A pair of professional prognosticators peered into their crystals on Nov. 19 to hazard estimates of the health of the area’s two economic drivers – real estate and tourism.
During a noon presentation at Democratic Party Headquarters, John Tuccillo spoke about the threats to the economy and real estate recovery. Later in the afternoon, Virginia Haley, president of the Sarasota County Convention and Visitors Bureau, gave her outlook on the coming tourist season to the Tourist Development Council (TDC). Both expressed "guarded optimism."
NATIONAL OUTLOOK
Tuccillo, the former chief economist for the National Association of Realtors, said most economists believe the recession is over, and there will be a "steady, sluggish recovery through 2010." On the up side, about 60 percent of the national stimulus funds are waiting to be spent in 2010, he said.
But a significant threat to recovery still exists. "The banks are flush with liquidity. They’re so proud of it, they want to keep it," he said. "The real villains in this piece are the banks."
Tight-fisted national banks are busy padding their assets by raising credit card fees, and lowering credit lines. Without credit, it is difficult for business to create jobs, and that is Tuccillo’s first fear. "Job growth is non-existent," he said.
(For a look at the growth in national unemployment, see http://cohort11.americanobserver.net/latoyaegwuekwe/multimediafinal.html)
Tuccillo said the only bright spot is the weakness in the dollar, which will promote exports.
A second threat is the overhang of foreclosures. "They will be with us for the next five to ten years," he said. The banks "will feed them in gradually, and it will be a continuing drag on the economy."
Over-development in the commercial real estate sector is another problem. "As a rule commercial real estate is deeply in trouble across the country," he said. "It was over-built everywhere." The best sector of commercial real estate is the hospitality industry. "There been an increase in business travel, and a demand for lower-cost rooms," said Tuccillo.
Unlike most economists, he has concerns about inflation. "We’re sitting on a trillion dollars in excess liquidity, and that means you are sitting on price increases," he said. "The [Federal Reserve Board] has a major task to reclaim that excess liquidity to fight inflation. Interest rates are going to be higher."
OFFERING THE NATIONAL TOURISM OUTLOOK
Haley briefed the Tourism and Economic Development Board on Nov. 4 and the TDC on Nov. 19. Corporate travel remains weak, and more businesses are turning to on-line and digital formats for meetings. She said group travel is looking better for 2010, but it fell locally by 33.7 percent from January through September. One uncertainty for business meeting planners is a 20 percent default rate for hotel mortgages nationally.
Haley expects fewer fliers and more drivers in 2010. "People are trading down, they are more cautious," she said.
While 53 percent of generations X and Y are saying intend to travel next year (down slightly), there is a slight increase in interest by boomers.
Nationally Haley anticipate room rates will continue to decline. "You’ll need to look to 2013 before rates will be back to where they were 18 months ago," she said. "It’s going to be a bit of a slog."
LOCAL TOURISM OUTLOOK
Haley was more optimistic for Sarasota tourism. She expects a continued decline in the average daily rate for room, but the decline will moderate in 2010. Bookings for next year are improved over last year this time, another encouraging sign.
A survey of local hospitality businesses this month, however, indicates rough times ahead. More than 65 percent reported winter bookings are down, and only 9 percent said they were up. About half expected their room rates to stay the same, but 43 percent said their rates would fall further. In the past 18 months, hoteliers have been slashing room rates to attract business.
As for their "business outlook," 39 percent said it would about the same as 2009, while 48 percent said it would be lower. Only 13 percent predicted a higher outlook than last year.
The director of the Ritz-Carlton hotel in Sarasota was optimistic. James McManemon told the TDC, "We’re starting to see business pick up. Christmas is up. January is up."
LOCAL ECONOMIC OUTLOOK
"We will trail the national economy," said Tuccillo. "The housing slump has compounded the jobs slump. Our job engine is now finance and health care."
Prior to the 2008 crash, the key industries were construction and service.
For real estate, "we overbuilt," he said. "People will come back, but it will take time to suck up the existing product."
"Foreclosures hang heavy here," he said. "And commercial real estate is tanking. US 41, Main Street, Lakewood Ranch – all over-built retail, and now there is lots of empty space. And the landlords aren’t budging."
However, he noted home sales are up, and inventories are going down. For every home sale, an additional $20,000 goes into the local economy for repairs and refurbishment.
"Recovery will come later here and probably kicks in late ’10 or early ’11," he said. "We will feed off the recovery elsewhere."
Speaking before the democrats, Tuccillo said the 2010 U.S. Senate race may have a major impact on recovery. Gov. Charlie Crist accepted the 2009 stimulus money, but he is taking fire from the right wing of his Republican Party.
"If Charlie moves to the right, it could diminish the amount of federal stimulus funds Florida receives," Tuccillo said.