A Tale Of Two Cities: New Orleans After Katrina
The convention center reopened for its first citywide convention in June 2006 after a $60 million renovation – a small price to pay, considering the city lost $2 billion in business during the time the facility was closed.
The Super Dome – site of Super Bowls and home to the New Orleans Saints professional football team – received a $180 million renovation.
The city’s famous Mardi Gras drew 800,000 people this year after a weak 2006 showing. But its pre-storm levels were a million plus. On a broader basis, however, visits are down sharply. The city attracted 10.4 million visitors in 2004 but just 3.6 million in 2006.
The city has yet to regain all of its major convention customers, but it has brought in some big ones, including the American College of Cardiology Conference in March, which drew 26,000.
"We’re really optimistic," says Schulz, sounding optimistic. "The experience of coming here as a vacation traveler or business traveler is very much the same."
That opinion is echoed throughout the hotel industry. All but about 4,000 of the industry’s 38,000 plus rooms are back on the market. Through June of this year, occupancy rates are up 6.9% from a year ago, but have not returned to what they were before Katrina.
Fred Sawyers, general manager of the Hilton Riverside and president of the Greater New Orleans Hotel & Lodging Association, says "the pocket that most people see is in great shape," which is counter to most images.
Sawyers' 1,616-room hotel has undergone $66 million in repairs and improvements since the storm, and is now targeting more corporate meetings to compensate for the loss of the bigger conference business.
Other big hotel names – Marriott, Ritz-Carlton – have also made investments.
On the downside, however, is that the Hyatt (next to the Super Dome), Fairmont (which is undergoing a change in management) and Park Plaza (formerly a Radisson) hotels have yet to reopen. And a planned expansion of the convention center has been put on hold.
"We still have challenges," says Darrius Gray, the hotel association’s chairman and general manager of the Holiday Inn French Quarter. "We’re struggling to secure convention business." Gray says hotels are having to sacrifice on room rates a bit as well as offer incentive plans to attract business.
There have been other developments to brag about. Cruise line operator Carnival recently announced that it would keep its 2,056-passenger ship in New Orleans at least through 2008. In November, Southwest Airlines will add eight daily nonstop flights from New Orleans’ Louis Armstrong International Airport, where the number of daily flights is 75% of pre Katrina levels.
The Lost City
Though the hospitality industry has bounced back from the hurricanes of 2004, its recovery, as well as that of the overall economy, has been somewhat limited by the existing labor pool -- which will be a major factor in the future of New Orleans.
One of the cruel ironies of New Orleans today is that the labor market is tight, even though there is so much work to be done. Also worrisome is that job growth has slowed dramatically since an initial pop from the recovery.
In August 2005, the New Orleans metropolitan had 603,700 non-farm payroll jobs, according to the Bureau of Labor Statistics. Two months later – after Katrina and Rita – there were 425,800.
Jobs. Jobs, Jobs
From November 2005 to June 2006, payrolls grew an average of 7,400 a month. That slowed to 2,000 a month in the second half of 2006. For the first five months of this year, it was down to 1,000 a month. As of July, there were 503,600 non-farm payroll jobs, a decline from the peak in June.
GDP data is also not very encouraging. The economy grew a robust 5.1% in 2004, was almost flat in 2005, and managed a 1.7% gain in 2006, well below the national growth rate.
Even before Katrina, New Orleans job base had been changing and shrinking. Between 1960 and 2000, the city’s population declined more than 20% which had a dramatic effect on the labor-housing market dynamic. Simply put, housing became unusually cheap.
Vigdor of Duke University says many of the people who remained were relatively low-skilled workers, with poor-paying jobs and little chance of advancement. They remained because of a low cost of living, thanks largely to a glut of housing, which depressed prices.
Shortly after the disaster, FEMA estimated close to 140,000 homes and rental properties in the New Orleans metropolitan area were destroyed or left uninhabitable by the storm. Some $13.5 billion was paid out to Louisiana homeowners under the National Flood Insurance Program.
"The housing market was turned upside down, or is it right side up?" says Vigdor. So was the workforce.
The population of the metropolitan is now 1.2 million versus its pre-Katrina level of 1.4 million. Orleans Parish, which includes the City of New Orleans and some adjacent areas, was recently estimated to have a population of 273,000 -- 60% of its 2004 level.
"The hospitality industry thrived because there was a supply of workers," explains Vigdor.
His analysis of evacuee data indicates that those who have returned are doing pretty well in finding jobs with decent pay. People in the lower wage, service category are not moving back. That supply has been reduced and business has had to adjust.
"We are using a great deal of contract labor," says Gray of Holiday Inn.
Sawyers at the Hilton is also using more contract labor than before. He says there’s also a shortage of more high-skilled culinary workers and guesses that wages for such jobs have risen 20%-30% as a result.
Even Shulz of the convention center says labor "is a big question we get" from prospective clients. "They want to know are there going to be people to staff the hotels and restaurants," she adds,
The labor shortage is a widespread problem, says Scott, the economist. "Employers tell me they are in desperate need of people. Some are recruiting overseas."
Scott adds that the bigger employers, such as the shipyards and refiners, had the financial wherewithal to weather the work stoppage resulting from the storms, come up creative ways to deal with housing and to keep their payrolls stable. Smaller and local employers have struggled.
Long Road Home
The construction sector is also in need of workers. A shortage of general contractors along with sharply higher home insurance and utility bills is hurting homeowners struggling to recover.
The bulk of that task falls on "The Road Home" program, which administers relief efforts for the state. It was formed to provide up to $150,000 to cover uninsured losses resulting from major and severe damage.