Downtown Austin streets are normally so packed during South by Southwest that some locals purposefully avoid the area in March. Then the coronavirus pandemic changed everything last year, and there wasn’t an out-of-state tourist, office worker, or drunken reveler in sight.
In 2020, only a few weeks before the sprawling international festival was set to take place and while much of Austin was still in denial, downtown restaurants, bars, and music venues played the proverbial “canary in a coal mine” role, seeing the signs of what was to come.
Now, in March 2021, downtown Austin is very different from what it was a year ago. With diminished tourism and a calendar year’s worth of canceled in-person events, the streets of downtown appear almost desolate. Hotel rooms, once filled with out-of-town visitors, are experiencing unprecedented vacancies, while office buildings sit empty, their one-time inhabitants nestled securely at home, working remotely out of harm’s way. It’s here in downtown Austin where one feels the depth of impact of the pandemic — an amplification of what’s happening across the rest of the city.
The SXSW cancellation was bound to happen. Months before the call was made, international companies were already backing out of long-scheduled restaurant bookings in Austin. Those, in turn, were followed by corporate clients. “We started getting a lot of cancellations” beginning in December 2019 into the following February, says Shawn Cirkiel, the owner of hospitality group Parkside Projects, which runs two restaurants, Parkside and the Backspace, and a venue, 800 Congress, in the downtown area.
Yet all the indicators didn’t make it any easier to bear the official SXSW cancellation a mere seven days before it was set to take place. “You have those moments in life when you’ll never forget where you were,” says Mike Stitt, the CEO of Austin bakery mini-chain Easy Tiger. He recalls how he learned about the announcement while standing at the bakery’s original downtown location. Just a few months later, the company closed that same sprawling East Sixth Street bakery and beer garden — the one that helped launch the business in 2012. It’s perhaps the highest-profile closure downtown since the pandemic started, but far from the only one.
First to face hardships, now Austin’s biggest entertainment and tourism district may be last to recover from extended health safety measures that make large events and gatherings unsafe for the foreseeable future, despite the governor’s orders fully reopening businesses a year after the pandemic began.
The SXSW effect
Eater Austin documented at least 17 downtown establishments that closed in 2020 alone, disproportionately more than other parts of the city. COVID-19 hardships contributed to most closures, although reasons differ in each case. More than a dozen downtown operators shared their personal pandemic experiences with Eater for this piece.
Some establishments, such as Easy Tiger, broke from long-term downtown leases without any penalty, allowing them to concentrate on opening locations in other more residential neighborhood hubs. Others couldn’t sustain themselves after the loss of one SXSW — let alone two cancellations of the annual event. For 2021, the festival toyed with a hybrid in-person and virtual event, but organizers ultimately decided to stick to a virtual format with digital panels, film screenings, and online musical performances.
Without the income from the festival, many downtown operators simply couldn’t make the numbers work. “Those are the months when we generate a significant amount of operating profits for the whole year,” Stitt says, referring to the period just before SXSW happens well into the unofficial event season through May. “Losing SXSW two years in a row is a blow to Austin.”
In the past, many new downtown restaurants and bars tended to time their openings to coincide with SXSW, delivering instant cash flow and publicity. Without that tentpole event to help launch their businesses, some restaurants and bars are taking a wait-and-see approach to opening: Greek restaurant Simi Estiatorio intended to open in late winter 2020, but opted to wait until COVID-19 restrictions were fully lifted. Downtown’s Wanderlust Wine Company was going to host SXSW events before it opened last March, but all of those were canceled, resulting in major revenue losses for the not-yet-opened business. Shortly after shutdowns were imposed across the country, owner Sammy Lam reshaped the self-pour winery in April into a temporary wine shop with virtual classes in order to bring in some revenue at the time.
Now, all downtown restaurants and bars in Austin are trying to learn how to become less dependent on what was once a virtually guaranteed huge season for business. Money generated from the festival and its coinciding events used to account for anywhere from one-third to two-thirds of downtown businesses’ annual profits.
