Ripples now, waves later from the Holiday

December 18, 2004
Mobile Register Editorial

Already, the Holiday is taking filled-to-capacity cruises out of Mobile and leaving behind economic ripples that city officials and downtown business owners can net for even bigger returns.

After only 10 sailings that began Oct. 16, the Carnival Cruise Lines ship has pumped an estimated $1.16 million into the city's economy from passenger and crew spending alone.  If the trend continues, Mobile economist Semoon Chang of the University of South Alabama predicts, the ship could have a $20 million impact on the city each year.

Moreover, the success of the 1,400-plus-passenger Holiday will likely attract a bigger ship or a second ship to Mobile.

All that bodes well for the Port City, but city officials and the business community have much to do to fully reap the cruise business potential.

Indeed, there are disquieting grumblings overheard from passengers and the 660 crew that there's "nothing to do downtown."  But that perception can be--and must be--changed.

Keeping businesses open longer on the Mondays that the Holiday sails would be a good start.  Beyond that, business owners can ask passengers and crew what they want, and then better serve their needs.

Restaurant owner Roy Pope did just that, and he's had to add three tables at Busaba's Thai Cuisine to handle the additional customers.  After hearing what would please crew members who patronize his restaurant, he provides maps of downtown, sells phone cards, and plans to open a Western Union service in the back of the restaurant.

Margie Wilcox, owner of Mobile Bay Transportation Inc., is another local business owner who has tailored services to the passengers and crew.  For example, the company redesigned its routes to include a stop at a Western  Union office, which is popular with the ship's crew, and takes crew members to Airport Boulevard malls.  Since the arrival of the Holiday, the company has hired more than 10 new employees.

Granted, not all businesses can be as blessed, but the ones that make the effort can capture some of the cruise ship business.

For their part, city officials can devise creative ways to promote downtown businesses.  Transportation from the terminal should be the city's priority.  Longer-range plans, such as a much-needed sky-walk from the terminal to accommodate foot traffic, must be pursued as well.

Dr. Chang says passengers will spend from $14 to $79 each in the city, and each crew member will average $112 per visit.  Some of that will be spent at stores and restaurants outside of downtown, which contributes to Mobile's overall economic success.  But the downtown is Mobile's front line--the first impression for many passengers and crew.  Consequently, city officials and the downtown business community can capitalize on that.

Russ  Adams, owner of Bienville Books in downtown, says his business hasn't grown appreciably from the cruise ship, but he hopes it will.  "It's a business waiting to happen down here," he said.  He's right.

As Mr. Adams suggests, the city and businesses will reap great rewards if they "integrate with Carnival to offer passengers more."

The economic ripples from the Holiday can turn into waves of commercial activity with wise planning and investment in Mobile's downtown.

Cashing in on cruisegoers

December 12, 2004
By LEE DAVIDSON
Mobile Register
.    .    .
Estimating impact

In its first 10 voyages out of Mobile, Holiday carried some 15,000 passengers--tourists who likely injected about $457,000 into Mobile's economy, according to estimates by Mobile economist Semoon Chang.

Chang, a professor at the University of South Alabama, projected economic impact for Mobile by using formulas derived from a Florida cruise survey.  In Florida, passengers reported spending an average of $79 each during an overnight visit, or an average of $14 if arriving the day of the cruise, Chang said.

To make his estimates, Chang said he assumed that 1 in 4 people would spend the night in Mobile before a cruise, a more conservative number than the 1 in 3 people judged likely to stay an extra night at a Florida port.

Crew spending creates a more surprising economic impact, Chang said.  A crew member spends an average of $112 per visit, according to a 2000 survey by the Florida-Caribbean Cruise Association.  That means the crew could have spent in excess of $700,000 here already.  If the Holiday makes its scheduled 75 voyages within the year, crew spending could be about $5.2 million, according to Chang.

