Analysis
Museums & Heritage

'There is no fast track back to normal': museums confront economic fallout of the pandemic

Closed museums are losing millions in income, ushering in job cuts, appeals for emergency relief and lasting changes in strategy

and

The Uffizi Galleries in Florence, one of the world’s most popular museums, has missed out on an estimated €10m in earnings over the Easter season

As Covid-19 lockdowns continue to paralyse public life worldwide, museums are racking up income losses that could drastically curtail their operations for years to come—and wipe out some altogether. On 13 April, the president of the International Council of Museums (Icom), Suay Aksoy, warned, “This crisis has put numerous cultural institutions around the world on the verge of economic collapse.” Her statement calls on both governments and private supporters to inject emergency funding into the sector, because “we will need museums when this is over—even more than we ever have”.

Icom is still conducting its online survey mapping the economic fallout of the pandemic for museums internationally until 30 April, but preliminary data from more than 800 institutions in Europe, North America and Asia point to troubling trends. According to Peter Keller, the professional network’s director general, 90% of these early respondents expect that future museum programming will be reduced as a result of the pandemic, 25% say jobs in their workplaces are at risk, and almost 10% believe their institutions might never reopen.

The damage will vary by country, depending on the length of each government’s lockdown period, and the availability of emergency funds and support schemes, but also by museum. “The rule of thumb is that the more an organisation is dependent on earned income, the tougher this is in the immediate term,” says Alistair Brown, the policy manager of the UK Museums Association. Enforced closures—with little or no certainty on reopening dates in many countries—have erased the usual income streams from admissions, shops, cafés, venue hire and other commercial activities.

The more an organisation is dependent on earned income, the tougher this is in the immediate term

Museums in Europe’s tourist hotspots are reporting income losses of up to 75% to 80%, according to a survey of 650 museums in 41 countries published on 6 April by the Network of European Museum Organisations (Nemo). Large institutions such as the Rijksmuseum in Amsterdam are losing hundreds of thousands of euros every week. “There is no fast track back to normal,” concludes Nemo, noting that international travel restrictions may well continue into the usually busy summer period.

For US cultural institutions, which depend on private philanthropy as well as earned revenue, this is the most precarious time since the Great Depression, as donors’ investment portfolios and museum endowments decline with the markets. American museums are losing around $33m a day while closed, says Laura Lott, the president and chief executive of the American Alliance of Museums. Up to a third were operating on such tight financial margins before the crisis that they may be unable to reopen, she predicts, potentially leading to mergers between museums or appeals for federal grants to keep collections in the public domain.

Lost income and layoffs

Several museum leaders interviewed by The Art Newspaper confirmed they are facing serious budget shortfalls. Closure during the Easter season alone means a €10m drop in income at the Uffizi Galleries in Florence, one of the world’s most-visited museums, says its director Eike Schmidt, although he is optimistic that “we will be able to shoulder this if [the Italian lockdown] will carry on for a few more months only”.

The Royal Academy of Arts in London, which is entirely self-funded, is losing around £1m a month, despite cutting costs in response to Covid-19, says its secretary and chief executive Axel Rüger. And in Austria, the first European nation to relax its lockdown, Vienna’s Albertina is missing out on around €1.6m in income a month, according to director Klaus Albrecht Schröder. Its historic building and the new Albertina Modern are now expected to open up on 27 May, along with other major Austrian museums.

In an ominous bellwether for US institutions, the mighty Metropolitan Museum of Art in New York, with its $3.4bn endowment, announced a projected $100m shortfall (covering this and the next fiscal year) just six days after it closed on 12 March. (It now says that amount could swell to $150m.) With salaries for 2,200 employees accounting for over 65% of the Met’s $320m annual budget, the institution laid off 81 employees in its visitor services and retail operations this week and warns that more job losses could be forthcoming. The museum, which says it will not reopen until 1 July—some expect that date to be pushed back—is also diverting endowment income for acquisitions and exhibition programming into a $50m emergency fund to support salaries and facilities maintenance.

The Metropolitan Museum of Art, which will be closed until at least 1 July, is diverting endowment income into a $50m emergency fund to support salaries Photo: Brett Beyer; courtesy of the Met

Numerous American museums have also laid off or furloughed staff—by far the biggest expense on their annual operating budgets. (Furloughed workers in the US receive pay and health benefits for a limited period of time.) Among the most prominent casualties, the Museum of Contemporary Art, Los Angeles, laid off 97 part-time workers from a staff of 185, the Cleveland Museum of Art shed a third of its 500-strong staff, all part-timers, and the Boston Museum of Fine Arts furloughed 301 of 550 employees. Many museums have guaranteed salaries only until a certain date, such as 4 July at the Met or 31 May at the Walker Art Center in Minneapolis. Others have reduced pay, including that of top leaders like Max Hollein, director of the Met, and Daniel Weiss, the Met's president and chief executive; Richard Armstrong, the director of the Solomon R. Guggenheim Museum in New York; and Lisa Phillips, head of the New Museum.

For now, staff at European museums are more secure, thanks to their public status and government policies preserving jobs during the health crisis. Rüger says the Royal Academy is furloughing 60% of staff under the UK’s job-retention scheme, which will subsidise 80% of salaries (up to £2,500 a month) until the end of June. “That will give us some relief because the biggest challenge now is to manage cashflow”, he says.

In Germany, “regular staff in public museums are protected by their contracts”, says Eckart Köhne, the president of the German Museums Association. And in Italy, even “autonomous” state museums such as the Uffizi do not have the power to hire or fire; most staff are public sector employees.

But as the high fixed costs of maintaining museum buildings and collections continue through the shutdown, the clock is running down on cash reserves. Schmidt estimates the Uffizi, having earned well in recent years, would be insulated until the autumn, while Alistair Brown of the UK Museums Association says that some independent museums run by charitable trusts only have enough to last six to eight weeks.

