Strome Business Minute With Dr. Jeff Tanner

Now that the beach is open for business, will tourism immediately return? The answer is probably a qualified yes. Global tourism and travel will gradually open up with tourism accelerating toward normalcy at a much faster rate than business travel. Business travel, a part of our hospitality sector that gets less attention in the press, is really important to us locally. Hotels in Norfolk, for example, are more reliant on business travel than those at the beach. But businesses will be slow to allow employees to travel, primarily for cost reasons, and will rely more on web-based meetings whereas there will be pent-up demand among tourists for vacations and seeing sites and places that can be easily reached by car, like the beach and the historic triangle, will be among the first to benefit. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

Adweek agrees – it’s time to pivot to the positive. A recent analysis suggested that consumers are tired of hearing negative messages. According to Adweek’s Robert Klara, a Pew Study found 71 percent of Americans turning off the news to avoid hearing about the pandemic. Another study by Mitto found that 41 percent of consumers think it’s time for brands to talk about something else. For one thing, these consumers are probably tired of the piano music as the people in the commercial repeat “We’re here for you.” So if mannequins in restaurants are part of the new normal, at least for now, and consumers are ready to get out, as we saw in Virginia Beach last weekend, it’s also time for advertisers to pivot to new normal strategies with hope and optimism. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

It’s time to pivot to the positive. A phrase coined by regional chamber president, Bryan Stephens, he suggests we focus on the positives in our region. What are some of those positives? The first may surprise you: strong regional collaboration. It doesn’t take the memory of an elephant to remember the kerfuffle between Virginia Beach and Norfolk over access to the discount mall, but the fighters are gone, replaced by collaborators like Norfolk and Suffolk cooperating on utilities construction so an Amazon warehouse could happen in Suffolk. If you need more convincing, look at 757 Recovery dot com, a region-wide effort involving peninsula and south side business organizations. Still not convinced? Developments in offshore wind, coastal resiliency, and other areas of economic diversification are benefiting from greater collaboration. It’s time to pivot – to the positive. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

Eating more at home and rising meat prices due to plant closures has changed meat consumption patterns. Data analytics firm Lotame observed massive spikes in consumer interest in a fish-only diet, or pescatarianism, in March compared to a year ago, along with a jump in interest for vegetarian diets. But it wasn’t just interest. According to Adweek, sales of meat alternatives like Beyond Meat and Impossible Foods grew four hundred and fifty four percent in one week in March compared to the year before. Beyond Meat’s stock nearly doubled over the past month, as have sales, and privately-held Impossible Foods tripled the number of retailers selling its products. Similar growth in pescatarianism would help our region but lacks the supply chain and simple preparation of a vegetable-based hamburger. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

JC Penney finally filed for bankruptcy last Friday and it looks like this is really it. The poster child for the slow decline into oblivion among department stores is not alone, however, as both J Crew and Neiman Marcus have also filed for bankruptcy. Squeezed by online retailers who could provide greater variety and big box retailers who had better prices, department stores simply lost their place. But their place accounts for thirty percent of the square footage in the nation’s malls, a fact that has mall owners more than a little panicky. But all three are Chapter eleven filings, meaning they come back from bankruptcy, assuming they can reduce the debt they owe, one point seven billion for J Crew, three point seven for Penney’s, and four point three billion dollars for Neimans. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

The stay-at-home orders have certainly changed the rhythm of our days. For many people, this is a time to plunge back into hobbies and home improvement activities. Locally, Stihl has enjoyed a couple of good months of equipment sales as homeowners take on their lawn and garden projects. Nationally, a WebIndex survey found that one in three are renewing their hobby interests, but for the other two-thirds, it seems their plans are to spend more time on social media or play video games. Working out at home is popular, too, with Peloton reporting strong sales increases for its exercise cycle platform. Emarketer dot com reports that ad spending for toys and puzzles was up in March and April but is down at the moment, as those companies wait for buyers to finish their puzzles. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

One trend I expected to happen began this week, sooner than I thought – permanent teleworking. Companies are learning that teleworking isn’t necessarily terrible and may be cost effective. Twitter is leading the way, as their CEO, Jack Dorsey, told employees by email that most of them could permanently telework if they wanted to. Why didn’t he tweet that? Anyway, such a move has office building owners shaking with fear, but could benefit cities like ours, as well as benefit co-working space companies like Gather who can rent a single office or even less. Office workers could choose where to live based on any personal desire, making year-round beach living easier. Our area has a lot of available office space, though, which may also make us attractive for distributed work teams, like ADP’s Norfolk office. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

