‘Everybody’s on the same ship:’ Impact of coronavirus ripples through Houston’s economy

Tacos a Go Go built a reputation for its lamb barbacoa and frozen margaritas. In a way, the meal was a feat of alchemy. It brought together meat and tomatoes, tequila and lime, and produced the stuff of early morning taco runs, catered birthday buffets and late nights out with friends.

But the act of transformation didn’t end there. The food was then turned into paychecks for employees, orders for vendors and rents for landlords, who, in turn, converted it into spending of their own.

It was an everyday miracle, performed, in one version or another, by restaurants, retailers, salons and other businesses around the world until the need to slow the spread of the novel coronavirus clamped down on social interactions. The question is, how soon will that miracle return?

Stay-at-home orders have been lifted in Texas, but fears of the pandemic’s resurgence, a decrease in disposable income and an increase in deferred debt remain for many. Workers have seen hours and paychecks reduced, vendors and their salespeople have lost sales and commissions and landlords have begun negotiating rents to help tenants survive, thinning their own bottom lines and potentially imperiling the commercial mortgage industry.

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Before the shutdown, Monday morning at the Tacos a Go Go on White Oak Drive would have involved a crew of five setting out tables and chairs. A machine called the Egg King would be whirring, busily removing shells from entire pallets of eggs in order to keep pace with the incoming rush as the staff set up the self-serve salsa bar.

Now, tables, seating and high chairs for toddlers were stacked against the walls as a skeleton crew scooped salsa into to-go cups. A delivery truck from local tortilleria La Ranchera pulled up, but the driver, Freddie Teran, unloaded fewer bags of fresh tortillas than he would have six weeks ago — sales at the Heights Tacos a Go Go are down roughly 30 percent since closing its dine-in area.

Bianca Ceballos, the restaurant’s manager, pointed an infrared thermometer at the necks of the two other employees working on a recent morning to check their temperatures as they arrived for work.

“It’s the new normal,” she said.

Feeling the impact

Ceballos had followed news of the coronavirus’s spread across the globe since January, feeling her heartbeat quicken every time the virus advanced one step closer to Houston.

The 40-year-old, who has had pneumonia in the past, worried she may be part of a vulnerable demographic. But it wasn’t until she heard that cities were discussing whether to shut down restaurants that she realized the pandemic would affect people’s livelihoods.

“That’s when it clicked to me that, hey, this is going to impact a lot of people and it would impact me,” she said.

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Sharon Haynes, co-owner of Tacos a Go Go, also remembers realizing that the inherently social act of dining at a restaurant could risk spreading the coronavirus. As she listened on March 16 to Harris County Judge Lina Hidalgo’s announcement closing restaurants and bars, she felt conflicting emotions. She agreed it was in the best interest for both public safety and the safety of her staff. But the financial consequences were obvious.

She briefly considered shutting down the restaurants — which first opened in 2006 and now employ roughly 100 people across five locations — for even a short time as the most financially prudent decision in the face of a steep falloff in business.

“It seemed like it might be best in terms of business, in terms of bills, in terms of purchasing,” she said. “We decided to stay open mostly for our employees, so they could still have jobs and paychecks to pay their rent and feed their families.”

But with business down, there were no longer enough orders to necessitate a full staff of cooks and servers.

Ceballos saw her schedule fall to 40 hours a week from 50; her twice-a-month paychecks have decreased by roughly $400 each. Feeling the squeeze, she has paused payments on medical bills, but would have nonetheless come up short on rent if her husband’s stimulus check had not arrived in the nick of time.

Rosalina Jenkins, the manager of the T.C. Jester Boulevard location, has also cut back on expenses. In some ways, the need to maintain social distancing has dictated what to cut. She is not traveling, not taking her younger children to Chuck E. Cheese, not throwing the parties that had been planned for her high school senior.

Both Ceballos and Jenkins were positive about the support they’ve received from their “work families” and customers. “We always try to do the best we can do through whatever crisis,” said Jenkins, recalling the time she worked through Hurricane Harvey.

But unlike during Harvey, it will be difficult to know when the pandemic’s danger will have passed. Ceballos could not picture resuming her previous habits any time soon. “I definitely look forward to going back to Marshall’s or Ross or the Galleria even,” she said. “But it’s not something I want to do right away.”

