Massey's Alison Brook finds there are clear lockdown winners and lockdown losers. She looks ahead to see which industries will emerge stronger or weaker after lockdown

Massey's Alison Brook finds there are clear lockdown winners and lockdown losers. She looks ahead to see which industries will emerge stronger or weaker after lockdown
Photo by Tim Mossholder on Unsplash

While all industries have been affected by the COVID-19 pandemic, it’s clear that some will bear the brunt of the downturn much more than others. Some sectors will be able to rebound quickly and may even see a boost from pent-up demand and government stimulus while others will take many months if not years to recover. Making predictions is fraught in such an evolving situation, however, some early trends are beginning to emerge in New Zealand and around the world.

The lockdown winners

In New Zealand, the industries that have held up to date according to GDPLive include essential utilities like electricity, gas, water and waste services, financial and insurance services and public administration and safety. Globally, streaming services like Netflix and video conferencing applications like Zoom have seen a huge boost in subscriber numbers. Others benefitting from the crisis are e-commerce marketplaces like Amazon, home delivery services and pharmaceutical companies working on testing kits and vaccines.

Video conferencing

As millions of people around the world have been encouraged (or instructed) to work from home, businesses have been relying on video-conferencing to keep workers connected. Zoom has been a clear winner, according to CNBC with 200 million daily users in March, up from just 10 million in December. Daily downloads for the app increased 30 times over based on year-on-year figures.

Online entertainment

A ban on mass gatherings that could last for many more months plus the fact that people are spending a lot more time at home has seen a huge spike in demand for streaming and online gaming.

Home delivery services

Home delivery services have struggled to keep up with the enormous spike in demand precipitated by the lockdown. This demand is likely to continue to build as more goods become available online and while people are still encouraged to stay at home and socially distance.

In Australia, Uber is extending beyond its core taxi and food-delivery services with a broader courier service for packages, medication, and pet supplies.

The losers

Airlines and cruise ships

The effect of the pandemic on the international travel industry has been devastating and dramatic. Airlines will be severely affected by the ongoing border controls which will effectively eliminate international tourism for the foreseeable. The decrease in visitors to New Zealand from China, in particular, will be a significant blow for the industry, given Chinese tourists represent 10.5 percent of total visitors annually.

The International Air Transport Association IATA has said it expects airline passenger revenues to drop by more than half this year and warned that more than 25 million jobs in aviation and related industries are at risk.

The cruising industry has been particularly affected by the pandemic, being associated with many of the early missteps with country border controls. According to the Telegraph, all major cruise lines have now suspended operations. Although at this stage they all propose to restart by mid-year this seems optimistic.

Accommodation and Food Services

The restaurant industry was one of the first industries to be impacted by coronavirus as the government moved to close all restaurants, cafes and bars when alert level 3 was implemented. While some will be able to take advantage of meal delivery and takeaway services as the restrictions reduce, is unlikely that demand will be at the same levels they previously enjoyed. Hospitality NZ President Jeremy Smith told the NBR he predicts up to 70,000 jobs could go from the sector and a quarter of businesses were unlikely to survive.

The hospitality and particularly the accommodation industry will also be heavily affected by reduced international tourism. IBIS research estimates that international visitors account for more than 30 percent of the hotels and resorts industry revenue.

Tourism

Ongoing travel restrictions and a reluctance to travel may mean a permanent dislocation for the tourism industry which pre-crisis employed 8.4 percent of the New Zealand workforce. According to Foreign Policy Magazine, six of the world’s top tourist destinations (by travel receipts) are ranked in the top 10 for coronavirus cases, indicating a potentially strong correlation between rates of travel and spread of the virus.

The opportunity for the New Zealand tourism industry post-pandemic is to recalibrate as a high-value and sustainable model servicing the domestic market, then gradually expanding to the Pacific Islands and Australia.

Events Industry

The pandemic has effectively shut down the event industry as public gatherings and venues are restricted or closed from alert level 1. The latest survey from the NZ Events Association (NZEA) estimates a loss of approximately $100 million for an industry that previously contributed half a billion dollars per annum to the New Zealand economy. The medium-term outlook is also grim as large gatherings are likely to be banned in most countries until a vaccine is widely available.