“We’re already into that period,” he says, pointing out that the Covid-19 emergency grants announced by the major UK public funders, Arts Council England and the National Lottery Heritage Fund, may be too little, too late in such cases. The first awards (up to a maximum of £50,000) are expected to arrive between mid-May and early June, Brown says. “Some organisations will really struggle to get over the line.”

The independent house museum Charleston—the East Sussex former home of the Bloomsbury group painters Vanessa Bell and Duncan Grant—is applying for the grants, but it has also launched a crowdfunding appeal to offset a “devastating” income shortfall projected at £400,000. The Charleston Trust has “no reserves and no endowment”, says its director and chief executive Nathaniel Hepburn. “If we don’t close that gap, Charleston won’t survive the autumn and winter.”

The Charleston Trust, which preserves the former country home of the Bloomsbury group as an independent museum, has turned to crowdfunding to offset a “devastating” income shortfall Photo: Grace Towner

Emergency aid?

Arguing that museums are “economic engines” contributing $50bn a year to the US economy, the American Alliance of Museums has entreated Congress to give non-profit museums at least $4bn in emergency aid. Yet a federal stimulus bill signed into law on 27 March allocated just $75m to the National Endowment for the Arts, 60% of which will support direct $50,000 grants to cultural non-profits across the US. In a ray of light, $349bn was allocated in the bill for forgivable payroll protection loans for small businesses, including non-profits, which allowed some museums to benefit, but the money ran out after less than two weeks. This week both houses of Congress passed a bill allocating $310bn to replenish the programme.

Many fear the arts are coming up short in politicians’ economic rescue plans. “We all understand there’s a lot of trauma in our communities, but I don’t think the amount of resources put toward culture is going to be adequate,” says Rand Suffolk, the director of the High Museum in Atlanta. “It’s not going to compensate for the loss of income.” Icom will deploy its national committees to lobby for government support for museums, Peter Keller says, even as he acknowledges the probability that “the money won’t be there for cultural activities”.

The German culture minister Monika Grütters was quick to recognise the “massive burden for the cultural and creative sectors” posed by the pandemic, but the immediate government assistance is focused on freelancers and small creative companies rather than on institutions, Köhne says. Public museums in Germany are not at risk of permanent closure, he says, but are “in danger of having their budgets cut in the next months when the real cost of the coronavirus crisis comes”.

Post-pandemic strategies

In an effort to balance the books, museum directors are bracing for broad changes in strategy. Reduced income will push curators to rely more on permanent collections for exhibitions, as the costs of transporting and insuring loans prove prohibitive, and acquisitions could be scaled back. But as museums retrench in their physical spaces, their pursuit of digital audiences looks set to continue.

The Worcester Art Museum in Massachusetts reports a rise in younger visitors to its website since it shifted to online content. “This will affect our business,” says the director, Matthias Waschek; physical visitors to the museum tended to be over 50. A longer-term challenge will be monetising that virtual following. “I think the next step will be hoping that [digital activity] pays and trying to turn this into support from donors,” Lott says.

Crowded blockbuster shows could stir deep unease for years after the pandemic, some suggest. The Met is forecasting “a reduced number of visitors for the next year or two”, says Weiss of the Met, due to lingering fears about transmission of the virus and the likelihood of prolonged social distancing measures. The Los Angeles County Museum of Art (Lacma) is considering “how you’d even have to change installation design to avoid people congregating”, says its director and chief executive, Michael Govan.

The economic downturn has also cast doubt on ambitious capital projects such as Lacma’s controversial $750m campaign for a new building designed by Peter Zumthor. (Demolition of four existing museum buildings began in early April.) Some wonder whether donors reeling from stock market gyrations will make good on $650m in pledges, and whether Lacma can pay off $300m in bond debt associated with the project.

Govan is bullish, drawing parallels with the 2008 recession, when “all the pledges came through” for the construction of the museum’s Resnick Pavilion. “Institutions that have strong support and a strong board—people are especially caring about their non-profit institutions at a time like this,” he argues.

Can Lacma’s ambitious $750m capital campaign for a new building designed by Peter Zumthor weather the economic downturn? Rendering: courtesy of Atelier Peter Zumthor & Partner/The Boundary

Others say today’s crisis is far worse for museums than in 2008, when they did not close their doors and confront zero earned income. Market turmoil means some donors “are hesitant to make contributions and will be for the foreseeable future”, Lott says. And many US museums have had to cancel spring fundraising galas that attract well-heeled patrons. The Met indefinitely postponed the blockbuster 4 May gala staged yearly by its Costume Institute, which brought in $19m last year. Lacma cancelled its 17-18 April Collectors Committee benefit, which generates anywhere from $2.5m to $6m for acquisitions. The High Museum moved its annual wine auction online but does not expect it to raise the $3m for which it had hoped.

European museums such as the Albertina, relying on visitor income rather than endowments or philanthropy, were largely unaffected by the 2008 recession, says Klaus Albrecht Schröder, but they may be hurt by a collapse in tourism until 2023 or 2024, he thinks.

One silver lining of the crisis will be a greater focus by museums on serving local communities

One silver lining of the crisis will be a greater focus by museums on serving local communities, believes Mary Ceruti, the executive director of the Walker Art Center. “We’ll be looking at what kinds of shows are going to resonate and provide that sense of connection people will be craving,” she says.

For Mami Kataoka, the director of the Mori Art Museum in Tokyo and president of the International Committee for Museums and Collections of Modern Art, a better comparison than the 2008 recession could be the 2011 Japan earthquake and tsunami. “The national calamity truly called for an existential question,” she says. “What are the essential reasons for the museum, art communities and art itself to exist?”