College Budgets Take Another Hit With Dining Halls Sitting Empty

(Bloomberg) -- The impact of Covid-19 pandemic has hit all corners of college life -- even the lunch line.

With just a fraction of university students buying food from campus dining halls, customers are down while virus-related expenses for items including disposable cutlery and carry-out containers are up.

The drop off in dining revenue is another blow to university budgets at a time when limited campus activity and falling enrollment caused by the pandemic have led to unprecedented financial stress. The impact of this year’s shutdowns have hit everything -- from room and board to parking fees and conference center rentals -- that schools usually use to supplement their budgets, such as for scholarships and athletics.

“We’ve got fewer residential students and less dining revenue,” said Steve Mangan, senior director of dining services at the University of Michigan, where the number of students in college accommodation in the fall semester was down by a third. “You can’t run at deficits forever.”

Michigan said last week that classes will be mostly virtual in the semester that begins in January, with the use of campus housing expected to dramatically decline. Rutgers University also announced a mostly virtual next term beginning in 2021.

With the pandemic raging across the U.S., the pain could last for many more months. And it comes on top of the damage that’s already been done: Earlier this year, schools issued refunds for room and board when they closed campuses, a move that cost Harvard, for example, $32 million.

The impact is also being felt by food services companies. Sodexo SA’s revenue from universities fell 48% in the fiscal fourth quarter, according to company filings. At Aramark, revenue from its U.S. education business declined in the third quarter due to school shutdowns, the company said.

“It’s unlikely to be a full recovery in the short term” for the industry, said Eshan Toorabally, a Bloomberg Intelligence analyst who follows Sodexo.

Representatives from both companies declined to comment.

This fall semester’s enrollment of first-year college students, avid users of meal plans, is down 16%, according to the National Student Clearinghouse Research Center. Schools also face additional costs for Covid testing, plexiglass shields and opening spaces for dining due to social distancing.

Some schools have renegotiated their contracts with food service providers.

George Mason University’s new agreement with Sodexo saved the university about $1.5 million in March after lockdowns, said Bill Dracos, associate vice president for business services at the public school in Virginia.

Revenue dropped by almost 60% for board plans and more than 70% for Mason- managed retail restaurants, from which the school earns commissions, Dracos said.

The University of Alabama extended its contract with Aramark for five years, said Kristina Patridge, who has run the school’s dining services for 20 years. The school negotiated its commission based on a sliding scale and removed a commission guarantee clause, she said.

Orlynn Rosaasen, dining services director at the University of North Dakota, said the pandemic has meant more staff is needed for offerings such as the salad bar.

Today it takes four or five people compared with one staff member because of safety protocols including the fact that students can’t serve themselves. The school is also spending almost $1 million more for disposables and additional labor, he said.

“Even at 25% capacity, we’re lucky if 50% is being utilized,” Rosaasen said. “It would be really tough to survive more than one year. We’re dipping heavily into reserves to make this work.”

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