Chang also estimates $2.3 million in passenger spending, based on the Holiday's double-occupancy capacity of 1,452 passengers.  That figure would grow if the current occupancy trend continues: Holiday has had an average of 1,500 passengers per cruise since moving to its Mobile home port.

"If everything goes well," Chang said, the cruise industry could generate up to $20 million a year in known local spending--about half of it in cruise repair or maintenance work for Mobile's two main ship repair companies and the remainder in parking fees, dockage, harbor and water costs, in addition to passenger and crew spending.
.    .    .

Economic Expectations High for 2005
2004 Indicators Show Strong Results

December 2004/January 2005
Mobile Area Chamber of Commerce
The Business View, pp.4-5

Many economic indicators show the area's economy is continuing to grow, and anticipated holiday sales are expected to continue the momentum, propelling Mobile's economy to even stronger levels for the start of 2005.

"It looks like we moved past recovery and consistently into growth mode," said Semoon Chang PhD, director of the Center for Business and Economic Research at the University of South Alabama.

City Tax Receipts Up

City of Mobile tax receipts for the first time in several years registered larger increases than Mobile county.

According to Paul Arnold, a revenue manager for the city of Mobile, the new sales and use tax that went into effect Oct. 1, 2003 is the reason for the increase.  "We can see the numbers," said Arnold.  The new tax structure has boosted overall sales and secured Mobile's share of Internet and catalog sales that went previously untaxed.  Mobile County is still using gross receipts tax."

The major difference between the two is the new formula calculates tax based on where the customer accepts delivery (point of delivery) and gross receipts taxes are based on point of sale.

On the flip side, Chang is concerned about the Eastern Shore Centre retail development and its possible effect on city and county sales tax receipts.  But retailers in Mobile expect the impact to be short-term.

"We're not packed at all," said Tim Nolan, general manager of Colonial Mall  Bel Air.  The first year the new center at Malbis is open, Nolan estimates it will cost his mall 3 to 5 percent.  "That's what happens when competition enters the market.  After the first year, we'll go back to sales increases because, as people make more money, they spend more money."  Colonial Mall Bel Air, one of the few in the country that are 98 percent occupied, recently has drawn a number of national retailers like Hollister and Abercrombie & Fitch.

Last year, the state of Alabama collected more than $6 billion in taxes, recording another annual increase.  In 2004, sales and individual income taxes rose again through August.

Housing Market to Remain Red-Hot

Mickie Russell, president of Dauphin Realty, said, "2004 is the best year we've ever had."

According to the Multiple Listing Service, home sales surpassed 5,400 last year, and economists expected rising interest rates to curtail activity.  The  Federal Reserve has raised the prime interest rates three times since June by .25 percent each time, but mortgage rates continued to be among the lowest in 40 years and Mobile's housing deals are still consistently beating the area's banner 2003 year.

"Building is up, sales are up in both Mobile and Baldwin counties--everything is up," Russell said.  She added low interest rates are allowing young couples to move into larger second homes a little earlier, and continue to be a driving influence in overall sales.

Ellen Maxime, Mobile Bay Area Apartment Association president and property manager for Delaney Development, said the housing boom has had a negative impact on apartment occupancy since 2001.

"When interest rates dropped, people were buying and occupancy fell close to 5 percent.  Now things are leveling off and things are getting better."

The Population Factor

Mobile County's population has held steady at about 400,000 for the past five years, while the city population dropped slightly and the unincorporated areas grew moderately, a trend Lynn Stacey, executive director of the Business Innovation Center, said is common.

"Typically families that are migrating are generally high income.  Some counties will grow faster than others, some will hollow out.  Mobile will be in the middle."  Stacey adds that depending on whether population statistics are being affected by net birth-to-death ratio or by net in-to-out migration, Mobile could end up in the negative, economically.

Stacey recommends the city continue with the demolition of run down areas, such as the housing developments along I-65, and efforts to recruit tenants and tourists downtown, referring to Carnival Cruise Lines and the RSA office tower.

