The path to recovery: How the worst-hit industries are overcoming COVID-19

Theaters, festivals, amusement parks — these are the businesses that thrive on bringing people together. So what happens to these businesses when people are forced at least six feet apart?

According to recent QuickBooks research , the recreation industry is down 20% year over year, or $43K per organization, on average. Bowling alleys are the hardest hit by COVID-19 of all businesses in the recreation industry, with annual revenues down by an average of $251k per business. As it turns out, none of us really felt comfortable wearing shared shoes or using community bowling balls last year.

But bowling alleys aren’t the only entertainment businesses to suffer. Theme parks shut down, concerts were rescheduled (and re-rescheduled), and theaters across the country closed their doors. Movie attendance, which had remained steady at over 1 billion per year for several decades, dropped to 240 million —an all-time low. Today, movie theaters are still down more than 50% year over year or $144k per business.

Like thousands of others struggling to keep afloat while their doors were closed, these recreation industry businesses had to find new ways to reach customers. For some, that meant either going digital or getting outside. For others, adapting to an era of social distancing proved much harder.

Digital experiences reign supreme

For many entertainment and recreation businesses, surviving 2020 meant offering digital options that would allow consumers to enjoy playing games, watching movies, and attending concerts from home. New movie releases skipped theaters entirely—allowing moviegoers to enjoy box office hits without the box office. Concerts and events streamed live from empty venues direct to our TVs, and consumers spent a record amount on video games. All in all, digital entertainment revenue in the US grew more than 33% year over year.

But what about the small businesses that don’t have such an obvious digital extension? Businesses like bowling alleys, gyms, independent cinemas, or escape rooms that rely on in-person participation?

“COVID brought our business to a halt,” said Les Pardew, Founder of Mystery Escape Room . “We started as an in-person escape room where four to twelve people—sometimes total strangers —are enclosed in the same room. When the pandemic hit, the government ordered us to close all our live locations.”

Pardew knew that his business would have to pivot, and fast. Fortunately, he was already working on a virtual experience that could bring teams together, even if they weren’t physically located in the same place.

“I used my background in developing video games to develop new ways for people to virtually enjoy all of the aspects of an escape room,” he said. “I was just beginning to feel good about our virtual rooms when the pandemic hit and the online escape room adventure was the only product we could still sell. It saved our company.”

Mystery Escape Room has since developed a handful of online escape rooms for adults and children alike. And their business is thriving because of it.

“I think that the real magic of the online adventure is that it’s won us an international market,” said Pardew. Digital Mystery Escape Room events are now hosted in more than 40 countries around the world—a far cry from their first physical location in Utah. “Some of the biggest companies on the planet are coming to us and using our escape rooms for team building events,” he said. “We are attracting customers who would have never been able to experience an escape room.”

For some, the pandemic serves as a lesson in future-proofing

Pardew was fortunate to have time and experience on his side. He was already working on a virtual experience when the pandemic hit, and thanks to his background in video game development he had the skills he needed to do it himself. But other small recreation businesses weren’t so lucky.

Bowling alleys, independent theaters, and gyms struggled to think of ways to digitize their experiences. But virtual meet-ups and on-demand classes could only get them so far. Additionally, many of these companies had just a few weeks to pivot their business plans or create new experiences before they ran out of cash. A recent study by JP Morgan found that small businesses have an average of 27 cash buffer days in reserve. But a quarter of small businesses have less than 13 days worth of cash on hand. The sad reality is that many businesses simply couldn’t pivot fast enough.

With more time and more money, perhaps more businesses could have thrived. The pandemic, while impossible to foresee, served as a harsh reminder to small business owners to create a cash reserve (three to six months is the recommended amount), to have a contingency plan in place for unforeseen events, and to start now, before it’s too late.

Movies and more find success in the outdoors

Mystery Escape Room is just one example of a small business making big changes to adapt to a digital world. Bartenders took to social media to teach on-demand bartending classes. Personal trainers continued training their clients on YouTube and Zoom. And musicians relied on live streams to bring in an audience.

Of course, some things simply can’t be projected on a screen. Even the best virtual reality headset can’t replicate the feeling of flying down a snowy mountain with a snowboard strapped to your feet, or the sun on your skin as you lounge beachside. Fortunately, these types of activities are socially distanced by their very nature—literally. As such, outdoor recreation—things like skiing, golfing, and camping—flourished in 2020.

“Recreation was highly impacted by the pandemic,” said Julie Singh, co-founder of TripOutside . “But it was overall a very positive impact. As sporting events, festivals, concerts, and even bars shut down, people turned to the outdoors for entertainment, fresh air, and a boost to their mental health.”

