How New Orleans’ economy might bounce back after the pandemic
By: Tony McAuley | NOLA.com | The Times-Picayune | August 6, 2020
Five months into the coronavirus pandemic the New Orleans economy looks Depression Era bleak, with the threat of many more business closures looming and the level of unemployment likely even worse than the grim official numbers because of the high proportion of gig workers in the city.
But now is the time to learn lessons from the unprecedented lockdown and plan for what the economy will look like when the pandemic has been subdued and the economy can begin to recover, according to business leaders speaking Thursday at an online economic forum hosted by The Times-Picayune | The New Orleans Advocate and sponsored by LCMC Health and Hancock Whitney Bank.
“Crises like these pressure-test both systems and people and help us to see where the seams strain,” said Michael Hecht, president and CEO of Greater New Orleans Inc., the economic development agency for the 10-parish Greater New Orleans area.
The crisis has underscored yet again that the city’s economy relies too heavily on tourism and hospitality. New Orleans is the third-most exposed metro area in the country in terms of its reliance on hospitality and leisure spending, with about 128,000 jobs, or nearly one-in-four, working in the sector, according to a March report by The Brookings Institution, a think tank in Washington D.C.
Jerry Reyes, a longtime hotel executive who currently is general manager of the 437-room Westin New Orleans Canal Place, said that hotels like his are scraping by on occupancy levels that are running at just 15% during the week and barely reaching 30% at the weekends. That compares to average occupancy levels before the pandemic of close to 80%. Even a vaccine for the coronavirus cannot guarantee a return to those levels anytime soon, he said.
But the pandemic also has highlighted opportunities for New Orleans, said Brandy Christian, CEO of both the Port of New Orleans and the Public Belt Railroad.
“I think the pandemic has fundamentally changed how companies look at their supply chain,” especially those who had relied too heavily on China, Christian said.
A recent survey by Gartner, a consultancy, found that about one-third of large global manufacturers are planning to move at least some of their manufacturing out of China, with Mexico one of the top three alternative sites. Christian said the trend to diversify manufacturing and sourcing likely will boost Gulf of Mexico cargo ship traffic and benefit Port Nola.
Also, she said the pandemic has made companies more likely to build inventories and storage in warehouses, particularly at ports with access to a variety of transport modes.
New Orleans already had seen a boost in its storage and transportation business before the pandemic because of its unique position as a major port and hub for rail, river, road and air. Hecht noted the decision in December by Medline Industries, a medical supplies company, to build a $53 million warehouse in St. Tammany Parish that will employ about 460 when completed.
Hiring by logistics firms has bucked the trend during the pandemic as a move toward home shopping and delivery was accelerated. Marc Johnson, who previously worked in medical supplies, founded Legacy Logistical Solutions two years ago when Amazon Delivers was looking for local partners. He said he is now trying to hire another 100 driver-deliverers before December after leasing the old Pepsi warehouse in Elmwood to handle a tripling of his Amazon routes. “I figure a lot of people are ready to get back to work and we’ve got a lot of spots,” Johnson said.
The health sector has been pushed to its limits during the pandemic, highlighting a shortage of qualified workers and the need to invest in education and training, said Greg Feirn, CEO of LCMC Health, a health system that includes Children’s Hospital, Touro, University Medical Center New Orleans, New Orleans East Hospital and West Jefferson Medical Center.
“I think part of bringing back the economy in New Orleans is for the health care sector to work with local academic institutions and technical schools,” he said. “There has been a shortage … in registered nurses, respiratory specialists, patient care technicians and the like … for quite some time, and we’ve certainly felt that during the pandemic.”
Still, in the near term the health of the hospitality sector will weigh heavily on the local economy.
Reyes said that the return of big gatherings to the Ernest N. Morial Convention Center, where he was recently appointed by Gov. John Bel Edwards to chair the oversight board, as well as to the Mercedes-Benz Superdome, and Smoothie King Center, are crucial. The convention center estimated recently that the cancellation of its events from March through at least the early part of next year will cost the local economy $1.2 billion.
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