"We should be focusing on importing dollars versus people," Stacey said.

Employment Opportunities Will Remain Key

County employment peaked in 1998, with manufacturing closings taking its toll on county employment.  The first employment increase was recorded in 2003, and sharp gains have been reported through 2004.  "Impressive growth is charted month by month," said Chang.

Bill Sisson, the Mobile Area Chamber's vice president of economic development, believes local companies are responding to the national economy.  "There's a lot of pent-up growth and demand, and people are feeling a lot more optimistic about Mobile."

Statewide unemployment is 6 percent, and in Mobile, 7.4 percent.  So far, 18,700 jobs have been added to the state economy.  According to Chang, there has been a net gain of 2,040 jobs in Mobile from August 2003 through August 2004.

Sisson said area maritime, high-tech and other companies are contributing to that number.  "Austal is looking to hire 600 workers over the next two to three years.  Mobile Aerospace Engineering needs to increase its workforce, and companies like Mentor Graphics, TeleVox and Integrity Media area also hiring."

Early indications from a survey conducted by the Chamber have projected area companies will hire 1,176 employees and invest $357 million in capital over the next four years.  "Area executives are seeing good things ahead," said Sisson.

Business licenses issued is the city of Mobile are nearly double what they were through the same time period of 2003.  From January through August 2003, there were 1,892 business licenses granted.  In 2004, the number is 3,429.

Darrell Randle, small business development vice president for the Chamber, said that doesn't surprise him.  "Mobile has been recognized for a number of years as an entrepreneurial-friendly city--the numbers show a lot of people are aware of the resources available to small business owners who have the courage to pursue their dream."

Outlook Positive for Mobile

Results of the statewide Business Leaders Confidence Index (BLCI) show the economy and the confidence factor improving side by side.  "It (BLCI) is a good predictor of how the economy is actually progressing," said Ahmad Ijaz, economist with the University of Alabama Center fir Business and Economic Research.

In June, the Alabama consumer confidence index had the strongest reading in nearly two years, according to the third quarter BLCI report.  Navigating the Alabama economy, automotive manufacturers and suppliers are ahead of the national curve, growing at 21.5 percent, according to Ijaz.

The Port of Mobile is already seeing an impact from the state's accelerating automotive industry.

"We're the closest deep water port and have excellent transportation connections via rail or highway to these manufacturers and suppliers," said Judith Adams with the Alabama State Port Authority.  "This is one of the driving reasons behind Choctaw Point, the intermodal facility aimed at increasing the port's container traffic."

Adams estimates there will be 40,000 TEUs (20-foot equivalent units) for Hyundai alone.  She also emphasizes the importance of the South American markets as well as increasing imports from Europe and the Far East.  "The infrastructure is in place.  Choctaw Point is enhancing what we have so we can capture our share of the container market."

There are a number of infrastructure projects Chang lists that will continue to impact the Mobile economy well into 2005 including:

    RSA Tower & Battle House Hotel (valued at $160 million);
    Mobile County Public School System renovations and repairs ($100 million, and will increase with the repairs needed from Hurricane Ivan);
    Choctaw Point Intermodal Facility (valued at $300 million);
    National Maritime Museum of the Gulf Coast, Welcome Center and High-Speed Ferry Terminal ($26 million);
    University of South Alabama Cancer Research Institute ($40 million); and
    Voters recently approved an estimated $92 million worth of "pay as you go" infrastructure projects, including an additional shed at Austal USA.

Factor X--The Unknown Economic Influence of Hurricane Ivan

Hurricane Ivan's economic impact is yet to be determined, said Semoon Chang PhD, director of the Center for Business and Economic Research at the University of South Alabama.  But as damage estimates are still being tallied, Ivan is expected to be the costliest storm on record.  Locally, the impact will be felt as property owners and companies shell out funds to meet insurance deductibles, municipalities underwrite clean-up fees and tourism-dependent businesses suffer in Alabama's coastal areas.

