Special Alert: COVID-19 Bulletin - Travel and Wholesale Impacts

Dear Friends,

As we approach the eventual re-openings of businesses and winery tasting rooms, Davis Wright Tremaine, counsel for the Oregon Winegrowers Association, provides this blog post for “Employers Planning to Reopen.” Keep an eye out as you near the end for the “Related Posts” that may be of interest.

OWB has been staying in touch with our partner agencies during the emergency, and two in particular shared some timely and significant insights during presentations last week.

The first webinar is Oregon-specific with essential data on wine tourism. It was delivered on April 29 by the Oregon Restaurant & Lodging Association, Travel Oregon and the Oregon Destination Association. The first panelist was my counterpart at Travel Oregon, Todd Davidson. He gave a blunt assessment of the challenges hotel and tour operators are now facing alongside those in the restaurant, airline and associated hospitality segments.

Oregon hotel occupancy for the most recent week measured in April continued falling dramatically to just 24%, and revenue per available room was off -75% compared to a year ago. Port of Portland tracking data further illustrates the magnitude of the contraction with daily passenger counts in April at Portland International Airport down -95%. Nationally, travel and tourism forecasting experts project a negative economic impact nine times greater than what followed the September 11 attack nearly 20 years ago.

Since Travel Oregon’s annual budget is based on state lodging tax revenue, the effects from COVID-generated downdrafts, compounded by a ratcheting back of the lodging tax rate from 1.8% to 1.5% on July 1, leave the agency facing a funding shortfall of at least 40% in the year ahead. That translates into a $17 million budget reduction compared to what was built into Travel Oregon’s annual business plan a couple months ago.

Legislative statute requires that Travel Oregon dedicate $4 million of its diminished income to the Regional Cooperative Tourism Program and another $2 million to the competitive grants budget. On top of that, half of the money in the Wine Country License Plates (WCLP) account is distributed directly to regional tourism marketing organizations.

Despite the unforeseen budgetary headwinds Travel Oregon is experiencing, the money it will distribute across the state for regional marketing and grants in the year ahead still equals about three times our industry’s average annual tonnage tax collections.

In addition to the opportunities some regional wine groups are already taking advantage of to access tourism dollars and design business-building programs with their local destination development partners, the Wine Country License Plates Matching Grant Program continues to support Oregon’s wine economy. Just last month, WCLP applications were approved for three regional winery associations and a fourth grant will go to the OWB. We recognize the urgency and importance of incremental funding to our industry’s recovery, so OWB will stay close to Travel Oregon as the tourism grant menu is refocused for 2020-21.

Last week’s other online session was produced by the Wine & Spirits Wholesalers of America. A couple minutes into the program, Cory Rellas of Drizly shared his observations on the migration to online buying accelerated by the COVID-19 emergency. Drizly’s 8-year-old e-commerce platform connects consumers in 26 states (so far) with local retailers so beer, spirits and wine orders can be home-delivered within about 30 minutes. Rather than upend the three-tier system, Drizly’s technology helps optimize it, reducing transactional friction and mirroring the consumer’s experience in other product categories.

At the 13:45 mark in that discussion, Dale Stratton of SipSource summarizes distributor depletion data for wine through March. While the rolling 12-month average points to a downward trend (-1.9%), it’s actually an improvement versus the 12-month number through December (-2.7%) due to channel shifting as consumers bought more for home consumption in Q1 partially offsetting volume lost by forced shutdowns on-premise.

Following up on last month’s two OWB webinars detailing the federal government’s emergency financial aid for businesses (available in the OWB’s COVID-19 toolkit), Nick Shepherd from Irvine & Co. CPAs offers some compliance suggestions. If yours is one of the thousands of Oregon businesses that was approved for, or may soon be awarded, a Paycheck Protection Program (PPP) loan, Nick sends this reminder that no loan forgiveness is possible without proof of expenses. While everyone is waiting for the Treasury Department to publish additional rules on loan forgiveness and documentation requirements, forgiveness is ultimately determined by the banks originating the loans.

Nick recommends tracking all qualified expenses with as much detail as possible. Toward that end, some business owners have asked if a separate bank account is necessary. While the law does not require one, it may be a helpful in tracking expenses. For any payments, note the date of service, what the expense is for, the date paid, the check number of the payment and the vendor name.

In addition, for qualified expenses such as utilities, rent, health insurance, matching company retirement plan payments, etc., keep a copy of:

Cancelled checks, payment receipts, or other documents verifying payments;
Invoices/bills supporting the expense;
Payroll tax filings reported to the IRS or any other regulatory agency.

One piece of good news for wine businesses subject to Oregon’s new Commercial Activity Tax comes from the state’s Department of Revenue. DoR has determined that federal assistance to businesses under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, including PPP and Economic Injury Disaster Loans, is not commercial activity under Oregon statute and will not be subject to the Commercial Activity Tax.

Another state agency, the OLCC, has sent this clarification for those wondering how to interpret the Commission’s April 24 announcement about potential limitations on “virtual wine tastings”:

“When the virtual tasting is at a physical location in Oregon, it may be held at any location provided the location is not a premises with an OLCC-issued Full On-Premises, Limited, On-Premises or Off-Premises Sales license unless the winery licensee is also the same licensee of record (as listed on the OLCC license certificate) at the same premises. Only the licensee and/or staff may be physically present at the host location of the presentation (viewers may not be physically present at the host location).”

While it’s a bit confusing, OLCC seems to be allowing virtual tastings originating from a licensed winery provided no consumers are onsite.

To make sure this bulletin concludes on a positive note, take a look at the blog post from Sally Murdoch focused on the initiative demonstrated by our winemakers to help their communities and keep Oregon wine top of mind with consumers during the lockdown. To add your vineyard or winery story, get in touch with Sally.