Perhaps just as challenging, Cirkiel says, is the broader loss of entertainment venues downtown due to the pandemic. Only four music venues in the district, including Stubb’s BBQ and Empire Control Room, have so far reopened at half-capacity with, in some cases, assigned seating to further mitigate the spread of the virus. “Usually it’s dinner and a show,” Cirkiel says, describing what had been a typical evening out in the before times, but now, “with no show, there’s no dinner.”
Many of these venues served as a natural extension of the SXSW ecosystem, hosting both official and unsanctioned events, which helped downtown Austin gain a reputation for major music festivals and corporate events outside beyond March. Now, at least 25 percent of the business members of the Red River Cultural District, a nonprofit of small businesses in the entertainment district, have permanently closed because city- and state-imposed health restrictions shut down most commercial activity, executive director Cody Cowan tells Eater. The losses include once-popular places like dance club Plush and live music venue and bar Scratchouse.
“These live music venues depend on 50 to 55 percent of annual revenue to come during SXSW,” Cowan says, anecdotally.
Even though bars and venues can reopen now due to Texas Gov. Greg Abbott’s orders lifting all coronavirus measures, some Red River Cultural District members will hold off on reopening just yet, waiting through the spring. That, plus new businesses such as the comedy club coming to the pandemic-hollowed Barracuda space, can offer some room for optimism, but it won’t be enough. The downtown entertainment is still very much in peril, Cowan says. Most of the Red River Cultural District businesses are considering this year’s virtual-only SXSW events a wash in terms of profits and aren’t planning for any “unofficial” crowds. “The venue business model still doesn’t work without tours, festivals, and consumer confidence,” he says, “which will all be determined by vaccinations.”
Local and federal small-business relief programs may be the only saving grace for up to 80 percent of downtown’s remaining music venues, Cowan estimates. “If live music is the backbone of our cultural tourism industry, it won’t come back until music venues can reopen [with normal service],” he says. While Texas has lifted its mask and social-distancing measures, Travis County is still requiring masks.
That further impacts tourism traffic beyond SXSW — a pivotal loss for restaurants such as Café Blue, a local restaurant located next to the Austin Convention Center, a main hub of the festival since 2016. Co-owner Pete Clark estimates that SXSW represents up to one-fifth of Cafe Blue’s annual business downtown, although the recent loss in tourists has been made up for somewhat by locals during the pandemic. Nevertheless, the downtown location still performs half as well as Café Blue’s other location way out at Hill Country Galleria, before and during the pandemic.
“A lot of people who lived downtown were trying us for the first time during the pandemic,” Clark says. “We still have some tourism action, just not as much.”
Without the festival, restaurants, bars, and entertainment venues are having to reinvent themselves to be less dependent on a single event. “We’ve all become reliant on SXSW as a revenue model, so it’s going to force us to manage and be different,” Cirkiel says. “It’ll probably be different no matter what. SXSW might not come back as we once knew it.”
Restaurant industry’s retreat into other neighborhoods
Downtown was already proving “tricky” for East Sixth Japanese restaurant Daruma Ramen compared to the group’s other restaurants, even before the onset of COVID-19, co-owner Kayo Asazu tells Eater. Asazu and her husband, Takehiro, made the decision to close Daruma in June 2020 and Japanese stall Ni-Kome in downtown food hall Fareground two months later.
Rent increased since Daruma opened in 2013, but it didn’t factor into its eventual closing. Instead, it was the lack of a downtown residential base, Asazu says. People she once assumed lived in the area stopped showing up, because they were actually employees whose downtown offices closed due to the virus. “I was hoping to see more of a downtown neighborhood with all the condos going up,” she says, “but that didn’t happen as much as I thought.”