The silver lining comes when calculating the economic injection of insurance claim funds and FEMA (Federal Emergency Management Assistance) funds.  And weeks after the hurricane, area hotels and motels remained full.  Emergency workers and volunteers stayed as far away as Gulfport and commuted by bus. 

Barbara Estes, president of the Associated Builders and Contractors, said, "There was already a ton of work scheduled before the hurricane.  A number of local companies have a six-month backlog of work.  The project lists span residential, commercial, schools, landscaping, flooring, roofing--just about everything imaginable."

"There is possibility of a post-hurricane construction boom," said Chang, depending on the number of home and condo owners who are able to afford to meet the new hurricane codes.

The latest statistics such as tax collections, employment, home sales and more through August 2004 show even with the uncertainty of Hurricane Ivan, the area's economy met expectations.

Another critical unknown in the economic picture is the cost of gas and oil.  "Many of the rigs in the Gulf of Mexico were damaged in the hurricane, and then came along Tropical Storm Matthew.  It's going to be a while before all the repairs are made and anything remotely tied to petroleum, like roof shingles or the cost to run a concrete truck, is going to be affected," said Estes.

Fast Facts By the Numbers

The average economic growth for the last 100 years averaged 3 percent.  That's why any year meeting or exceeding that percentage qualifies as a growth year.  Here are key economic predictions by local, state and national economists:

    National
        The national economy is expected to achieve 4.6 percent growth for 2004, the fastest since 1984;
        Growth in 2005 for the nation, is estimated at 3.9 percent;
        Interest rates are predicted to increase above 6 percent, and possibly stretch to close to 7 percent in 2005;
        Inflation is estimated at 2.5 percent for 2004 and 2.0 percent for 2005;
        Unemployment should decline to 5.3 or 5.4 percent.

    State
        The state economy will grow by an estimated 3.5-4 percent for 2004;
        Alabama added 18,700 new jobs between January and May 2004;
        Payroll will rise 0.3-0.5 percent;
        Interest rates were named the most influencing factor in the latest survey of the Business Leaders Confidence Index.

    Local
        Continued growth at a rate of 3-5 percent is expected at least through the first half of 2005, and may slow to 2-4 percent in the second half of the year.

    Sources: Semoon Chang, PhD, University of South Alabama Center for Business and Economic Research; Ahmad Ijaz, University of Alabama Center for Business and Economic Research; and the Mobile Area Chamber of Commerce economic development department.

 

Chang says Mobile economy improving

November 10, 2004
By GEORGE TALBOT
Mobile Register

Mobile's business climate is stronger today than it was 12 months ago, according to a variety of economic indicators compiled by local economist Semoon Chang and presented Tuesday to a Mobile civic group.

Chang told Mobile United members at a breakfast meeting that the local economy is following the national economy on the road to recovery after a three-year recession that began in March 2001.

Chang said city and county sales tax collections, employment rates and home sales all are trending above 2003 levels.

"The short answer is, we are doing well," said Chang, a University of South Alabama economics professor. "In most of the important categories, the numbers this year are up over 2003."

Chang said sales tax collections grew by 4.8 percent in Mobile over the past 12 months, and by 3.5 percent in Mobile County. Statewide tax collections rose 10.9 percent.

Chang said that local and state governments should get a boost in tax revenue after Hurricane Ivan, which struck the Alabama Gulf Coast on Sept. 16. The storm had area cash registers ringing up sales of building supplies, gasoline and food products, and created huge demand for construction and repair services, Chang said.

"I imagine that employers are having a very difficult time finding construction workers in Mobile right now," Chang said.

Initial estimates of damage from the storm have ranged as high as $10 billion, though a more certain figure will not be available for at least six months, Chang said.

Ivan-related costs should keep local tax collections growing at a rate of 3 to 5 percent through the first quarter of 2005, Chang said. But he added that the increased spending doesn't necessarily mean that area residents will be better off financially. Many owners of damaged property will be forced to pay repair costs out-of-pocket because of hurricane deductibles on their insurance policies. The deductibles generally range from 2 to 5 percent.