Delta announced Friday that today will be the last day for service out of Newport News and consolidate all of its Hampton Roads operations out of Norfolk. The decision was made possible by an FAA ruling that allows airlines to consolidate in any region served by two or more airports. Taking advantage of the ruling, Delta is closing operations in ten airports across the country. The move is intended to be temporary, assuming that air travel returns to normal levels. American Airlines also flies out of both airports and has not said yet whether it will be consolidating operations in any regions. The company has announced suspension of flights to Philadelphia out of Newport News, leaving only Charlotte as a destination. Overall, airlines have lost well over ninety percent of their business. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

Maybe it’s because we couldn’t take Mom out for dinner or maybe we just wanted to make this Mother’s Day special but whatever the reason, Americans spent more on Mother’s Day this year than we did last year. Gifts nearly reached twenty seven billion dollars, up eight and a half percent from last year, driven by an increase in the number of people buying Mother’s Day gifts as well as an increase in the average spent. And before we get too far into thinking it’s all a commercial racket, this year’s presents tended to be more sentimental and personalized, according to Profitero’s analysis of Amazon data. And while Profitero’s research found that gifts involving social outings were down nine percent, most men still plan a special outing for mom – we just don’t know when. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

April was actually a pretty good month for the stock market and May hasn’t been so bad either. A question, though, is whether the rally has been justified. Kelly Bogdanova, a leading analyst for RBC, says yes, well, sort of. She didn’t use this term but over the years, I’ve developed what I call the pendulum theory, meaning that the psychology of the market causes it to overswing in either direction. So she says that earnings have justified a rally but one not quite as big as what we’ve seen. She also cautions buyers to remember that they are buying future earnings and she is predicting a long recovery. You can observe the pendulum effect with individual stocks as well as sectors or, as is the case now, the full market, and that creates opportunity. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

With all the fuss over the CARES Act and its Payroll Protection Program or PPP, the second round of funding passed without so much as a whimper. Of course, most of the paperwork was completed in the first round rush. The Virginia Bankers Association says the average loan in the second round was half that granted in the first round, or about seventy-nine thousand dollars. Large banks, like Wells Fargo and Capital One, had difficulty processing loans; Wells stopped taking applications May third and Capital One was widely criticized in the first round for not accepting applications until after the funding ran out. If your business missed out, there’s still six hundred billion in the Federal Reserve’s Main Street lending program aimed at supporting small businesses with loans up to half a million. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

757 Recovery released the results today of its study of local businesses. The group is comprised of area economic organizations like the Chambers, the Economic Development Alliance, and the Workforce Councils, along with the Strome College of Business at ODU. Data indicate that the impact of the COVID crisis is wide-spread. Two-thirds say business is down at least twenty-five percent, with about twenty one percent reporting that they’ve lost over half of their usual sales. Ten percent have closed permanently. There is some good news. Nearly half report that the CARES Act has helped, particularly older established businesses. Some businesses have actually grown during the crisis and one in four expect to begin hiring workers in June. The full report is available at 7 5 7 Recovery dot com. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

757 Recovery released the results today of its study of local businesses. The group is comprised of area economic organizations like the Chambers, the Economic Development Alliance, and the Workforce Councils, along with the Strome College of Business at ODU. Data indicate that the impact of the COVID crisis is wide-spread. Two-thirds say business is down at least twenty-five percent, with about twenty one percent reporting that they’ve lost over half of their usual sales. Ten percent have closed permanently. There is some good news. Nearly half report that the CARES Act has helped, particularly older established businesses. Some businesses have actually grown during the crisis and one in four expect to begin hiring workers in June. The full report is available at 7 5 7 Recovery dot com. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