Asazu’s passion for the restaurant industry is driven by the opportunity to help her regulars, those local customers she gets to know on a first-name basis. But downtown, compared with the other neighborhood restaurants she runs, never quite felt right. “Downtown wasn’t really for me and wasn’t my favorite location to run a business,” she says. “What happened last year pushed me to leave downtown for good.”
Overall, Asazu has found more success outside of the business core with her other restaurants Komé, Uroko, and two Sa-Tén Coffee shops, found in North Loop and East Austin. The atmosphere at those restaurants more closely mirrors the environment she came up in early into her restaurant career: casual, easy, neighborhood restaurants with repeat customers.
In contrast, some operators are doubling down on the city center. “Downtown’s all we’ve got now, and it really sucks how it all happened,” says Turf N’ Surf Po-Boy owner Ralph Gilmore. He closed both the north and south outposts of his walk-up restaurant last summer, but reopened the original location in downtown Austin during that time. The pandemic’s timing was unfortunate because many downtown restaurants typically operate at losses during the winter when sales are slower, Gilmore says. Then, before the pandemic, SXSW would save the day by doubling typical sales. “And we’d make it all back and were ahead again,” he recalls.
Gilmore, whose restaurant is attached to local mini-chain Lavaca Street Bar, hasn’t ruled out opening his own standalone restaurant outside of downtown Austin. In fact, he recently came close to acquiring space in Mueller, a neighborhood northeast of downtown, but decided against it, because he wasn’t sure if it was the right fit.
Compared to Parkside Projects chef and owner Shawn Cirkiel’s restaurants elsewhere in the city, downtown is admittedly a “much more challenging environment right now,” he says. His tiny pizzeria, the Backspace, already has one location downtown behind Parkside, and expanded in mid-2020 into the north neighborhood of Crestview. Still, Cirkiel remains bullish on downtown’s recovery. Parkside and the Backspace are open for dine-in and takeout service. In fact, he’s noticed a trend of younger diners downtown during the pandemic. “It makes me feel old to say it, but it’s good to see different types of people eating out, maybe people who hung out at bars before COVID,” he says.
And even if downtown faces harder times in the short-term, Cirkiel speculates that decreased demand for spaces could lower rental rates in a way that “will drive creativity.” Ideally, that could mean more diverse concepts.
Downtown revival already in progress
Despite closing one brick-and-mortar location, in North Austin, Veracruz All Natural co-owners Reyna and Maritza Vazquez chose to open their first downtown establishment during the pandemic. What started as a temporary walk-up taco window in May 2020 became a new, permanent, full-service restaurant by November, opening at the Line Hotel not too far from Veracruz’s shuttered original food truck location on East Cesar Chavez.
The benefit of the downtown location was the walk-up window, which allowed them to ease into the opening with takeout service only, Reyna says. “It has been good because it brings in a lot of new people, but also a lot of locals.” The space has since opened its dining room with limited service; she shares that sales have “been more than sustainable.”
Fittingly, the Veracruz taco window is found on the same wall as a 12-story mural depicting Wonder Woman. Maritza says it’s an honor to be located next to such an empowering artwork, especially because they are women and Mexican immigrants. “We started so small, and now we have a location downtown. We feel like we accomplished something.”
Nearby, in downtown food hall Fareground, is Israeli street food stall TLV, which also started as a food truck. Executive chef Berty Richter closed his restaurant briefly at the beginning of the pandemic and reopened it in June 2020, operating on curbside and delivery orders; the food hall remains closed to dine-in traffic. It’s not an ideal situation, he shares, but there’s enough business to sustain himself. (Eater reached out to Fareground, but hasn’t heard back.)
TLV debuted during SXSW in 2019, the last time the festival held in-person activities. That made for a strong opening, says Richter, making the consecutive conference cancellations that much more painful.