Other losers from the storm include the tourist industry, real estate developers and small businesses in Gulf Shores and other coastal areas hit hard by Ivan, Chang said.

A year-long series of cruises launched last month from Mobile by Carnival Corp. should produce a $21 million impact in the city "if everything goes well," Chang said.

A little more than half of that total should come from passenger and crew expenditures, parking expenses and dockage fees, and the rest from ship repair and maintenance work performed by local businesses. The cruises should create 391 direct and indirect jobs in Mobile, Chang said.

Chang said it was too soon to tell what impact the closure of ShawCor Ltd.'s pipecoating plant in Theodore will have on the local economy. The three-year-old plant employs 450 workers and is expected to close by next spring.

Mobile prepares for the cruise crowds

October 5, 2004
Greater Milwaukee

MOBILE, Ala. -

This Alabama port city is getting ready for a big influx of visitors as the new homeport for a 726-cabin cruise ship, Carnival's Holiday.

The Holiday's sold-out inaugural trip from Mobile is a five-day cruise to Cozumel and the Western Caribbean departing Oct. 16. It marks Mobile's first venture into the big-time cruise business, and it's a challenge the local hospitality industry is ready to meet.

Mobile Area Convention & Visitors Bureau president Leon Maisel said the cruise ship will transform Mobile from a "pass-through" destination to a "go-to" city.

The Holiday, with 1,452 passengers and 670 crew members, is expected to visit Mobile 75 times a year _ three calls every two weeks. If fully booked, that could bring at least 120,000 passengers into Mobile each year, with about 30 percent of them spending the night. About 20 percent would arrive by air, but most are expected by car.

The marketing effort for Mobile and the Holiday targets cities within a six-to-eight hour drive, or a 400-mile radius. "The first efforts will be in Alabama, then go out of state," said Landon Howard of the Convention & Visitors Bureau.

University of South Alabama economist Semoon Chang estimates homeporting the Holiday at Mobile could generate $21 million, including $3.3 million in spending by passengers. It's expected to create 391 jobs and stimulate $10 million in retail spending from Gulfport to Pensacola, Fla.

"It's critically important to make us (the city) attractive," he said Friday.

Hurricanes' financial winners and losers

September 19, 2004
By EDDIE CURRAN
Mobile Register

. . .In the year after Hurricane Frederic, city of Mobile sales tax collections increased by about $1.2 million, according to Semoon Chang, an economics professor at the University of South Alabama and a longtime student of the area's economy. 
After that 1979 storm, Chang published a study of the impact of Frederic on the local economy. 

"What I found was that during the 12 months after hurricanes hit, the retail sales in general are increased rather significantly," he said.  "The sales tax collections will increase, but that's kind of misleading, in the sense that there are businesses that will lose substantially," he said. 

One wild card cited by Chang: The massive highway and bridge destruction that occurred in Pensacola, especially along Interstate 10.  A bridge at the Alabama-Florida state line was damaged, and most significantly, parts of the eastbound bridge over Escambia Bay collapsed into the water, with damage to the westbound bridge as well. 

"Probably 40,000 to 50,000 vehicles go over that bridge every day, and they will have to be rerouted, and I don't know where they will be rerouted," Chang said Friday.  Damage to I-10 can be expected to inflict serious harm to gas stations, hotels and restaurants in areas where the highway is closed, though others, in areas where traffic is rerouted, could benefit.

Mobile city officials have to be worried about any detour that would cause tens of thousands of motorists to miss the city when driving to Florida.

"There will be a tremendous transfer of business from some places to others, and that will be interesting," Chang said. . .
 

Strong year ahead for Mobile economy
01/25/04
By GEORGE TALBOT
Mobile Register

Semoon Chang has done the math, and the numbers tell him that 2004 will be a robust year for the Mobile economy.

