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Purple Tier Pushback as Holidays Loom

When Orange County was forced to revert to the most restrictive purple tier last week due to a new surge in coronavirus cases, many local businesses had just 24 hours to scramble and adjust their operations to remain open.

Those that could were among the fortunate ones. Many notable businesses shut down—again—just two months after reopening.

Notable closures included gyms, with indoor operations prohibited under the purple tier.

Irvine-based LA Fitness, the country’s largest gym operator and OC’s 11th-largest private company with annual revenues in the $2 billion range, sent an email to members last Monday following news that the region, along with Ventura County, had been placed back in the purple tier.

“While we believe that we have been operating our clubs in a safe and responsible manner, we will temporarily close the clubs” in Orange and Ventura County, the company said.

Orange County was one of 38 counties placed in the most restrictive first tier in August, when California rolled out its new monitoring system, representing 87% of the state’s population.

After improving metrics, including fewer cases and a lower positive testing rate, OC moved into the second tier on Sept. 8.

In an “emergency” move made last week by Governor Gavin Newsom, Orange and Ventura were forced to join many other state counties in the purple tier (see story, page 14).

Now, there are 41 counties in the purple tier, representing 94% of the state’s population.

Pushback has come from both businesses and other elected officials.

The “unilateral move by Governor Newsom is troubling and harmful to Orange County families who need to put food on the table, to small business struggling to stay open,” Orange County Supervisor Michelle Steel, just elected to the House of Representatives, said in a statement.

“This one-size fits-all approach threatens the livelihoods of our residents.”

Restaurants, Retail

Restaurants, gyms, movie theaters, churches, museums and other businesses were allowed to reopen indoor operations in September when OC moved to the second, red tier following improving metrics.

That changed last Tuesday, with indoor operations prohibited in the purple tier for these businesses.

Retail stores, indoor malls and libraries now must limit capacity at 25%; grocery stores can open at 50% capacity.

The moves come just before Black Friday and the traditional start of the holiday shopping season.

It will be a challenge for South Coast Plaza to limit traffic to those levels during such a traditionally busy week, Anton Segerstrom, general manager of South Coast Plaza West, told the Business Journal last week.

The largest mall in Southern California has spent much of the year rolling out new features to safely accommodate shoppers at the luxe center.

Economic Impact

“Tighter restrictions are going to hurt Orange County’s economy [as well as] the state,” Anil Puri, director of the Woods Center for Economic Analysis and Forecasting at California State University-Fullerton, told the Business Journal.

Puri added that “retail sales, restaurants and small businesses will feel the worst impacts, and the slowdown could last several months.”

A stimulus package in December could help to offset severe job losses, Puri noted, who also projected a lower-than-expected GDP growth for Q4 2020 because of the new restrictions.

Mona Shah, president of public relations firm Moxxe PR, said several of her restaurant clients have been making investments in recent months to operate outdoors, but capacity requirements will “be a blow to businesses during the holiday season.”

“Many restaurants can make up to 25% of their annual revenue going into holiday season,” said Shah, who represents restaurants like The Winery Restaurant and Bar in Newport Beach and Tustin; Fable and Spirit in Lido Marina Village; and Sushi Roku in Fashion Island.

“All of these restaurants have been innovating to meet county requirements,” such as doubling the outdoor seating area and investing in heating and lighting.

“Shutting down indoor operations again will mean staff cuts,” said Shah.

Disneyland Losses

The shutdowns do not bode well for the much-anticipated reopening of Disneyland Resort, the region’s largest economy driver that isn’t able to reopen until Orange County significantly improves its COVID-19 metrics.

The state announced in October that the county would need to meet yellow tier requirements, signaling a case rate of less than one per 100,000 residents, before large theme parks could reopen.

The Anaheim resort, which includes two theme parks, three hotels and the Downtown Disney retail area, all closed on March 14; Downtown Disney has started a phased reopening in recent months and California Adventure last week opened some spots for shopping and dining. The bulk of theme parks remain closed.

Disneyland is OC’s largest employer with 32,000 workers at the start of the year.

Much of that employment figure has been cut in the wake of the closures, with Walt Disney Co.’s park division cutting 28,000 domestic employees in September.

A 2019 study by California State University-Fullerton said Disneyland Resort creates $8.5 billion in economic impact and more than 78,000 jobs in Southern California.

By that estimate, the ongoing closures could mean a loss of nearly $5 billion since March.

Anaheim’s not the only city in OC feeling the hit to its tourism industry; last week the Newport Beach Christmas Boat Parade announced next month’s edition, which traditionally draws more than 1 million people to the city in December, would be cancelled.

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