As Philly museums reopen, they brace for COVID-19′s financial wallop

The Philadelphia Museum of Art, closed since the middle of March, is finally sticking its toe in the water like a cautious swimmer facing the icy waves off Race Point.

Last Sunday, the museum opened to the general public for the first time in half a viral year, and 1,658 art-starved people went in through the one door now available to visitors, less than a third of pre-pandemic levels for a pay-what-you-wish day.

Caution is the museum watchword on coronavirus reopenings, epitomized by the Art Museum, which has employed layoffs, furloughs, buyouts, and unfilled positions to reduce its staff of 500 by more than 25%, bracing for who knows what.

So far there is no rescue boat visible on the cold waters.

The American Association of Museums published a survey in July suggesting that a third of the nation’s museums — 12,000 institutions — might not survive the pandemic and its aftermath.

“Museum revenue disappeared overnight when the pandemic closed all cultural institutions, and sadly, many will never recover,” said Laura Lott, association president chief executive. “Even with a partial reopening in the coming months, costs will outweigh revenue and there is no financial safety net for many museums."

The Art Museum is not facing that most dire of fates — less of its income relies on visitors than at many other institutions. But it has been hit hard, along with everyone else in the field.

“It’s fair to say that COVID has had an impact on the museum’s ability to operate,” a spokesperson said. “We have had to limit hours, programs, and exhibitions. ... So there will be continuing need for other sources of revenues, such as gifts and grants, city and state support, and endowment income.”

The spokesperson continued: “If there is another COVID-related shutdown, we are well prepared to address it having already clearly defined and established new protocols and procedures for essential on-site staff and those working remotely.”

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That said, low levels of visitation pose an existential threat to all cultural institutions over the long haul, particularly those institutions that depend a great deal on revenue generated by visitors — ticket sales, shop sales, food sales, parking.

The Franklin Institute on Logan Square leans hard on such revenue — about 63% of its $35 million operating budget is generated by visitors and rentals. For the Please Touch Museum in Fairmount Park’s Memorial Hall, the percentage is even higher. About 85% of the Please Touch operating budget of approximately $8 million is generated by daily visitors. (Officials said that earned income accounts for about 30% of the Art Museum’s budget.)

Since the Franklin Institute reopened July 8, the first of Philadelphia’s signature cultural institutions to do so, it has been averaging 350 to 800 visitors over a five-day week, said president and chief executive Larry Dubinski, roughly 15% to 20% of pre-2020 numbers.

The city has restricted reopened museum operations to 25% of capacity.

"We went into this with very real eyes open,” said Dubinski. “Our theme from the beginning was ’We’ll survive it.’ We’ve got to survive it and then we’ll thrive, knowing that it’s going to be a slow build. We made some really difficult decisions early on. ... One is our expense reductions that we put in place early, which unfortunately you know included devastating [staff] reductions, I mean just devastating.”

Dubinski said that “philanthropic support has been really key” to maintaining operations, although a number of programs have been suspended, such as summer camp, overnights at the museum, and traveling science shows.

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Across the Benjamin Franklin Parkway at the Barnes Foundation, which reopened July 25, executive vice president, CFO, and COO Margaret Zminda said she expects earned income to fall substantially. Normally it represents about 30% of the Barnes' operating budget. Not this year. She expects a slide to about 15%.

“Where we’ve seen the falloff as you would expect — general-admission visitation is at about 30% of last year," she said. "But, you know, visitation from groups isn’t happening.”

The Please Touch Museum, on the other hand, decided to remain entirely closed through the end of the year, a decision made because of fiscal and public health uncertainties.

“We really made a public health decision [to remain closed] that was grounded in data and that had some economics to it,” said Please Touch president and chief executive Patricia D. Wellenbach. With no visitors, staff was ultimately cut by three-fourths. Expenditures have now been reduced from about $700,000 a month to $200,000, and the museum is actively “looking to preserve working capital for the long term,” she said.

