Kodiak businesses slow to reopen

Terri Pruitt, owner of Vizhunz Salon, prepares for the reopening of her business in April. 

A study of the COVID-19 pandemic’s impact on Kodiak Island released last week quantified the economic damage and showed both positive and sobering recovery outlooks for the economy. 

Kodiak Island Borough Manager Michael Powers said the four-month study, which cost around $49,000, will inform the Kodiak Island Borough Assembly about what needs to be researched or analyzed further. 

“It is very useful to understand some of the effects of the pandemic,” Powers said. “I think some of the impacts of tourism was something we intuitively knew but had never quantified before.”  

The study, conducted by the McKinley Research Group, showed how Kodiak’s primary industries — tourism, seafood, retail and food services — fared during the pandemic. 

The tourism and food service sectors were hit particularly hard. Travel restrictions decreased the number of out-of-state visitors to the island, resulting in the cancelation of spring-season bear hunts and summer fishing tours. Without the visitors, remote lodge operations also decreased. 

The study noted that in the first seven months of the pandemic, passengers arriving by plane to the island totaled just over 19,000 passengers. By comparison, in 2019, 82,945 passengers arrived in Kodiak by plane. 

The 2020 summer cruise season was also canceled, resulting in the loss of planned visits by 17,900 ship passengers. 

In the second quarter 2020, lodging revenues in the city of Kodiak fell 58% from the same period in 2019.

The food service industry also saw significant impacts, with a 35% loss of employment over the past year. 

The seafood industry, meanwhile, faced issues with the supply chain, additional costs associated with COVID-19 mitigation and disrupted markets, which affected profitability for seafood processors and prices for fishermen. 

Seafood processors were among the first to see impacts from the virus, which was first detected in China, one of the biggest buyers of Alaska seafood. The impacts were felt as supply chains were restricted, seafood exports into China were delayed and prices increased for testing and personal protective equipment.

More recently, freight prices have increased. According to the Freightos Baltic Index, global container freight prices have increased 80% since early November 2020.

Unfortunately for Alaska exporters, an increase in empty freight containers in China has incentivized shippers to rush empty containers back to the country rather than waiting for them to be filled with goods.

Another hit to the seafood industry is the decrease of fish prices across the board. 

The study noted that the lower prices were most noticeable in Kodiak’s salmon fisheries, which saw higher harvests but lower overall values.

In addition, seafood processing jobs decreased by 5% in the first and second quarters of 2020 compared to the same time the previous year. In June, those jobs decreased 16% compared to June 2019. 

The retail sector was also heavily impacted by the pandemic as businesses were required to shut down temporarily and capacity was restricted. Despite losses in business, the study showed a relatively modest loss in overall employment.  

In the leisure and hospitality sector, employment was down 35% year-over-year in second quarter 2020. Food service employment was down 33%, a loss of 100 jobs compared to the same time period the previous year. 

“These losses result from overall reductions in in-person dining, including the absence of a robust tourism season,” the study said. 

A bright spot in the economic landscape was the government sector, which the study said was a stabilizing force as other sectors lost jobs. 

However, with funding and budget constraints at the state level because of COVID-19, reduced oil revenues and other costs, the economic recovery could be challenging for the government sector. 

Tourism is likely to be positioned well once vaccines are rolled out and people start to travel again. 

The food service  industry has a moderate recovery outlook, depending on whether establishments can endure the post-vaccine period. During this time, carry-out options can help such businesses stay afloat. 

The seafood sector’s recovery is complicated by numerous factors in addition to COVID-19. The study found that impacts to harvesting are likely to be minimal over time, while those to processing could take a few years to bounce back. 

The recovery of the retail sector will depend on each individual business to maintain operations long enough for customers to return after the vaccination period. The study pointed out that the availability of federal relief will likely play an important role in how well the sector bounces back. 

Throughout Kodiak Island, lower-income residents were disproportionately affected by the pandemic. As work opportunities decreased with the closure of businesses and the drop in seafood processing jobs, they often had less savings to depend on. 

The study found that during the pandemic, Kodiak experienced a steep increase in unemployment claims beginning in May. The numbers hit their peak in the late spring and summer, with nearly 900 claims in May. Numbers began to trend downward in July. 

The study also found that more women than men requested unemployment insurance, which reflects national and international trends. According to the study, this suggests that women tend to work in sectors hit hardest by the pandemic, such as hospitality. With school closures, women may have also assumed additional parenting responsibilities. 

Other forms of aid helped keep businesses afloat and residents in their homes. 

In total, businesses and nonprofits on Kodiak Island received $59.5 million in federal economic aid from programs like the Paycheck Protection Program ($10.2 million), Economic Injury Disaster Loans ($10 million) and Economic Impact Payments ($11 million). 

Native tribes received $700,000 in coronavirus relief funds, as well as $2.8 million in aid to Tribal governments and $300,000 in welfare assistance. 

The island also received $600,000 in housing relief program funding for homeowners and renters, and $18.4 million in municipal funding from the Coronavirus Aid, Relief and Economic Security Act. 

In his preliminary review of the study, Kodiak Island Borough Mayor Bill Roberts said he thought McKinley Research Group highlighted well how fisheries were impacted and what the main drivers of Kodiak’s economy were.

Roberts said that the borough is in “survival mode” after Gov. Mike Dunleavy “vetoed all bond debt repayments'' last year. However, he hopes this will inform decision makers about how to improve the island’s economic development. 

“We will look at what we can honestly do for economic development to encourage small businesses to come back,” Roberts said.

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