Health Conditions

A harsh winter is coming for the hospitality sector

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Good morning. David Meyer here, filling in for Alan.

I am very lucky to live in a part of Berlin (near the Schöneberg/Wilmersdorf border) that is packed with excellent restaurants. As someone who has worked from home for many years, it is a longstanding pleasure of mine to be able to step out at lunchtime and enjoy one of their affordably priced Mittagsmenü (“midday menu”) offerings.

Indeed, I will make sure to do so again today, right after posting this newsletter, because from Monday all restaurants and cafes in Germany will be closed for at least a month, except for takeout. That’s part of the new lockdown agreed yesterday by Germany’s federal and state administrations, in order to suppress our rapidly ascending COVID case numbers.

Ours is not nearly as harsh a lockdown as that announced yesterday in France—people here won’t be confined to their homes, and shops selling non-essential goods will be able to remain open—but then again our numbers (16,774 new cases yesterday) aren’t as bad as those in France (36,437). Yet.

Berenberg Economics said in a note this morning that the French lockdown could lead to a 3-4{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} GDP decline in Q4; in Germany, the decline will be more like 1{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00}. In both countries, the hospitality sector will be hit hardest.

“I understand the frustration, indeed the desperation, especially in these areas, very much,” said Chancellor Angela Merkel yesterday. She added that restaurateurs who had come up with hygiene and safety concepts over the spring and summer, to tempt diners back indoors, will need them again soon.

That counts as an optimistic view, given our increasing understanding that the coronavirus is largely spread through aerosols (check out this excellent El Pais explainer on that point.) That means any protracted stay in an unventilated indoor space, with other people, is risky even if patrons are spaced out.

Personally, I’ve been eating exclusively in restaurants’ outdoor spaces for the last couple months. Even if this fresh lockdown only lasts a month, as is tentatively planned, that will be tricky in the Berlin winter.

“Without a clear public health plan like a vaccine or cure to the coronavirus, governments are falling back on lockdowns as the primary way to deal with rising infections,” London Capital Group research chief Jasper Lawler said in a note this morning. And uncertainty over how far those lockdowns will need to go, he warned, “means markets may not have fully baked in worst case scenarios—namely insolvency.”

Most (but not all) of the restaurants near my apartment have managed to hang on so far. I fear some won’t survive the winter, and that’s a scenario I unfortunately expect to see playing out across many sectors and geographies.


On a more positive note, Fortune’s 100 Fastest-Growing Companies list is out this morning. On average, companies on the list delivered a 19{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} return to shareholders over the past few years, while the S&P 500 produced just 11{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00}.

This year’s #1, AppFolio, delivered three-year annual revenue growth of 34{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} and earnings growth of 161{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00}.

Tech watchers will be excited to see Netflix (at #5 this year) making its tenth appearance on the list. Amazon makes its fourth consecutive appearance, and seventh overall, coming in at #10 this year. Facebook, meanwhile is making its sixth consecutive appearance, but coming in only at #52.

More news below.

David Meyer

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