She wants to wait until the number of new cases a day in the state falls to the low double digits — and until her hours return, she does not have the money.

Dominoes fall

Mark Kennedy doesn’t work in a restaurant, but his fortunes rise and fall with the industry.

The salesman earns commission on the products he sells to restaurants — mostly dairy products and dry goods such as to-go containers and paper bags. As restaurants have seen business fall, so has his pay. He’s now making 30 percent to 40 percent of what he had before the crisis.

Now, Kennedy said, most of his sales are to-go items. He sells Tacos a Go Go its branded bags and condiment cups for its salsa. As he works, he’s noticed problems up and down the supply chain. Some of his manufacturers have run out of certain supplies — he has taken to running to Restaurant Depot and Sam’s Club to try to fill orders he cannot obtain through his usual channels. Some restaurants — though not Tacos a Go Go — have had difficulty paying for their orders in a timely fashion.

“Everybody’s on the same ship,” he said. “Everybody’s getting squeezed. Not just us.”

He believed it will take time for restaurants — and his commission — to recover. “Wouldn’t you be a little skittish going to a restaurant next week with your (loved ones)?”

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How long it takes for shoppers to return to stores and for retailers to see profits return will have an impact on the strip malls that line Houston’s streetscape.

Hines, the property manager for one Tacos a Go Go location, and Dan Braun, the landlord of another, declined to comment on the economic impact the pandemic is having on their businesses. “We are simply trying to keep our heads above water,” Braun wrote in an email.

Some landlords have seen revenue drop dramatically. Excluding grocery stores, retailers in strip malls have been able to pay only an average of 20 percent to 40 percent of April’s rent, according to preliminary data from commercial real estate firm CBRE.

That has led many shopping center investors and owners to ask for relief from their lenders. If landlords begin to default, expect those who own commercial real estate debt — including pension funds, insurance companies and others — to take a hit.

Every arrangement between landlords and tenants differs, but some small businesses that were able to receive a degree of relief will have to repay it over the remainder of their leases, said Derek Pershing, a real estate attorney with Wilson Cribbs + Goren.

That means they will emerge with higher monthly costs as the economy restarts.

Facing the future

The morning before Gov. Greg Abbott announced that restaurants would reopen May 1, Haynes stood inside the empty Tacos a Go Go dining room on White Oak Drive contemplating what such a reopening would entail.

Surrounding her were the new accouterments of the pandemic — hand sanitizer by the cashier’s station, tables by the door where orders could be left for pickup by delivery services to minimize physical interactions, taped X’s on the floor spaced 6 feet apart. On the door, a sign read, “To be as safe as we can please limit 1 person at a time in the store.”

Reopening, she explained, entailed a difficult calculus — trying to chart a course to keep staff and customers safe from an invisible threat while restoring as many work hours as possible.

“We’re burdened with trying to make the best decision … for the health of our employees, for the health of our community and for the financial health of our community,” she said.

To prepare for restaurants reopening, she was meeting that afternoon with an app developer to discuss a way to allow people dining in to order through their phones, which would remove the point of physical contact at the counter, but also reduce the need for a cashier. Their catering menu was moving toward individual boxed meals, instead of family-style trays; the salsa bar would no longer be self serve.

But when the news broke that restaurants could reopen by the end of the week, she didn’t feel ready.

Tacos a Go Go remained closed for dine-in, though it opened its patios for people who wanted a place to eat their to-go orders. Over the weekend, Ceballos and Jenkins noticed modest upticks in traffic at their locations; this week, Jenkins’ hours are increasing, and, on his end, Kennedy has seen orders inch up, though they remain far below what they had been pre-shutdown.

But they weren’t ready to resume their previous routines. Ceballos and Jenkins both described themselves as “cautious” in their habits outside of work. “I’m not ready to let my kids go out — I haven’t changed the costs I’ve cut back,” Jenkins said.

Haynes said safety would drive her decisions on when and how she will reopen dining in her restaurants — she’s keeping a close eye on the number of new coronavirus cases in the area. “For now and probably for the foreseeable future, we’ll probably keep doing things the way we are.”