The downtown location is Richter’s sole operation; he closed his food truck to focus on the restaurant. “That’s why I’m holding onto it with my life,” he says. The other food hall restaurants — Contigo, Dai Due, Ni-Kome, Henbit, and Italic — have either temporarily or permanently closed to focus on their primary locations during the pandemic, “but for me, it’s my only spot.”
Richter’s business regained its footing by selling spice kits and pre-packaged vegetable sides that play well with the downtown residential base since people are cooking at home more. TLV has also taken over sibling restaurant Emmer & Rye’s dining room on Rainey Street each Monday in February and March 2021 for in-person dining, further helping market the restaurant to potential customers.
“It’s reinvigorating for the staff — and for me — as a creative outlet,” Richter says, especially after spending so much time boxing to-go orders for most of the past year. The effort buys time, he explains, but the business is managing to get along with curbside and delivery service. “I can sustain a bit longer because we’re pretty frugal,” Richter says. “Obviously, the huge support from our customer base helps, and 75 percent of our tickets are from regulars.”
Austin burger chain P. Terry’s made the difficult decision to not reopen its downtown location, the only such closure in the company’s history. The restaurant, under contract to rent the Sixth Street space for the next couple of years, is trying to sublease to another renter, CEO Todd Coerver says, but so far no deal has been struck. It would cost more to reopen the restaurant than to keep it closed, he says. However, as pandemic guidelines evolve and downtown begins to regain momentum, he isn’t ruling out a return to the downtown address. “If things turn back around this summer,” he says, “we’re not afraid to reopen.” The location still bears the signage, albeit covered up, and the equipment. “So we can pretty easily reopen for business the day we believe that makes sense again.”
Downtown foot traffic once hovered around 36,000 people per day, according to data from the Downtown Austin Alliance, but dipped to one-sixth of those levels during much of the late spring and summer in 2020. For context, the group’s statistics show that foot traffic didn’t reach pre-pandemic levels until November 7, 2020 — the day election results were called in President Joe Biden’s favor. But, as Sixth Street bars reopened as restaurants in order to operate during the bar shutter, some late-night activity has picked back up. Some of these establishments maintain safety measures, while others do not.
Before the pandemic, unofficial parties unaffiliated with SXSW were common. While this year’s festival is taking place virtually, some business owners aren’t ruling out potential passersby. In fact, this month, local events listings Instagram account When Where What Austin is tracking events and parties during the span of SXSW 2021. Anthony Deloache, general manager at downtown Belgium beer bar Mort Subite, is preparing just in case activity picks up. He is working on a walk-in art exhibit he hopes will attract potential customers walking by the bar.
“We’re preparing for the best. That’s all you can do,” Deloache says. “We will definitely operate at a loss — it’d be foolish of me to say we wouldn’t — but you do what you can do.” The bar itself is doing about 22 percent of its pre-pandemic business, and that “pays the bills.”
Because of its bar status, Mort Subite required a food operation before it could reopen. Without a kitchen and the departure of the Indian food truck that had been parked out back, Deloache had to recruit a new tenant, Classic American, which relocated from Rainey Street. That food truck serves anytime Mort Subite is open, a necessity as a bar benefiting from temporary state rules to reclassify it as a restaurant.
It’s going to be a slow climb up, “and I don’t think there’s going to be a downturn,” Deloache says. “Let’s not act like the world is over.” Mort Subite will still continue to require masks when inside of the bar, per local orders.
Long-term downtown outlook
Of the businesses that have elected to remain open downtown, many have tweaked their formats and business models to reflect a new, very different era of service. Veronica Briseño, Austin’s special-designated chief economic recovery officer and head of the city’s economic development initiatives, emphasizes how flexible local restaurants have proven to be during this ongoing crisis. “They’re not resting on their laurels as they determine how to get to the point where they’re still providing service to the community,” she says.
Shortly after the first SXSW cancellation in 2020, the city met with downtown restaurant owners and operators to find out the immediate and anticipated long-term economic impacts. Briseño and her team learned how much restaurants were hurting from the lack of a downtown office crowd as more tech companies embraced remote work. How, and if, office work resumes may very well determine downtown’s long-term fate, she says.