Bricks and mortar retail

With shops closed in levels 3 and 4 and people largely restricted to their homes, traditional retail is in crisis and will take a long time to recover unless they can quickly move online. According to StatsNZ, March showed heavy declines in purchases in clothing and apparel and consumer durables. Some retail activity was higher than normal as consumers stocked up on food and personal care items, but this spike in expenditure is likely to go back to usual levels in the coming months as spending normalises. From there, consumers who have become accustomed to buying online may permanently adjust their purchasing behaviour.

As we move out of Level 3 the full ongoing effect on a number of industries will become clear, such as:

  • Non-essential healthcare providers, such as GPs and Dentists, who will still present a greater risk of exposure to the virus.
  • Clothing and furniture retailers as these are largely discretionary purchases. Winter season clothing sales are likely to be particularly affected as people need less new season clothing when they are still spending most of their time at home.
  • Commercial real estate, particularly open plan and densely-packed office space may suffer as businesses grapple with ongoing physical distancing requirements for customers and employees.

What happens next?

Reflecting on which businesses and industries will benefit most as the restrictions are loosened, Business Insider suggests in the US at least, those industries that shut down last are also likely to be the ones that will come back first. This indicates manufacturing and construction will be standouts. In New Zealand, the concern is whether government-funded infrastructure projects will be sufficient to balance the cancellation of construction projects and the resulting loss of construction companies.

Once we move into Level 2 for a sustained period the new ways of working and living are likely to become entrenched. At this stage, businesses can come to grips with the new demand patterns after the initial boost resulting from pent up demand.

Those businesses that have used the opportunity of the lockdown period to streamline their business operations and to digitise are likely to be disproportionately advantaged in the medium and long term.

Whatever happens in the rapidly evolving global landscape, it is clear that few industries will return to normal any time soon.


*Alison Brook is from the Knowledge Exchange Hub at the Massey University campus at Albany, Auckland. She is on the GDPLive team. This article is a post from the GDPLive blog, and is here with permission. The New Zealand GDPLive resource can also be accessed here.

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28 Comments

a lot of little food shops will disappear, couple of reasons, they are low margin and only survive on foot traffic, discretionary income, low cost employees, all of which will decrease. just drive down dominion road shop after shop selling a similar thing
the ones that survive will get stronger as they pick up the customers that are still around, and in the future when we get back to normal new ones will appear and unless we change policies it will look the same as now in five years just different names on the front of the shops

it will be interesting to see what happens in the office space area, with companies now seeing that people can work from home and employees embracing it, I think you will see more of a mixture so companies can use less space than normal and save some costs.
check the comments by the MD of MYOB very interesting for companies that will be looking at costs over the next couple of years

16
up

This article is just massively stating the obvious but also avoiding the elephant in the room. Few are going to see real growth for a long time. We are going to see a period of epic deflation, with most businesses losing real income...creating an issue of comparative loss, i.e. whoever loses least and remains solvent, wins.

If there is collapse in the financial system (corporate debt, derivatives, currency crisis, take your pick) then deleveraging will absolutely have to happen this time. So, eventually, we are probably going to see central banks encouraging inflation to help with the debt. If we can get that right, then we could expect a boom in innovation and productivity. But for that to happen we need to take the medicine this time.

A good probability of that.
But, as you suggest, "we need to take the medicine this time" is the problem.
One of my friend's mothers had lung cancer and had her left lung removed. The surgeon told her "We were lucky we got that when we did or it might have spread to your right lung"
The first thing she did when she got home, was light up a cigarette.
When you're addicted to something ( debt, and even better, 'free' debt) giving it up is nigh impossible.
But we live in hope!

12
up

bw ha, that's a grim analogy, but i'm going to go with it! The woman with the lung cancer that carried on smoking with her remaining lung was the GFC, the decade of continued smoking was the anaemic recovery, now she's just going to die. The recovery I mention will be for the loved ones she leaves behind who grieve her loss (and her selfishness/stupidity) and vow to never go near a cigarette again.

And then, eventually, a new poison will come along, or maybe even a younger generation who didn't experience the grief of lung cancer and begin the cycle again.

"When you're addicted to something ( debt, and even better, 'free' debt) giving it up is nigh impossible."

The critical point is to stop the supplier / provider of excessive debt. - i.e the banks.

