations: On Friday, a portion of an annual, long-running conference at the Palm Springs Convention Center slated for this week was turned into a virtual event.
Officials from Esri, a geographic information systems company, canceled the Esri Developer Summit portion of the conference, and all 2,100 registered attendees received refunds.
“Making these adjustments is not something Esri takes lightly,” said public relations manager Jo Ann Pruchniewski. “Our priority remains the health and wellbeing of our employees, partners, and users.”
Aftab Dada, chair of hotel association PS Resorts and general manager at the Hilton Palm Springs, said the cancellation was “a big tumble” for Palm Springs hotels who rely on convention business. Those losses aren’t likely to be recouped, he said.
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And he said the BNP cancellation will be “pretty brutal” for hotels down valley, who rely on the tournament as a major part of their business. This time of year provides income for hotels and workers alike that gets them through the leaner summer months, he said.
“March and April are our two largest” revenue months, Dada said. “The one-two punch, we call it.”
In Palm Springs alone, those two months drive the most transient occupancy tax (TOT) revenue — the taxes on hotel rooms that are a large revenue stream for many valley cities, Dada said. City figures show they accounted for about 23% of all TOT revenue in the 2018-2019 fiscal year.
So far, the next major conference scheduled for the Palm Springs Convention Center is still on, Dada said Monday.
Scott White, CEO of the Greater Palm Springs Convention and Visitors Bureau, said it’s too soon to say how many hotel rooms were canceled as a result of the tournament —some tournament attendees may get their tickets refunded but still take their vacation.
“We’re open for business, and the hotels are here,” he said. “We’ve encouraged people to keep their vacations in place.”
White said that because the Centers for Disease Control and Prevention hasn’t put any travel restrictions in place, the convention bureau is continuing to encourage tourists to come to the area and is looking to increase marketingin markets within driving distance like Southern California, Phoenix and Las Vegas.
A major concern is what the BNP cancellation could mean for workers — many tourism workers have multiple jobs and rely on this time of year for big part of their income, White from the Convention and Visitors Bureau said. His agency is urging landlords and utility companies to work with people who may have an income dip and consider payment issues on a “case by case” basis for the next four to six months.
“A lot of these individuals earn the majority of their income in the first four months of the year, which is now going to impact them in June and July,” White said.
As for the Coachella and Stagecoach music festivals — set for three consecutive weekends starting April 10 — Tom Corley, the vice president of Front Row Insurance in Nashville, said that it is unlikely that any entertainers, who generally will take out insurance policies for liability, could get insurance reimbursement for a coronavirus-related cancellation.
The organizers of such events also have insurance policies, which may or may not have a clause that kicks in for a government-mandated cancellation.
“Civil acts like riots, strikes and so forth can affect the policy, but it depends on the policy,” he said. “That’s what would have to happen for Coachella or any large festival. They won’t do it themselves unless they see the government is going to shut them down.”
On Friday, the Austin Chronicle reported that South by Southwest co-founder Nick Barbaro, who is also the paper’s publisher, said the event didn’t have insurance covering a disease outbreak or the city’s declaration of a “local state of disaster.”
The 2017 Coachella festival drew about 250,000 visitors to both weekends, plus another 75,000 people for the following week’s Stagecoach Country Music Festival. The combined 2017 regional economic impact exceeded $403 million, according to the 2017 report from the Greater Palm Springs Convention and Visitors Bureau.
Overall, tourism had a $7 billion economic impact on the region, according to the 2018 report from the Greater Palm Springs Convention & Visitors Bureau. Around 13.6 million visitors generated about $5.5 billion in spending, which contributes taxes that amount to about $3,700 in savings per household in greater Palm Springs, the report said.
Chang, the USC professor, said local businesses are right to be concerned if Coachella were to be canceled.
“BNP is huge. Coachella is even bigger,” said Chang. “These things represent a significant portion of the economy of the entire region. To have both of those events go away is, I mean, I don’t know what scary word you want to use but it’s not a pretty picture.”
Andrew John covers the BNP Paribas Open for The Desert Sun and the USA TODAY Network. Email him at [email protected] Melissa Daniels covers business and real estate in the Coachella Valley. She can be reached at (760)-567-8458 or [email protected] Follow Melissa on Twitter @melissamdaniels. Desert Sun arts and entertainment reporter Brian Blueskye contributed to this report. He can be reached at [email protected] or (760) 778-4617.