The effects of the coronavirus are starting to be felt in Orange County’s tourism and hospitality sector.
Natural Products Expo West, a nutrition and wellness-focused trade show that typically brings in north of 85,000 visitors to Anaheim, was postponed the day before it was due to begin, after pushback from attendees, many of whom had already pulled their involvement due to concerns over the virus.
The show is the second-largest trade event annually at the Anaheim Convention Center. Its economic impact on the area is in the $100 million range, sources tell the Business Journal.
“Everyone in the city will share in this loss, from the hotels, to the restaurants, to the attractions,” said Jay Burress, president and chief executive of Visit Anaheim.
Event organizer New Hope Network alerted attendees of the cancellation—and potential rescheduling—on the evening of March 2. The show, in its 40th year, was scheduled to run March 3 to 7.
“It is clear, despite continued advice from local government and health authorities that the city of Anaheim remains open, that the majority of our community wants the show, but they do not want it now,” the Boulder, Colo.-based organization said in the statement.
Also postponed: the eighth annual World Patient Safety, Science & Technology Summit, scheduled for March 5 and 7 at Waterfront Beach Resort in Huntington Beach.
The healthcare-focused event, the brainchild of Masimo Chief Executive Joe Kiani (see front-page story), brings in hundreds of executives and was to again feature Bill Clinton as a keynote speaker.
“We all believe in, ‘First, do no harm,’ the group said on Tuesday. “Out of an abundance of caution and to live up to our values and principles, we will be postponing [the event].”
Dropping Out
News of the postponed Anaheim event came just days after New Hope said it expected 40% to 60% lower attendance for this year’s show, and had requested travelers from China, Iran, South Korea and Italy not to attend.
More than 3,600 companies from 132 countries were initially anticipated to participate.
Nestlé and Unilever are among larger food companies that had pulled their involvement; notable buyers that canceled prior to the event’s postponement include Whole Foods Market, HEB and Costco, among others.
Additional last-minute cancellations came in the days leading up to the event, with a majority of participants pulling their involvement before the event was nixed.
Some attendees still showed up to the convention center on the first day of the show, according to Anaheim spokesperson Mike Lyster, who was on-site.
“Most attendees would have shown up on Thursday,” a busier day for the show, Lyster said.
“But many, including those traveling farther distances like from Australia or New Zealand, planned to arrive earlier.”
“People are making the best of the situation, with some making arrangements to meet with buyers in the area,” he said.
40,000 Room Nights
It is a far cry from what would have been a busier-than-usual week for the city.
The event generates at least 40,000 room nights for Anaheim, with 11,000 room nights occupied on the show’s peak day, according to Burress.
Cancellation fees and policies for the area’s larger hotels vary. Larger blocks of rooms are often booked with insurance policies covering cancellations, officials say.
The Anaheim Convention Center campus is the hub for this economic activity, with the three area nearby hotels capturing a bulk of the room nights from the event. They include the 1,574-room Hilton Anaheim, the 1,030-room Anaheim Marriott and the 486-room Sheraton Park Hotel.
Combined, the three properties include more than 3,000 rooms and close to 300,000 square feet of meeting space on a convention center campus that a few years ago wrapped its own $200 million expansion and upgrade—adding 200,000 square feet of space, called ACC North, to top 1 million square feet, all-in.
But with an event of this magnitude, virtually all of the hotels in the city had reservations on the books.
“The economic impact relates to not just hotels, but everyone in the city,” Burress said.
New Hope is currently working with the city to determine a later date to hold a replacement show, though it is expected to be significantly smaller.
“It is our intention to deliver a Natural Products Expo West event before the summer to serve the community, either in Anaheim or a suitable alternative location,” the company said.
It added that it is working on issuing a rebate fund of $5 million to exhibitors and attendees, “with particular focus on the many entrepreneurs and small businesses who are the heartbeat of this community.”
Cautious Companies
The cancellation occurred at the time when there were no active coronavirus cases in Orange County; though many companies have elected to cancel all non-essential travel as a result of the outbreak.
“There has been a lot of fear, a lot of misinformation,” said Burress. “Companies made the choice based on an internal decision, not because the city was shut down.”
Additional trade shows across the country have been canceled in response to the coronavirus, and leisure travel is expected to take a hit, too.
A news report by the U.S. Travel Association suggests that international inbound travel to the U.S. will fall 6% over the next three months, which would be the largest decline in international inbound travel since the 2007-2008 financial crisis, according to the Leading Travel Index.
Vince Battaglia, a Fullerton-based business owner that tracks dates and attendance figures for trade shows, said he’s counted about 70 events that have been canceled or rescheduled over the last two months because of the virus.
“We didn’t anticipate this to affect trade shows in the U.S., and it is hard to tell what this means for the industry,” Battaglia told the Business Journal. “It’s already lost quite a bit of money, and now we are wondering how long it will last.”
Battaglia, who has been in the trade show industry for 25 years and operates thetradeshowcalendar.com, can’t remember a time when something has caused this many cancellations across multiple continents.
“We’ve seen it on a smaller scale, with natural disasters or political unrest, but nothing that has caused mass cancellations internationally and locally,” Battaglia said.
The city said it is expecting to see “ripple-down effects from this decrease in business,” but isn’t forecasting long-lasting negative effects, said Lyster.
“We are a broad-based diversified visitor market that isn’t dependent on any one show or business. We will see some impact locally, but we are fortunate that we have been through situations like this before and we are prepared to deal with them,” he said.
Falling Stocks
Another meetings and events entity in Orange County has experienced a different type of fallout in recent weeks.
San Juan Capistrano-based Emerald Holding Inc. (NYSE: EEX), an owner and operator of trade shows, has seen a sharp sell-off of its stock over the past two weeks, falling as much as 43% to a new 52-week low of $6.14. Its losses were among the most of any OC public company in the last week of February, when nearly every area company’s stock took a hit.
In a recent earnings call with analysts, Chief Financial Officer David Doft said the roughly $420 million-valued company “has been paying close attention” to the coronavirus.
“Fortunately, our events, unlike others in the industry, are entirely produced in the United States, which minimizes the risk,” Doft said.
“Nevertheless, last year, 2% to 3% of our revenues came from Chinese exhibitors, which must be viewed as at risk until the virus is under control.”
He added that the company is looking into ways to insure itself against future cancellations caused by the virus, or related travel bans.
“We hope that the financial impact will be minimal,” Doft said.
Sunstone Losses
A similar hit was felt at Irvine’s Sunstone Hotel Investors Inc., a real estate investment trust that owns hotels across the country.
The company (NYSE: SHO) last Thursday announced that “due to uncertainty related to the ultimate impact on travel demand resulting from the COVID-19 virus outbreak,” it would be withdrawing its first-quarter and full-year 2020 guidance.
Shares in Sunstone are down some 30% from late February, giving it a market value of about $2.3 billion.
In mid-February, as part of the Sunstone’s full-year 2019 earnings report and call with analysts, it said it expected about $1 million of lost revenue resulting primarily from known group customer cancellations related to the coronavirus.
“Since the time this guidance was provided, the company has experienced a material increase in expected lost revenue from group customer cancellations, which, as of today’s date, have increased to approximately $11 million,” it said last week.
None of its hotel properties are in Orange County.
The majority of the lost revenue is related to business that was scheduled to occur in March, it said.
“Since the time of our earnings call, we have witnessed a sizeable increase in both group cancellations and corporate travel policy restrictions related to COVID-19, both of which are expected to reduce our near-term occupancy and hotel revenues,” said John Arabia, Sunstone’s president and chief executive officer.