Singh’s business saw a big spike in demand for biking, paddle sports, ski tours, rentals, and lessons throughout 2020. “All activities that provide people with a way to get active and enjoy the outdoors while staying socially distant,” she said.

Beyond that, unconventional outdoor venues (like drive-in movie theaters) saw a spike in popularity for the first time in decades. To accommodate the surge, many drive-ins expanded their viewings to include concerts, stand-up comedy, and more.

Looking ahead, it’s unclear if consumers will continue to turn to the great outdoors for entertainment and recreation when things like Netflix and Nintendo are just a button push away. But Singh says, for now, outdoor activity providers will continue to see strong demand for their offerings.

Embracing the new normal

In many ways, digital experiences can’t replace the real deal, but experts believe virtual reality is here to stay, even when social distancing is a thing of the past. At least, to some extent. Why go to the gym when the gym can come to you? Why go to a theater when you can stream box office hits from home? (That one is easy: for the popcorn).

Consumers have adapted to and come to appreciate the convenience of online shopping, food delivery, and grocery pickup. The use of online entertainment platforms like video streaming services and video games has skyrocketed, and consumers are hesitant to resume “regular” activities in shared spaces like gyms and restaurants once restrictions have been lifted.

Moving forward, creating an omnichannel business model, one that operates in person and online (to some extent), may be essential to success. Rather than keeping us apart, these digital recreation activities have the power to bring people closer than before.

Creating digital experiences has allowed Pardew and his business to bring more people together than he ever thought possible. “We’ve been able to help people fight isolation,” he said. “We can bring together families, companies, or coworkers, and connect them wherever they are.”

Looking to the future, Pardew says they’ll continue to develop both online and on-site experiences, monitoring health guidelines and adjusting accordingly. But it’s safe to say his online adventures aren’t going anywhere. “The pandemic has been hard,” he said. “But the silver lining is that it forced us to find new ways to serve more people.”

How essential is in-person learning? This has been the subject of much debate since the onset of COVID-19. Can students really learn over Zoom? And can teachers really teach when their classrooms sit empty?

For educators and small business owners in the education industry, the debate goes far beyond the effectiveness of virtual learning. It’s a matter of survival.

In 2020, stay-at-home orders forced thousands of small businesses to shut their doors. And while essential industries like utilities and agriculture continued to perform well, students across the U.S. were locked out of their classrooms — their teachers forced to adapt as best they could.

According to a 2021 QuickBooks study , education-based businesses like tutoring companies, specialty schools, and foreign language learning were among the hardest hit by the pandemic. Revenue across the education industry is down 11% year over year or $24k per organization. Elementary schools and secondary schools suffered the brunt of it. These establishments are down 16% year over year or $38k per organization.

And while some industries have already embarked on the road to recovery, educational services are slow to return. In New York, for example, the education industry continues to experience notable job loss well into 2021.

These revenue and job losses are impactful, but these businesses lost more than just money.

The challenges of virtual education

On March 11, 2020, Cynthia Hinkleman, a music instructor from Palm Beach, Florida, heard a news story about the coronavirus reaching American shores.

“I made the decision that night to cancel everything,” she said. Hinkleman has an autoimmune disease that puts her at higher risk of contracting the coronavirus, and her husband just turned 80. They weren’t taking any chances. “Basically, for the entire year and a half, we didn’t leave our house,” she said.

But Hinkleman’s business, Lighthouse Suzuki Strings , relies on in-person, hands-on music lessons. She has students ages 4 to 82. “With the Suzuki method, we create an environment,” she said. “The students watch other students play, they hear the music. Their brain learns the music first which makes it easier for them to physically learn it.”

Without the in-person instruction, her client base suffered. “27 students stopped lessons because of COVID…because we were going to online lessons,” she said. “We had some adults that stopped, but quite a few children. Young children weren’t able to continue because they really need hands-on, physical learning.”

Unfortunately, Hinkleman’s story isn’t unusual. Jim Waldman, owner of Tutor A+ Team , a one-on-one tutoring company out of Virginia, echoes her sentiments.

Waldman works with more than 60 tutors to cover all topics and all ages. Typically the tutors meet with the clients in person, either in their homes or at the library. Waldman himself meets with every new client in person before they sign on with a tutor. He firmly believes that in-person tutoring is best. “Everything is face to face,” he said. “Everything is one-on-one.That’s the most effective type of tutoring. There’s nothing better than having a tutor sitting at the table.”

But when COVID hit, things changed.

