TOP 10 New Orleans Business Stories of 2016
MSY Ups Its International Game
By Kim Singletary
First it was Germany, then England, now Honduras — after 34 years without a direct flight to Europe, this past year the Louis Armstrong New Orleans International Airport (MSY) welcomed announcements that nonstop flights are on the horizon to two European and one Central American destination.
Seasonal nonstop service on Condor Airlines to Frankfurt, Germany, was announced in June. Flights are booking now, with service set to begin May 17, 2017. Service will run during the high-travel summer months of May to September two days a week, Wednesdays and Sundays. The 10-hour trans-Atlantic flights will take place aboard a Boeing 767-300ER that includes 35 premium-class seats, 18 business class and 206 economy seats.
In October, New Orleans finally landed the big fish — British Airways. Nonstop service between New Orleans and London Heathrow Airport will begin March 27, 2017, four days a week on the airline’s Boeing 787-9 Dreamliner.
As the airline that pioneered first-class international air travel, it’s no surprise that British Airways’ latest addition, the Dreamliner, has a host of high-class features ranging from extra-large windows (60 percent larger than typical aircraft, according to one reviewer) and mood lighting to quieter, lighter, more fuel-efficient operation. The airplane’s premium cabin is also roomier — with eight seats compared to 14.
In a letter to members and colleagues, Stephen Perry, president and CEO of the New Orleans Convention and Visitors Bureau, said the wooing of the airline giant took place over four years, led by a partnership between the CVB, GNO, Inc., and local businessman Gregory Rusovich.
“The new partnership with BA will drive the brand of New Orleans as a world destination not only in the U.K., but throughout the European continent,” Perry said. “With the new Dreamliner and all of its amenities, we will have a top-of-class aircraft connecting London to New Orleans. We will jointly forge an entirely new marketing approach in collaboration with BA that will be a huge part of a greatly ramped-up international marketing program designed to bring hundreds of millions of new top-line dollars to the Greater New Orleans region.”
Simon Brooks, British Airways senior vice president, praised the link between the two cultural destinations, adding he was “pleased to be connecting our two cities as developing technology hubs and look forward to increased business opportunities as a result of the new service.”
About a week after the British Airways announcement, Choice Aire announced that it would be starting year-round nonstop flights between New Orleans and San Pedro Sula, Honduras, on Dec. 17. The three-hour flights will run Wednesdays and Saturdays aboard a 150-seat Boeing 737-400.
The service will be the second offering nonstop rides to Central America, following the addition of Copa Airlines’ flights to Panama City, Panama, that began June 24, 2015.
“This is another significant announcement for our airport and citizens,” said New Orleans Mayor Mitch Landrieu in a press release. “This flight will improve connection and synergy between businesses in both New Orleans and Latin America and be another positive advancement for our communities.”
Catastrophic Flooding in Baton Rouge
By Rebecca Friedman
With 13 people killed and the most recent damage estimate reaching $8.7 billion, the August flooding in the Baton Rouge area has become the state’s worst natural disaster since Hurricane Katrina.
Gov. John Bel Edwards returned to Washington, D.C., in November to request $4 billion in federal disaster aid, up from the initial $2.8 billion request the state made back in August. This aid would address not only the flooding in Baton Rouge but also severe flooding that hammered the northern part of the state earlier this year. In addition to relief for housing and business recovery, some of these funds would be directed toward water management, flood control and other initiatives intended to better protect the region in the future.
So far, the federal government has delivered $438 million in disaster funding to the state, but the Restore Louisiana Task Force, the group charged with allocating these funds, has yet to finalize the terms of an initial housing recovery program. The task force has asked for more time to consider the program guidelines in order to ensure that aid reaches the greatest number of people with the greatest amount of need.
One of the biggest challenges of the August floods is the fact that approximately 80 percent of those affected did not carry flood insurance, as they lived in areas where it was not required. With an estimated 180,000 structures damaged, that leaves property owners with millions of dollars in exposure.
Businesses certainly took a hit as well. According to Louisiana Economic Development, the flooding affected 20,000 businesses in the state, with 6,000 businesses flooded across 22 parishes, and 278,500 people unable to work during the peak of the crisis. The U.S. Department of Agriculture designated 24 Louisiana parishes agricultural disaster areas, and the LSU AgCenter estimated the state’s agricultural losses at $277 million.
FEMA aid typically covers 75 percent of rebuilding and remediation in the wake of a natural disaster, so Louisianians affected by these events — particularly the uninsured — remain hopeful that they will get some relief. But as New Orleanians who faced a similar struggle after Katrina can attest, they will need to be patient, as the bargaining process has only just begun.
‘A House Divided’ Over Short-Term Rentals
By Rebecca Friedman
The conflict between local economy and local identity has reached a fever pitch in the ongoing battle over short-term rentals (STRs).
With the continued growth of sites like Airbnb and HomeAway, STRs have surged in popularity in tourist-friendly New Orleans. According to AirDNA, a site that reports statistics about Airbnb activity, Airbnb posted more than 5,000 active listings in New Orleans in November 2016. Of those listings, nearly 75 percent are for whole-home rentals, a trend that has residents of many neighborhoods up in arms.
