Increased Energy Costs Create Challenges

New Orleans 500 Survey May 2022

NEW ORLEANS — 30% of the New Orleans executives who responded to this month’s New Orleans 500 email survey said that increased energy costs are creating problems for their businesses.

CNN Business reported that the price for regular gasoline hit a record of $4.40 per gallon this week, so it’s not surprising that owners of transportation-related companies were among those reporting the biggest concerns. 

“A lot of our business is in transportation. This includes VIP transfers using sedans and SUVs along with group shuttles using motor coaches and ‘mini coaches,’” said Jeff O’Hara, owner of PRA Business Events. “Anyone walking the streets of New Orleans will know how common a sight all of these vehicles are on our streets, shuttling visitors around town.”

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O’Hara said that the recent jump in gas prices has had a significant impact on the cost to operate these vehicles and he’s had to pass that along to clients.

“This results in some difficult conversations at times, but I will say that in most cases people have been understanding,” he said. “However, coupled with rising costs on everything from airfare to food, there is concern that the increased cost will cause companies to scale back on their events. This trickles down to every level of the hospitality industry in New Orleans. You tend to think about hotels and big venues, but bus drivers, restaurant servers, hotel housekeepers and [others] all feel it when events are scaled back.”

EnergyinflationO’Hara said business travel is especially important to the city because it’s responsible for the majority of weekday visitors.

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“We need it to complement the tourism traffic and keep a steady flow of business across the industry,” he said.

On a bigger scale, international trade and transportation executives headquartered in New Orleans said they are also noticing negative effects of rising energy costs.

Both Jack Jensen of TCI Trucking and Ed Webb, CEO of the World Trade Center New Orleans, cited increased shipping costs as a problem.

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“It impacts international business investors in particular,” said Webb. We’re very concerned about our maritime industry.” 

Another type of business facing increased costs? Any that’s responsible for managing real estate, which requires lots of power to keep the lights on and the air conditioners running. Two respondents in this category are architect and developer Marcel Wisznia, whose company owns and manages several properties, and Mimi Dossett, president of Money Hill Plantation in Abita Springs. Dossett said that “people’s fear and anxiety about the economy is negatively affecting business as well.”

When it comes to real estate, few have as much to manage as much as the team leading the Ernest N. Morial Convention Center, which has more than a million-square-feet of exhibition space and claims the country’s “largest contiguous-space exhibit hall.” Michael Sawaya, the facility’s president and general manager, said utilities costs are an obvious problem, but recent investments in infrastructure are helping mitigate negative effects.

“Our three-million-square-foot facility is the largest in Orleans Parish, and utility costs are our second highest expense after salaries and benefits,” he said. “In order to reduce usage and net costs, we have adopted progressive, leading-edge sustainability practices, and have made long-term capital investments aimed at reducing usage and costs.”

Sawaya said the Convention Center has replaced lighting fixtures in one million square feet of exhibition space, renovated electrical floor boxes, and installed new boilers and chillers to reduce overall consumption.

“Additionally, we have renovated 36 sets of bathrooms and installed fixtures that use less water and energy,” he said. “Annual savings are expected to be significant.”

Some business owners are solving the extra cost of utilities by downsizing. Lana Joseph-Ford, CEO of High Level Speech & Hearing Center, is one example.

“We decided to consolidate locations and focus on our mobile community outreach program to mitigate operational costs,” she said. “Although it took some getting used to, it has proven to be a cost efficient strategy for us. We realized how wasteful having two large clinic locations was, especially when our city was shut down due to COVID. Even when our clinic was unoccupied we still had to pay utility expenses. We decided not to renew our lease agreement and we’ve now adopted mobile, work-from-home and virtual appointment strategies to reduce costs and ensure that our company remains profitable.” 

Many professional service providers, especially those who work from home or have minimal overhead, aren’t experiencing business challenges because of increased energy costs — but some of their clients may very well be, and that requires extra attention and consideration.

“The greatest impact is in its impact on the concerns of clients and employees,” said John Deveney, founder of the Public Relations Agency Deveney. “With employees we are demonstrating empathy for their situations through efforts to provide them great financial rewards for our work. For clients we are sensitive to the impact they are feeling and offering appropriate counsel and initiatives.”

Nonprofit leaders, meanwhile, are aware of the additional strain inflation is putting on New Orleans families.

“For our organization, rising energy costs are increasing the need of hard-working families we call ALICE (Asset Limited Income Constrained Employed),” said Michael Williamson, president and CEO of the United Way of Southeast Louisiana. “These households live paycheck to paycheck, unable to save for an emergency, and already can’t afford a barebones survival budget. When costs increase, ALICE families make risky decisions — like choosing between filling a prescription or fixing the car —  that have long-term implications for the families and the broader community. And in an increasingly chaotic and competitive fundraising landscape, finding dollars to support households with basic needs like utilities is becoming increasingly difficult.” 

And Asali DeVan Ecclesiastes, executive director at Ashé Cultural Arts Center, said that, ultimately, it’s necessary to make the best of an imperfect situation.

“Especially as we approach a hot summer and an especially active hurricane season, I am super-concerned about our tenants, as well the artists and culture bearers we serve,” she said. “As Ida depleted much of our collective community resources, slow and insufficient insurance response, along with this inflation/price gouging has made it more difficult, if not impossible, for most of us to recover — and now we face an even more vulnerable time ahead. The strategy we’re working to develop is the creation of a climate-positive operations plan that allows us to still serve our community in times of disaster and crisis, even as high energy costs and poor service combine to diminish our capacity to do so.”

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