“We did not do as much business as we would have done if the pandemic didn’t happen,” he explained. Along with the decrease in new clients, Waldman’s business lost some existing clients due to financial difficulties or struggles with online learning.

Like Hinkleman, Waldman found that virtual learning simply didn’t work for his youngest clientele. “We can keep their attention for about 45 seconds,” he said. “After that, the computer becomes a toy, not a learning instrument.” Waldman’s company did what they could to meet with these clients safely, but families who depended on virtual learning slowly dropped out.

But for Waldman, losing a few clients isn’t his biggest concern. He’s more worried about the long-term repercussions the education industry might face in the aftermath of 2020.

Lasting impacts on the widening achievement gap

“My biggest concern is what’s going to happen in September,” said Waldman. He’s worried that students, especially elementary-aged students, are going to struggle—and their teachers along with them. “Their teachers are going to expect them to know what they were supposed to have learned the previous year. When they don’t, the teacher has two options: Spend time trying to get these kids up to date on their education, or forge ahead with their lesson plans. Sometimes there’s just not enough time. So this is going to be a major problem for a while.”

And education experts agree: the shutdowns caused by COVID-19 could widen the already troubling achievement gap. While all students are at risk of significant learning loss due to the pandemic, the loss will be greatest among low-income students who are less likely to have access to high-quality remote learning, high-speed internet, or even a quiet space to learn.

Looking forward, low-income students may fall behind by more than a year — exacerbating the existing achievement gap by up to 20%.

“The impacts of the COVID pandemic on learning, including remote education, have been among the most significant factors contributing to a widening achievement gap that I have seen in my 30 years as a scholar and educator,” said Dr. Deb Geller , Associate Dean of Students at UCLA.

Kathryn Starke, the founder of Creative Minds Publications , an educational literacy consulting company, agrees. “Our youngest students in elementary school have experienced the greatest gaps in the foundations of reading, writing, and literacy. Remote learning is a challenge for children learning to read who require hands-on manipulatives, books in hand, and one-on-one differentiated support,” she said.

According to Geller, even college-aged students were met with significant hurdles as they transitioned to online learning. “As campuses closed, many students had to return to their family homes, where they might not have a private space to study or attend virtual classes,” she said. “Some lacked the technology and reliable internet access required for their classes. Beyond that, faculty had to learn to teach remotely, and not all responded well to that challenge.”

Starke sums it up best, “We have lots of work to do for all students when schools resume in person.”

But for educators everywhere, “in-person” will look a little different than it did before.

Hybrid education models emerge

After more than a year of quarantine, Hinkleman is starting to meet with students face-to-face—at least as close as it gets in a post-pandemic world. “I was cautious about going back to being with students,” she said. “We meet in a large room, there’s a plastic screen, we wear masks and the classes are lighter.”

While Hinkleman navigates the tricky return to in-person learning, some educators believe the pandemic has taught some hard-earned lessons about the future of education.

Dr. Brent Goldman, CEO and co-founder of Xceed Preparatory Academy , a hybrid school, believes that traditional schools can learn some valuable lessons about virtual learning and the benefits of hybrid teaching—pandemic or not.

“There’s definitely a need for long-term hybrid and virtual approaches in education,” he said. He believes that traditional school models that cater to larger and larger student populations with diverse needs don’t work for today’s students.

Throughout the pandemic, as his students made the switch to hybrid or fully virtual learning, Goldman discovered more benefits than disadvantages. “[The students] liked being able to focus on their schoolwork at their own pace or without the social drama they had at their former school. There is not a one-size-fits-all education model, and parents and students are now aware of the choices out there.”

In fact, some experts believe that adopting a hybrid learning approach and improving remote learning opportunities will not only shorten the length of disruption for students (decreasing the loss in learning due to COVID-19 from 10 months to six months ) but also have a meaningful impact on existing achievement gaps going forward.

For Goldman, 2021 is an opportunity to make long-awaited changes to the industry. “The traditional model of education is antiquated and we need to re-examine the methods in which students are being taught and how they actually learn.”

After all, traditional education structures were established in the 18th century, and they haven’t changed much since. For example, the traditional summer break was adopted to give children a reprieve from sweltering classrooms void of air conditioning. However, for today’s students who struggle with learning, either virtually or in-person, a long summer break can be devastating to their progress.

Knowing this, some schools have experimented with shifting school calendars. Others are considering scrapping grade levels and focusing on proficiency-based learning. As educators everywhere figure out how to catch up on lost time from the COVID-19 pandemic, the possibilities are endless. And education experts agree: “Perhaps the COVID-19 crisis can be a catalyst for innovation.”