Proponents of STRs tout the ability to earn additional income by renting out whole properties, or even a room or a couch within their home. In a city where wages for many have remained stubbornly stagnant, supporters have grown to rely upon the extra income their STRs provide.
On the flip side of the argument are members of the hospitality industry, who argue that STRs enjoy an unfair competitive advantage by not having to pay taxes or adhere to the same safety regulations as traditional hotels and bed and breakfasts. Neighborhood organizations lament the steady streams of tourists who take up scarce parking spaces and often behave in a disruptive manner. And affordable housing advocates blame STRs for reducing the city’s already insufficient rental housing stock and driving up rents.
The City Planning Commission and City Council have sought to strike a balance that would acknowledge the (seemingly permanent) reality of STRs and ensure that they contribute to the city’s tax base and enforcement efforts. On Oct. 20, the City Council (in a 6-1 vote) approved a proposal crafted by the Mayor’s Office, two major STR sites and City Council members that attempted to address both sides.
The resolution prohibits full-time, whole-home rentals in residential districts but does allow whole home rentals up to 90 days a year — outside of the Vieux Carré, where such rentals are banned altogether. Permanent residents (with proof of a homestead exemption) are allowed to rent spare bedrooms or half a double house on a full-time basis. And property owners in districts zoned as commercial or mixed use can operate STRs year-round with few restrictions. All STR operators must carry a permit.
In turn, STR industry platforms have agreed to collect taxes from STR permit holders, contribute to an affordable housing fund and provide quarterly data on their operators.
With details still being finalized, all parties involved are keeping a close eye on the negotiations.
South Market District Continues
By Marie Simoneaux
With three residences, seven retailers and nine restaurants, one luxury hotel and co-working space for up to 400 people, the South Market District is quickly making its mark in downtown New Orleans. Since the Paramount apartments opened in 2014, the South Market District has forged ahead on project after project, with a vision of changing the Warehouse District and the CBD.
Chris Abadie of Stirling Properties has watched the South Market District project since its inception and said it has changed the face of retail in the Warehouse District. The combination of desirable housing and new walkable retail makes the area more attractive to tourists, young professionals and locals.
“It’s become ground zero for retail within a growing area and has helped changed the face of this neighborhood within a very short time,” said Abadie.
Prior to the South Market District project, developed and run by the Domain Companies, the area had limited retail and no high-quality, accessible grocery store – both of which Abadie said is key to a thriving, downtown neighborhood.
Domain started work on South Market in 2013, when they broke ground on the Paramount apartments, but 2016 has been special, according to Matt Schwarz, one of the company’s principals.
“2016 has been an amazing year for the District and Domain, with new buildings opening, projects being announced, and restaurants and retailers setting up shop,” he said.
The Ace Hotel and the Beacon apartments both opened in March of this year, work on the Standard apartments was announced, and sales started in October (it’s expected to open in spring 2018), and a slew of new businesses opened or are set to open under the umbrella of South Market.
When the development is completed, the South Market District will boast 1,000 luxury apartments and condos, 200,000 square feet of retail space and 1,300 parking garage spaces. Domain expects that the project will have created over 500 permanent jobs and 1,500 construction period jobs.
“We are proud of the South Market District’s continued growth and positive impact on downtown New Orleans,” Schwartz said. “In addition to the economic benefits South Market’s new residents and businesses bring to the city, it has been wonderful to see a strong sense of community develop in the area. We’re looking forward to what 2017 will bring.”
International Tourism Boom
By Marie Simoneaux
In 2015, New Orleans experienced a 37 percent growth in international tourism — the highest of any city in the United States according to the United States Department of Commerce’s National Travel and Tourism Office.
In addition to the increase of overseas visitors, the total revenue from tourists increased by over 3 percent, to reach $7 billion.
In June, New Orleans was host to the IPW convention, a partner of the U.S. Travel Association and the largest generator of travel to the United States. The event attracted more than 6,000 attendees, including 1,000 national travel organizations, 1,300 international buyers and 500 travel journalists from over 70 different countries. The convention is predicted to have helped secure $4.7 billion in future tourism revenue.
Stephen Perry, president of the New Orleans Convention and Visitors Bureau, said the city is in a strong tourism growth curve.
“The increase in international visitation to New Orleans was a major milestone for the city and the fruit of many years of hard work and investment,” Perry said. “We will continue to build on the successes of this year, as we expect to see another boost in international visitation from hosting IPW in June, coupled with new, direct international flights beginning service in 2017.”
Mayor Mitch Landrieu said the numbers show New Orleans is one of the best places in the world to visit.
“Simply put, New Orleans is on a roll,” said Landrieu in a press release. “For the tenth consecutive year, New Orleans has seen a record-breaking increase in the number of visitors that are contributing billions of dollars to our economy.”
In total, 9.78 million visitors came to New Orleans in 2015 from over 70 countries. As the city prepares for its tricentennial in 2018, Perry said New Orleans will continue to take the global stage.
“It truly is an exciting time for New Orleans as a world-class destination.”
