New York CNN Business  — 

Business was starting to turn around for Lido, an Italian restaurant in Harlem, after a grinding 20 months.

The 11-year-old restaurant with a James-Beard-award-winning head chef survived the traumatic spring of 2020, when New York City became the center of the coronavirus crisis in the United States. Lido shut down and then pivoted to outdoor dining. It navigated changing Covid-19 safety rules, mask requirements and vaccine mandates, supply chain delays, rising inflation, a labor shortage, and other challenges as it clawed its way to recovery.

“We were getting close to 100%,” Susannah Koteen, who owns Lido and two other restaurants in New York City, said Monday.

Then came a sudden crush of coronavirus cases, driven by the highly contagious Omicron variant and a surge in Delta infections.

Lido, Susannah Koteen's restaurant in Harlem, in 2017. Customers have started to cancel reservations amid the Covid-19 wave in New York City.

New York State reported record-setting highs of new coronavirus infections over the weekend and officials around the country are bracing for another grim pandemic winter. In New York City, some Broadway shows have been canceled, offices have shut down and people are scrambling to change their holiday plans.

“We’ve taken a big nose dive the last two weeks,” Koteen said. “It’s painful.”

Customers are calling to cancel reservations and parties left and right, she said. Around 10 of her staff of 70 have tested positive for the virus, leaving the restaurant scrambling to fill their shifts.

Over the weekend, Koteen considered closing Lido down for January. Now, she’s thinking “we’ll limp along” for the winter.

“Everyone that works for me is my responsibility. I want them to have a paycheck, but I don’t want them to get sick,” she said. “This is going to be a really rough patch for us.”

Déjà vu

Spreading cases and collective anxiety are starting to take a toll on restaurants, stores, hotels and other businesses, which are desperate to recover from the pandemic and jumpstart business during the holidays.

Some shop owners describe a feeling of déjà vu and are struggling to respond to the latest Covid-19 wave.

In Philadelphia, Phil Korshak was forced to shut down his bagel shop on Thursday after one of his employees tested positive and the whole staff was exposed.

The store, Korshak Bagels, stayed closed through the weekend. He hopes to reopen Wednesday.

“I closed for the three days of the week where I make the most money,” he said. “I had to generate payroll without income for all the employees.”

Korshak is now keeping a rapid Covid-19 test on hand for each employee, but he’s worried he will be forced to shut down for an extended period this winter. He wouldn’t be able to handle closing for longer than that.

“Is there a possibility we will be shut down for so long a time that I won’t hold on to staff?”

‘Perfect storm’

For many businesses in the service sector, the holidays are the most important stretch of the year.

In the retail industry, stores often rack up the majority of their sales during the holiday shopping season as customers splurge on gifts and big-ticket items. Restaurants rely on big holiday dinners to help get them through the leaner winter months.

“The holidays are our Black Friday,” said Sean Kennedy, the executive vice president of the National Restaurant Association, an industry group.

Nicole Panettieri, owner of The Brass Owl, a boutique clothing, accessories and gift shop in Astoria, Queens, said the mood has shifted at her store.

Ninety thousand restaurants — approximately 14% of all US restaurants— have permanently shut down during the pandemic, according to the group.

Many restaurants were already struggling with a labor shortage and a sharp rise in wholesale prices, Kennedy said. Now, customer confidence is dropping as Covid-19 cases surge.

Fewer customers have visited restaurants in recent weeks than in November. For the week ending on December 20, restaurant seatings were down 11% compared to the same stretch in 2019, according to data from OpenTable.

“We are definitely picking up more cancellations, softer demand at a national basis at a time when revenue is critical,” Kennedy said. “This is truly the perfect storm for a low-margin business like restaurants.”

For Nicole Panettieri, owner of The Brass Owl, a boutique clothing, accessories and gift shop in Astoria, Queens, staying in stock on goods was her biggest concern heading into the holidays. Now, it’s the Covid-19 surge.

The week before Christmas is some of the “busiest days of the year.” But she canceled an event at the store set for Tuesday because she didn’t want to draw too big a crowd.

The mood among shoppers has shifted, she said, and she’s anticipating a dropoff in sales as people stay home. This may force her to pull back on staff and merchandise in 2022.

“Usually this a very joyful time to shop, and it’s feeling very somber,” she said.