How? The RBNZ should impose debt to income ratio limits on lending by the banks. Say 4-5x (like they did in UK and Ireland). That is how the availability of excessive credit is reduced.

Instead they're removing LVRs to try to keep the party going and give folk time to sell their properties to newcomers.

All the winners mentioned are corporates and losers - small businesses and travel related sectors. Survival of the fittest ha.

"Non-essential healthcare providers, such as GPs and Dentists"
I'm not too sure they are Non-essential"?

Yes, a weird comment. You can put off non-urgent and routine healthcare for a month or two, but after that it's going to be detrimental.

"the industries that have held up to date according to GDPLive include essential utilities like electricity..."

Yes
A real shame Shonkey didn't get to hock the whole lot off to those Mums and Dads who could do with those dividends ...

Yes, because the alternative is being owned by the government and the dividends being used to pad the government books, allowing them to keep taxes lower over the long term. Blinglish and Key sold them for a lump-sum to let them offset the massive hole they left in the government books by cutting taxes for rich people during the worst recession and worst natural disaster in living memory.

Any claim that these companies are more 'profitable' under private ownership only means they're better at extracting money from mums and dads, again not something to be lauded.

Clark and Cullen should've seen the writing on the wall and transferred ownership of those assets to the superannuation fund, thus ensuring the dividends would stay in government ownership and making them much harder to sell.

Don't forget that the super fund are just as ruthless as the rest of them. If they had a better use for the money, they would have sold the gentailers at the drop of a hat.

The impact and cost to the economy would have been far less if Govt had followed Health Officials recommendation to shut the border completely and given them 2 weeks to put quarantine processes in place for all arrivals.
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12328394

Australia went early with mandatory quarantine measures and controlled the spread without stuffing their economy.

Jacinda and Winston will realise this in September when we go to the polls.

australia have been shut down longer, they didnt call it lockdown they called it home confinement, and what the states did was against federal wishes and locked the place down
we went later and will come out earlier ahead of them.
also their measure to save jobs has not, they havent paid the employers yet so many got laid off first week 800000
people that quote aussie did this and aussie did that are listening to sound bites from politicians and are not across what is really going on over there
https://theconversation.com/90-out-of-work-with-one-weeks-notice-these-8...
https://www.smh.com.au/politics/federal/unemployment-to-hit-10-per-cent-...

This article needs serious improvements in quality control. Multiple grammar issues, disturbed the reading.
Otherwise a good article as an overview, but little in the way of revelatory analysis.

The gym and fitness industry also a loser. Absolutely obliterated.

It's from a tertiary institution so don't expect high standards.

"The opportunity for the New Zealand tourism industry post-pandemic is to recalibrate as a high-value and sustainable model". Why did we not do that in the first place, instead of chasing quantity over quality.

be interesting to see if the kiwi tour guide or staff reappears, most places i have been around NZ last few years i have felt like the foreigner speaking the funny language

The Kiwi tour guide will reappear if (and a big if) the govt can hold out on tourism industry demands for re-opening low-cost migrant labour, thus allowing the market to decide the true value of tourism in NZ.

Tourism as we understand it, is unsustainable.

But then, so is a helluva lot else.....

Car and boat sellers will struggle

new car sales will plummet, but people still have to get A to B, so other sectors of car industry will be fine. Price of older second hand cars in US went up a lot in years after GFC due to absence of new cars entering the market for a couple of years.

This one is determinants for both camps Alison: The Banks

Shipping, freight, logistics and other sectors essential to both Export and Import also have a bright future, if the initial roller-coaster can be navigated. We need to Exchange a lotta stuff:

  • Export milk products, meat, rocket launches, wine, software, and not forgetting Horsies
  • Import metals, fuels, machinery, software, robots, and not forgetting Vehicles

All needs heavy-duty transport and we have to start from where we Are......

We have lost a major foreign exchanger earner in tourism (though at same time saving lots on kiwis travelling). The only industry that we can hope to grow to take it's place is farming - fully irrigating canterbury - recovering water from river outflows and high country water harvesting storage would add about $5 Billion in exports replacing a lot of what was lost. Ensuring we have enough oil and gas to meet future needs would also save us a huge amount of money in future, and has positive effects in maintaining NZ's engineering capacity.

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