Opening up for business will not mean business as usual. American Airlines already provides face masks and requires them on some flights and we’ve all heard that airlines, for example, will leave the middle seat open. But Frontier, um, no. You want that middle seat open? It’ll cost you thirty nine dollars. That’s lower than full fare but I guess they could sell it OPEN to two people. I mean, who’s to know? ‘That’s my empty middle seat – no that’s mine.’ Southwest Airlines hasn’t decided what to do, as they’re waiting to see how the media reacts to Frontier. Restaurants also leave a seat open, utilizing half-seating capacity to maximize distance between patrons, with a full staff who cleans constantly. That practice will put pressure on prices and can’t be sustained. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

The Language Group based in Virginia Beach placed sixth in this year’s Fantastic Fifty a list of the fastest growing firms in the state compiled by Virginia Business magazine. The company, which employs twenty four people and provides translation services, enjoyed nearly one thousand four hundred percent growth. Companies with at least two hundred thousand dollars in revenue in twenty fifteen could enter, and ranking was based on percentage growth since then. ITA International in Newport News, placed nineteenth with three hundred seventy six percent growth. The engineering, cyber security, and maritime support services company employs three hundred and seventy three people supporting commercial and government clients globally. Norfolk-based port management company T Parker Host came in at thirty fifth and Buzz Franchise Brands of Virginia Beach was thirty ninth. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

Major healthcare systems across the country, including Virginia’s Bon Secours and Sentara, have announced resumption of elective surgeries. Some that classified as elective under the ban that expired last night at midnight include such things as knee and hip replacements, medical necessities but not life-saving. The resumption of these surgeries is critical to the financial health of hospitals, which are as empty as a mall except for COVID patients. In fact, non-COVID healthcare services are down as much as seventy percent, according to Virginia Business. Hospitals have furloughed staff, which may slow the re-start as they re-assemble staff. Also slowing the restart will be the need for new tests and imaging studies in order to document the progress of a condition. But at least it’s one area of our economy that’s restarting. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

Yesterday’s stock market was a nice rally. Some big gainers included Google, up ten percent, Paypal up six percent, and of local interest, Norfolk Southern up five percent. In fact, overall, the market is only down eight point five percent year to date, as investors are sorting through those businesses which are still doing well and those which are not. If you pull the oil stocks out, the market is only down about six percent. Town Bank was up over four percent, Huntington Ingalls up just over two percent and Dollar Tree up barely. To be fair, Dollar Tree is twenty percent up from its low of about five weeks ago. The good news in earnings, especially in tech stocks, drove the rally; whether it can be sustained is up to the virus. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

Economies of scale drive business – the bigger an operation is, the lower fixed cost per unit of production. Take Smithfield – the bigger a pork production plant, the fewer people per slaughtered pig. The same with a ship –bigger ships mean lower operating costs per container. Greater operating efficiencies lower costs and improve profits. COVID changes that. As global trade declined, shipping companies anchored empty ships but the move to giant Panamax ships has hurt their cost structure. In Smithfield’s case, it’s largest plant closed when employees got sick. If that plant been split up into five plants, they might have had to close one or two but production could have continued. Post-COVID, business will have to figure out how bigger can be better. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

Analysts wonder if we’ll have a U-shaped recession, or fast drop, fast recovery, a swoop-shaped recession, or fast drop, long recovery, or W-shaped, a fast drop with ups and downs before we really recover. The Raymond James analysts make the most sense with their K shape model. Picture a K –some companies dropped like a stone and will never return, like over-leveraged businesses, while others, think Amazon, Walmart and Teladoc, are unphased or even thriving. Others are the right leg of the K – they’re sliding down but they’ll come back, like oil, airlines, and car sales. And a fourth group, the arm of the K, include elective healthcare and tech, will come back quicker. But not all will come back at the same time. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.

Brandom acts of kindness is a new turn on an old phrase that describes how some companies are responding to the COVID crisis. I resisted random acts of kindness because they don’t address the person’s needs and create an unfair obligation on the recipient. A brandom act of kindness is not random, it is purpose-driven in that is in response to a need AND is consistent with the brand’s purpose. For example, Domino’s, KFC and others donating meals numbering in the tens of millions to healthcare workers and first responders, while Taco Bell and Burger King provide free meals to children dependent on school lunches. Crocs, already loved in healthcare, is giving a pair to every healthcare worker in the country. Brandom acts should be one good thing we remember about this time. To learn more, visit odu.edu/business. This Strome Business Minute is presented by the Strome College of Business at Old Dominion University.