In normal times, earned income represents 84% to 88% of the operating budget, Wellenbach said. That includes individual ticket purchases, cafe, shop, parking, and events.

“I can’t even begin to count the number of weddings that have been rescheduled,” she said, predicting “strong booking revenue on the other side” of the pandemic.

Still, COVID-19 has exposed the museum’s operating fault lines.

“We can’t come out of this with the same business and operating model,” Wellenbach said. “We have to find a revenue line. We have to figure out new partnership opportunities.”

The museum has enough working capital, she said, to carry it “pretty much through the first quarter of 2021.”

In the world of children’s museums, Please Touch’s pandemic struggles are familiar. Massive layoffs have taken place at the Children’s Museum of Pittsburgh, the New Children’s Museum in San Diego, the Minnesota Children’s Museum, and the Chicago Children’s Museum — to name only a few. Many, including Pittsburgh and Chicago, remain closed.

» READ MORE: Please Touch Museum laid off most of its staff and won’t reopen in 2020

Science museums tell a similar story. The Science Museum of Minnesota laid off most staff and has reportedly lost at least $10 million. The San Diego Natural History Museum has closed through the end of 2020. Dallas' Perot Museum of Nature and Science and the Pacific Science Center in Seattle enacted severe staff reductions. All have been hit hard.

“What I can tell you, primarily for science centers, is that a majority of our revenue is earned revenue,” said Dubinski, who chairs the Association of Science and Technology Centers. "When an institution shuts down and can no longer have visitors or rent out facilities for events, it is a devastating blow.

“We’ve all had to make the decision that our institutions need to be here for the long term,” he said. "That’s why I think you’ve seen so many science centers have to lay off staff. And at huge levels. I think you’ve seen children’s museums, as well, for similar reasons — they are much more membership and revenue focused.”

Other Philadelphia-based museums have also been wounded by the loss of earned income revenue. The Mütter Museum of the College of Physicians of Philadelphia, on South 22nd Street, and the Museum of the American Revolution, at Third and Chestnut Streets, both rely on gate and related receipts for roughly 40% of their operating budgets.

But both have substantial, if not huge, endowments, and diverse revenue streams.

The Museum of the American Revolution, which just reopened four days a week, is allowing about 360 visitors daily, said R. Scott Stephenson, president and chief executive — about 15% of a normal pre-virus day.

“We’re just trying, like everybody, to be very cautious and not get ahead of ourselves," Stephenson said.

Those 360 visitors will restore "a lot of our earned income stream,” he said. The museum’s endowment has held up with the stock market, and members, donors, and foundations have continued to give.

“We’ve stayed very healthy — our endowment has, fortunately. The stock market has been OK [for] investment income and, you know, members and donors and foundations have been very generous.”

But is there a point where, given low levels of visitation, it becomes not worth it to keep the doors open during the pandemic?

“So, really we’ve just got to restore that earned income stream," Stephenson said. "I can’t tell you where there would be exactly a moment where you say it’s better to close.”

At the Mütter Museum those kinds of considerations are a ways off. But visitation and income cannot remain at low levels for very long.

“We are doing better than expected, though our expectations were, I think realistically, quite modest,” said Dr. George Wohlreich, head of the Mütter. “I do not believe they are sustainable in the long run. And if you asked me, ‘What is the long run?' I would say for more than a year.”

Attendance since the July 18 reopening has been roughly 20% to 25% of pre-pandemic levels, he said; store sales have been strong. The museum has committed itself to retaining all staff, albeit with salary reductions.

“We are going to run a deficit,” said Wohlreich. “But it’s a deficit which the board thinks that we can tolerate for a short time, a year, and reconsider as we go.”

The Mütter’s endowment, now at $35 million, gives the museum some fiscal flexibility, and the museum has not yet tapped into its “very robust line of credit.”

"We can keep going the way we are, but if we had to keep going that way for more than a year, it would be very problematic,” said Wohlreich.