Whether increases in sales tax proceeds, income tax revenues, tourist activity or home sales, "all signs point to an improving economy this year," said Chang, a University of South Alabama economist. "We are clearly on an upward trend."

The good news comes after a three-year-long slump that sapped job growth, tax revenue and generally put a damper on economic activity in the city. Chang said the local economy entered a recession in June 2000, when a wave of manufacturing job cuts started rolling across the Mobile area. The recovery began in the third quarter of last year and, boosted by a series of multimillion-dollar construction projects, has been picking up steam ever since.

Chang is forecasting local economic growth -- measured by sales tax revenue -- of 3 to 5 percent in 2004, putting the city on par with projections at the state and national levels. That would be a welcome turnaround after three consecutive years of declining sales tax revenue in Mobile County by an average of about 4 percent.

"Our recovery is being assisted by the improvement of the national economy, but we are doing a number of things to help ourselves, too," Chang said.

Chief among those helpful things is construction of the 35-story RSA tower and the renovation of the adjacent Battle House Hotel, a $162 million project currently underway in downtown Mobile.

Other projects cited by Chang included construction of a $200 million intermodal facility at the Alabama State Docks, scheduled to begin in mid-summer; $100 million worth of renovations now being made to Mobile County public schools and the $38 million Mobile Landing cruise ship terminal soon to be under construction on the Mobile River waterfront.

Chang's optimism is shared by many local business leaders.

"This town is getting ready to bust wide open in 2004," said Leon Maisel, president of the Mobile Area Convention and Visitors Bureau.

Maisel said the city's selection as a cruise embarkation port -- Carnival Cruise Lines will launch a series of four- and five-day cruises from Mobile beginning in October -- has raised its profile among tourists and should bring a flood of new visitors in the coming year.

"We're becoming more of a destination for people, and that's an exciting turnaround for us," Maisel said. "By the end of this year, I don't think anybody will be describing us as a sleepy little port town anymore."

Jeff Newman, president of the Mobile Area Association of Realtors, said he expects new home sales in 2004 to top the 5,440 sold last year in Mobile County and the Eastern Shore.

"Last year was the best in our history, and we have every expectation that we'll be as good or better in 2004," Newman said.

Bill Sisson, vice president of economic development for the Mobile Area Chamber of Commerce, said he's receiving an ever-increasing number of inquiries from companies interested in setting up operations in Mobile. Though he declined to identify any of the companies by name or by their potential impact on the community, Sisson said his office is working about 20 different projects, including several that he described as "major employment opportunities."

"The interest level definitely is picking up. We have a lot to sell and a lot of attention on us right now," he said.

Area utility costs, already below the national average and an important incentive for industrial recruitment, should hold steady in 2004, according to local officials.

"Businesses trying to locate in an area are always looking for reasonable power costs, and that's certainly something we have to offer," said Bernie Fogarty, a spokesman for Alabama Power Co. in Mobile. "Right now, we're not anticipating any rate increases, so things are looking good for 2004."

Robert Edens, a principal at Gulf States Engineering Inc., said the Mobile-based design engineering service has seen a steady increase in commercial and industrial projects over the past year. The company employs about 19 engineers; he spent much of Friday interviewing candidates for a couple of new positions.

"This is the first year we've had a significant backlog" of design work, Edens said. He listed the 269-unit Lighthouse condominium in Gulf Shores and a $27 million distribution center for Millard Refrigeration Services in Theodore as two of the major projects his firm his working on.

Keith Ellenberg, chief operating officer for Mobile-based Chapura Inc., a software developer for handheld computers, said his company's sales depend more on the global economy than on activity at the local level.

But he welcomed the rosy outlook "because it means a better quality of life for Mobile, and that's important to our employees. It also makes it easier for us to recruit people to come work for us."

"The bottom line," Ellenberg said, "is that it's a great time to be doing business in Mobile."