Why the struggling restaurant industry may have played a role in the Rockets’ James Harden trade

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The Houston Rockets and Brooklyn Nets initially agreed to a trade that sends former NBA MVP James Harden to the Nets for multiple players and draft picks, according to ESPN. Harden, who will meet former teammate Kevin Durant in Brooklyn, has expressed his frustration with the Rockets in recent months, before finally asking the team to trade him.

The trade is monumental due to Harden’s massive $ 41 million salary and the fact that league MVPs are rarely traded. But the reasons for the trade may not be entirely basketball related. The origins of the trade can actually be traced to the struggling restaurant industry and the COVID-19 pandemic. The pandemic affected the finances of the NBA, forcing the league to cancel regular season games and build a bubble in Disney DIS, + 0.07% World Wide to play its postseason. The NBA fell short of its revenue projections of $ 1.5 billion, according to the AP. Similarly, the pandemic has crushed the restaurant industry, leading to layoffs in the millions, higher operating costs due to increased security measures, and lower overall customer capacity due to COVID-19 restrictions. The National Restaurant Association estimated that this year $ 240 billion in restaurant sales will be lost due to the pandemic: more than 110,000 restaurants and bars have closed due to the coronavirus outbreak. Some restaurants have had more problems than others based on the types of food they serve, delivery options, and geographic location. At the intersection of the restaurant industry and the NBA is Houston Rockets owner Tilman Fertitta. Fertitta is the sole owner of Landry’s, Inc., one of the largest restaurant corporations in the United States, operating more than 600 properties, including the popular Bubba Gump Shrimp, Del Friscos, and Joe’s Crab Shack. He bought the Rockets in 2017 for a record $ 2.2 billion. Landry’s business has been devastated in recent months. Fertitta estimated that his restaurant empire was losing about $ 1 million in sales per day due to the coronavirus pandemic. The losses led Fertitta to obtain a $ 300 million loan at more than 10% interest for his business, according to ESPN. Fertitta is known in NBA circles for publicly stating that he will spend money to improve the Rockets roster, but clearly Harden didn’t think he did enough. Also, Harden has been unhappy for months – he didn’t play in the preseason because he wasn’t happy with the team’s direction. Harden even came out after the Rockets game on Tuesday and said, “This situation is crazy. It’s something that I don’t think can be fixed. Thank you. “The comments led the team to tell him not to show up for future practices. Recent reports from The Athletic indicated that Fertitta was” hell-bent on cutting payroll and getting the Rockets out of the luxury tax business for the foreseeable future. ” The luxury tax is an additional punitive tax that NBA teams must pay if they spend above a certain payroll threshold. That payroll cut appears to have come in the form of trading former league MVP James Harden, whom He still has several seasons left on his contract. Harden’s annual salary of $ 41 million for the 2020-2021 NBA season is tied for the largest contract negotiated in NBA history. High-priced player Russell Westbrook was traded from Houston just before the NBA season began.While it is true that NBA rules stipulate that the Rockets must recover high salaries on the Harden trade, salaries comb inados that return to the team are less severe annually when the length of the contract is taken into account and can be traded back in future cost-cutting exchanges. Representatives for the Houston Rockets and Landry’s, Inc. did not respond to request for comment on this story. During the COVID-19 pandemic, Fertita is not the only NBA owner to have suffered significant losses in its non-basketball businesses. Miami Heat owner Micky Arison, president of Carnival Corporation CCL, -0.15%, the world’s largest cruise operator, saw his company’s shares fall 58% in 2020. At the opposite end of the spectrum, the owner Brooklyn Nets’ Joe Tsai has seen his net worth increase dramatically due to the coronavirus pandemic. Tsai is Co-Founder and Executive Vice President of Alibaba Group BABA, + 4.30%, whose shares increased more than 7% in 2020. His net worth has increased more than $ 2 billion since 2019.