The displacement of retail spending by students in host cities owing to Covid-19: A case study

The regulations implemented by governments in response to COVID-19 to limit the movement of people affected the nature of consumer spending. Consumption behaviour change, resulting from disasters or government-enforced regulation, is visible through spending displacement and response to fast-moving changes in circumstances. This study examines student spending in the host cities of universities and how a pandemic, such as COVID-19, may reduce or eliminate the spending injections into the economy through displaced spending. The value associated with the spending displacement is derived from a pre-Covid student survey conducted at the Potchefstroom Campus of the North-West University, South Africa. It reflects on the types of consumer spending that occur and also quantifies the value of spending lost to the city's businesses as a result of the transition to a predominant eLearning model in response to lock-down regulations imposed by Govenment. The university campuses in South Africa are known for their important role in both the development of the workforce's skills and the benefit this provides to the economy. A university campus attracts students from outside the confines of the city which supports spending injection to the local businesses. This benefit is of more value to the host city when it is situated in a rural setting and able to attract students from outside the local area, which has been the case with the Potchefstroom Campus. The Campus experienced an increase in the enrolment of on-campus contact learning over the past decade, a trend that has been beneficial to the local business community and led to continued investment in various property markets. A student survey provides insight into the spending patterns of students and is used to identify the retail spending benefit thereof, as well as the negative effects of its subsequent displacement, to the local retail industry. The introduction of a lockdown and a move to online learning by universities raise the question as to how this might affect the value of student spending and how this displacement in spending will impact the local economy. Some researchers indicate that various forms of spending displacement can be associated with COVID-19, while this research paper investigates how such displacement is relevant to the student population and the host economy. Three forms of displacement are identified in the literature related to the COVID-19 environment, and the results from the survey are aligned with these displacements. Considering the spatial aspect of consumption in the economic process, it was found that the value of student spending is not distributed evenly between retailers in the host economy. The survey results highlight the fact that mobility plays a role in spending patterns and that retail spending occurs throughout the host city. Within the context of COVID-19, the measures that restrict mobility and enforce social distancing, force trade to occur close to consumers' homes. This implies that student spending shifts from the host city to their hometown residence as a result of the change to online studies. The pre-Covid-19 student survey spending results revealed that 81 per cent of students' monthly retail spending takes place inside the host city with the rest spent outside. The Covid-19 enforced move towards online learning, and the potentially longer-term shifts from contact to online learning, will have a significant spending displacement effect on the host city. Concerning the type of consumption that occurs, the research revealed that students tend to spend on a variety of goods and services. The largest monthly spending takes place on retail goods, which represents an average monthly value of R3 146 or 46.5 % of their monthly expenses, followed by accommodation at 31%. In the case of COVID-19, the government regulations which limited contact education resulted in monthly losses in spending within the local economy on the purchase of retail-related services such as groceries and other goods, clothes and footwear, entertainment and hospitality services. Considering the time aspect of consumption, it was found that spending preferences related to time do exist. The results show that students are indifferent to spending during the week or on weekends and that most students are content to stay within the host city during weekends. No obvious time preference between the week and weekend for spending was found. The results show that student spending represents significant spending in the host city and for the time the COVID-19 restrictions remain in place, the spending displacement and loss of income for local businesses will be significant. The loss of student spending amounts to approximately R2 million daily. This not only highlights the cost of enforced lockdown measures, but also provides important indicators to university management upon considering replacing the existing tuition model of contact learning with one of online learning. Such a decision will lead to a significant negative impact on the economic activity of the Potchefstroom business community with farreaching implications for employment, income generation and wealth disbursement in this university city.

Automated summary

Government regulations in response to COVID-19 have affected consumer spending patterns, especially among students in university host cities. The shift to online learning due to pandemic restrictions has led to a significant displacement of student spending, resulting in economic losses for local businesses. This highlights the importance of considering the impact of such spending displacement on the overall economic activity of university cities.