Austin Is Suffering as SXSW Windfall Vanishes

(Bloomberg Businessweek) -- Asif Khan has a new routine every time one of his ride-share passengers steps out of the Toyota minivan he drives in Austin: He grabs a can of Lysol and sprays everything down. “It says it kills all the germs,” he explains.

With diligence and luck, Khan might be able to avoid getting sick. But there isn’t much he can do about the financial hit coming his way now that the city has canceled the 2020 South by Southwest music and technology festival over concerns about the coronavirus pandemic. Instead of the extra $2,000 he expected to rake in during the two-week event, he’ll likely make less than he does during normal times, driving 10 to 12 hours seven days a week. That’ll mean forgoing plans to pay down debt, he says. “Now it’s going to take a little longer.”

Organizers said SXSW, which draws hundreds of thousands of attendees from more than 100 countries every March, had a total economic impact on Austin of almost $356 million last year. That includes hotel and Airbnb rooms, the money big corporations spend renting venues for dinners, the bar tabs for the revelers that flood downtown, and the surge in shopping at hipster boutiques as foot traffic picks up.

“It’s like a hurricane of people, of humanity, that leaves behind money instead of wreckage,” says Brian Rush, who owns the Tears of Joy hot-sauce shop in the downtown entertainment district. March typically brings in two to three times the revenue he makes in an average month as he guides walk-ins to house-made concoctions with names like Dragon’s Breath and Night Destroyer.

Rush expects business will be lower than in previous years, but isn’t sure how bad it will be. That’s because he figures many people who already bought tickets to Austin will still make the trip, especially those coming for the smaller, unofficial music shows that pop up during the festival.

That’s also the hope of Miranda Welch, the lead barista at Gelateria Gemelli, which sells sweets, coffee, and cocktails just outside downtown. Welch also works as a doorperson and bartender at the music venue Cheer Up Charlies and counts on a windfall from SXSW, during which they typically see at least double the tips they’d make on a normal night. “I definitely won’t be able to go on vacation anytime soon, and I was kind of hoping for that,” Welch says.

Fernando Marri, owner of the Boteco food truck in East Austin, said the cancellation will cost him $45,000 of catering business, so he won’t be hiring the 10 workers he’d planned to take on during SXSW. The timing is particularly bad—he was expecting a jump in customers after his business, which sells coxinhas, brigadeiros, and other foods from his native Brazil, was lauded by Food Network host Guy Fieri two months ago. In the video, Fieri said he’d been turned on to the truck by the actor and beloved Austinite Matthew McConaughey.

“For everybody that lives in Austin, go out and support small businesses,” Marri says. “Think about that a little extra this month.”

Austin has long considered itself a city that’s friendly to the creative class, where musicians can find a steady stream of gigs and plenty of service-industry work to pay the bills before they make it big. But that reputation has changed in recent years; housing costs have shot up amid a technology boom that’s seen thousands of jobs created by Apple, IBM, Oracle, and other companies. While that influx of tech employers helped give the region the fastest-growing economy among major U.S. metropolitan areas over the past decade, Austin also saw one of the nation’s biggest increases in the economic gap between white and nonwhite populations, according to a recent Brookings Institution study.

Civic do-gooders are raising funds to support service workers who stand to take big losses from the cancellation of the festival. The Austin metro area has roughly 113,000 workers in the hotel and food-service sector, census data show. Two GoFundMe campaigns have generated more than $27,000 of donations. (The company that runs SXSW also says it will lay off about a third of its 175 full-time employees.)

The cancellation is particularly hard on Mudathir Abdulgafar, a full-time ride-share driver who’s lived in Austin for seven years. He says business usually doubles during the festival, and its scrubbing this year will be a blow to his finances. Abdulgafar had already stopped accepting pooled rides about three weeks ago, figuring the extra passengers on those trips increased the chance he could catch the coronavirus and be forced to take time off before the busy SXSW period.

He’s been talking with other drivers about what to do, and many of his colleagues are thinking about seeking work piloting delivery vans for Amazon. They figure the job will be steadier, and there’s less chance of catching an illness from a rider who is sick. Says Abdulgafar: “Packages instead of people.”

To contact the editor responsible for this story: James Ellis at jellis27@bloomberg.net

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