Museums Nationwide Bracing For Economic Devastation Due To Coronavirus Closures

The total economic contribution of American museums amounted to more than $50 billion in gross domestic product, 726,200 jobs and $12 billion in taxes to local, state and federal governments. That was in 2016 according to the American Alliance of Museums, a museum advocacy group.

The vast majority of those museums have now closed and will stay that way until at least the end of March to limit the spread of coronavirus.

Included in that number are thousands of institutions across the country from the very big, like the Metropolitan Museum of Art in New York and the Field Museum in Chicago, to the far more numerous very small museums–the countless community art, local history and natural history museums in towns and rural areas.

Each year, more than 850 million visits are made to U.S. museums, more than to sporting events. Today, almost none.

“I think some people thinking of museums as nonprofit don't realize that that profound impact,” Elizabeth Merritt, Vice President, Strategic Foresight, and Founding Director of the Center for the Future of Museums, an initiative of the American Alliance of Museums, said.

How badly damaged the museum sector will be by coronavirus closures of course depends on how long institutions are forced or recommended to stay closed. That figures to vary by geography and scale of audiences.

An internal memo sent by the Met’s president and chief executive along with the museum’s director to department heads on March 18 forecasts an institutional coronavirus closure related loss totaling $100 million with the museum preparing not to open until July according to reporting in the New York Times. The museum’s predictions are informed by “the epidemiological world” according to the memo which expects the pandemic to reach its U.S. peak in early May with recovery not expected to begin until June.

The museum anticipates the pandemic to diminish travel and museum visitation into 2021.

As a result, exhibits will be cut short, layoffs are likely, acquisitions will be curtailed and spending and operating costs trimmed where possible according to the memo obtained by the Times.

However long doors remain closed, the industry will suffer.

It is an industry which, in many cases, had been operating on thin margins before coronavirus. One third of institutions surveyed by AAM in 2017 reported that they had dipped into their financial reserves in the past year to cover operating costs.

Museums, in fact, have been struggling to recover since the last economic downturn in 2007. A major reason for their struggles has been reduced governmental support.

During the most recent recession, state tax revenue plunged 15% as a result of lost jobs, lower wages and depressed economic activity. In 2013, after the economy had begun to rebound, one-third of museums participating in AAM’s annual “Condition of Museums and the Economy” survey reported they were still experiencing year-over-year decreases in government support.

Grantmakers in the Arts data documents that state arts agency funding has only recently recovered from that recession, during which appropriations and grant outlays shrank by nearly a quarter. Those “recovered” levels remain significantly below where they were in 2001.

The recession of 2007 can’t exclusively be blamed for museums receiving less governmental funding; AAM, GIA and the Association of Art Museum Directors all report that government funding as a percentage of museum operating income has been declining for decades.

“The funding model for (American) museums is very different,” Merritt. “The presumption in most other countries, including European countries, is that most museums are funded primarily by the government; that's been changing in the last decade, as some countries, for example, the United Kingdom, have cut back their cultural funding and are starting to expect their museums to behave more like their U.S. colleagues, but in the U.S. government funding at all levels including federal, state and local, provides less than 20% of the income for museums overall.”

The Times story indicates the Met will pursue government assistance.

At art museums and sculpture gardens, 26% of revenues are generated by “earned income”–admission fees, gift shop sales, etc.–according to the Center for the Future of Museums. The lion’s share, 42%, comes from donations and contributions. For natural history, science and anthropology museums, those percentages roughly reverse.

Within the museum sector, zoos and aquariums are most dependent upon earned income (59%) while art museums and sculpture gardens are most dependent upon donations and contributions.

“Income streams in the U.S. have long been far more diversified than their colleagues in the European Union,” Merritt said.

That will need to continue. While bailouts from the federal government for the airline, hotel and cruise industries due to coronavirus related losses are already being discussed, no such momentum exists yet for the museum sector.

If the federal government bails out other sectors of the travel industry, a strong case could be made for why the museum sector should be included.

According AAM research, 76% percent of all U.S. leisure travelers participate in cultural or heritage activities such as visiting museums. These travelers spend 60% more money on average than other leisure travelers.

Museums and other nonprofit cultural organizations return more than $5 in tax revenues for every $1 they receive in funding from all levels of government.

If federal aid isn’t coming, or even if it is, what can these institutions do to secure their financial footing? As with every business, it begins with planning and efforts that should have been made long prior to the doors closing.

“Many museums have spent the past decade diversifying their income streams, so they've been improving the performance of their traditional income streams, whether that's membership or data sales, and experimenting with entirely new enterprises like running business incubators or media channels, or even museum-affiliated hotels,” Merritt said, adding that many of those initiatives were inspired by the financial uncertainty faced during the 2007 recession.

One of the nation’s most popular museums, the World War II Museum in New Orleans, opened a $65 million hotel and conference center in December of 2019. The museum has closed indefinitely, the Higgins Hotel remains open.

“The pandemic is ramping up the financial stress on museums no question,” Merritt said. “On the other hand, this is an opportunity for museums to shine in their role as community anchors and as educational resources and sources of comfort.”

No museum has done a better job of that than the Shedd Aquarium in Chicago, perhaps unintentionally.

In order to populate its social media channels with content, whimsically, museum staff let a pair of rockhopper penguins loose to explore the empty interior aquarium spaces. Public response to the adorable penguins’ curiosity has resulted in millions of views on social media and stories from CNN, USA Today, The Guardian (UK) and CBS “This Morning” to name only a few.

All of which should further ingratiate the aquarium to its public, reminding residents of its importance to the community.

It’s a value the public already recognizes.

According to an AAM study released in 2018, 97% of Americans believe that museums are educational assets for their communities. Eighty-nine percent believe that museums contribute important economic benefits to their community. Ninety-six percent would approve of elected officials who took legislative action to support museums and 96% also want federal funding for museums maintained or increased.

“The way in which the field is rising to the occasion I think will actually make it easier for museums collectively to make the case for our sector as part of the essential social infrastructure,” Merritt said.