“On one hand, we’re hearing about much more remote working. On the other hand, we know innovation occurs in office settings,” Briseño says, explaining how she thinks there is no replacement for in-person collaboration.
Jenell Moffett, the director of research and analysis for the Downtown Austin Alliance, has been following hotel occupancy numbers, office vacancies, and mixed-beverage sales to gauge the overall economic health of downtown. She tells Eater that recent measurements revealed encouraging trends of a slow-but-steady downtown recovery one year after SXSW 2020 was canceled. “Right now, in my economic brain, the demand for Austin is still very high,” she says, when it comes to the area as a destination for tourism, offices, and entertainment. “I don’t see any major shift in how we’re doing things.”
And, while the impact of repeat SXSW cancellations, at least physically speaking, may feel like unprecedented adversity, downtown Austin is actually accustomed to downturns. “We’ve seen this before,” says Mark Sprague, the state director of information capital for real estate broker Independence Title. “This reminds me somewhat of what Austin went through in the late 1980s when there was no activity downtown — so we’ve been through this.”
Austin restaurants took a big hit back then, too, and downtown is likely to feel the pandemic’s impacts for at least the next three to five years, Sprague estimates. He assumes one in every five existing downtown businesses will close down, and that failure rate may be closer to one out of every four restaurants and bars that close.
“But they’ll come back,” Sprague says. “It’s just a matter of whether they come back quickly.”
Bars, in particular, may struggle more as patrons transition to new, more health safety-conscious norms that prioritize social distancing and potentially leave out events that downtown establishments typically banked on. “Those businesses that rely on crowds I think will take years to come back,” he says, predicting that fans will be reluctant to immediately return to stands. How this plays out will be seen this week, as Texas Gov. Greg Abbott’s orders to lift all coronavirus safety measures — including capacity restrictions, social-distancing requirements, and masks mandates — began on March 10, but Austin and Travis County orders requiring masks are still in place, despite the state lawsuit.
It’s too early to predict how downtown Austin’s restaurant industry might look whenever the pandemic ends, but Sprague says the lessons learned during the pandemic should be beneficial in the long-term, changing the industry for the better. “I just think there is so much opportunity yet to come,” he says.
But, in two to five years, Sprague expects Austin to be the envy of other cities. People are moving into the city in droves despite the pandemic, and the housing market is booming. “We’ll get through it,” he says. “Austin’s downtown continues to be much more attractive than any place else in the nation or world.”
Demand for downtown real estate also doesn’t seem to be declining, says David Stauch, the managing principal of real estate development services company CPM Texas, which helped redevelop the Seaholm Power Plant as well as several other downtown projects. Stauch is currently helping advance several other central business district developments, though he didn’t publicly reveal which ones. He suggests that there will be a strong downtown market even if some signs, such as a high number of sublease listings downtown currently, still show that “it’s not boom time” right now.
Even if real estate activity downtown isn’t back to the same levels as before COVID, Austin’s momentum still outpaces downtown districts in other U.S. cities, Stauch says. And the slight downturn during the pandemic has the potential to lessen rental rate spikes, which could help current restaurants and bars while also drawing in new ones.
There are still large-scale developments set to open in downtown this year. There’s the recently opened Austin Marriott Downtown hotel, with three restaurants and bars, on East Cesar Chavez, and the San Jacinto Boulevard hotel project the Thompson, which will feature two restaurants from acclaimed Southern chef Mashama Bailey this summer. She and her business partner John O. Morisano are banking on the appeal of Austin for their first out-of-state project. “There are deals out there to be made,” Stauch says, suggesting it’s a testimony to the attraction of the city, especially in the food and drinks realms. As long as businesses are still interested in opening in the city center, it’s good for the future of downtown Austin.