Real Estate Good and Great
By Suzanne Ferrara
Despite lower energy prices, the oil and gas crisis and a higher than national average unemployment rate, the New Orleans real estate market actually grew more in 2016 than in the previous five years.
According to Latter and Blum’s 2016 Market Measure Real Estate Trends, the number of properties sold in the Greater New Orleans area was up by 8.7 percent for the first three quarters of the year when compared to the same time in 2015.
However, the president of the New Orleans Metro Association of Realtors, (NOMAR), Lesha Freeland, is quick to point out, “This [increase] is a drastic slowdown from the double-digit increases from the year before.” She says the marketplace right now is complicated. “There are really two sides: there’s a good and not so good side, depending on the price range you are looking at.”
2016 has been a buyers’ market for higher-priced homes ($400,000 on up). “There’s a slowdown occurring with homes over $400,000, and that hasn’t been the case for years,” adds Freeland.
However, there’s stiff competition for moderately priced homes (around $200,000) due to a lack in supply and high demand.
Real estate consultant Dr. Wade Ragus says the overall picture remains sunny compared to the rest of the country.
“We are considered one of the stronger housing markets nationwide, and we are still maintaining more appreciation than in much of national marketplace,” he says, before admitting that, “There is a consensus now that we have reached the top and are now entering a period with somewhat less growth in demand.”
As for the commercial market, sales in the retail sector increased 90 percent in the Greater New Orleans area in 2016 compared to the same time period last year, according to Latter and Blum’s 2016 Market Measure Report. “New Orleans continues to remain strong, particularly the CVB and warehouse sectors,” says Paul Richard, president of NOMAR’s Commercial Investment Division (CID). “What we’re beginning to see is a tightening of product inventory and a deceleration in prices per square foot for lease for some retail and office space.”
Richard says next year’s forecast will depend greatly on what happens with the Federal Reserve and the new president’s relationship with Congress.
Restaurant Greats Continue to Expand
By Maria Clark
The restaurant scene in New Orleans continued to grow this year with a variety of dining options popping up in neighborhoods all over town.
The year kicked off with the announcement that chef Emeril Lagasse was set to open his fourth restaurant in the city and the first to open since the renovation of Delmonico in 1998. Named Meril for his daughter, the restaurant opened Sept. in the Warehouse District.
O.C. Haley Boulevard has continued to draw attention from up and coming restaurateurs. One of the latest additions is Toups South, which opened in the same building as the Southern Food and Beverage museum on Oct. 5. This is chef Isaac Toups’ second location in the city and focuses on sublimely meaty Southern and Cajun-inspired dishes.
Both the Ace Hotel and the Pontchartrain Hotel have retained their popularity with locals and tourists after completing extensive renovations over the past year. Josephine Estelle, the sleek Italian restaurant in the Ace Hotel that opened this past March, has continued to draw a crowd of hungry diners. The Besh Group, meanwhile, revitalized the elegant Caribbean Room as part of The Pontchartrain Hotel’s $10 million renovation and brought back a menu built on contemporary Creole dishes.
In August, Altamura, an elegant Italian trattoria opened in the Magnolia Mansion in the Lower Garden District. Owned by Jack Petronella of Manhattan Jacks, Altamura’s menu includes classic Italian dishes such as osso bucco and minestrone.
Over in Mid-City, Vessel opened in June with an exciting new bar program and menu heavily influenced by Mediterranean cuisine. The new concept is spearhead by MiLa alum Nick Vella and offers a chic dining and happy hour alternative in the heart of Mid-City.
Another trend that has shaped the industry this year has been the expansion of longtime favorite hotspots, which includes the team behind Three Muses on Frenchmen Street bringing their concept Uptown with Three Muses Maple on Sept. 9. The venue features live music and a menu made up of small dishes and an array of cocktails.
Fellow Uptown tenant, the Delachaise team, has cemented its popularity over the past decade with the Delachaise on St. Charles Avenue. On June 5, the concept was expanded further Uptown with Chais Delachaise, a cozy bistro featuring a menu of small and large plates created by chef Daniel Volponi.
World Trade Center Turmoil
By Pamela Marquis
The efforts to resuscitate the building at 2 Canal Street seem simply Sisyphean: full of numerous lawsuits, possible demolitions, unrealized plans and busted negotiations with developers for long-term leases.
The city’s most recent plan includes selecting a development team led by Carpenter & Co. of Cambridge, Mass., and Woodward Interests of New Orleans to lease and renovate the vacant tower into a $360 million Four Seasons hotel.
The 33-story building was constructed in 1968. For years, it was known as the International Trade Mart building before becoming the World Trade Center. However, since the late 1990s, negotiations with developers over long-term leases have failed many times, during which the building sat vacant, generated no revenue and basically deteriorated.
In March 2015, Carpenter & Co. and Woodward Interest were selected as co-developers of the project and the city approved the lease with them shortly thereafter. The group is planning to develop a Four Seasons hotel with 350 guest rooms, two signature restaurants, more than 20,000 square feet of meeting space, a Four Seasons spa and fitness center, a rooftop pool and 76-hotel-serviced condos. Renderings of the ambitious project can be viewed at the project’s website Frontandcenterneworleans.com.
This process was not without its own share of tumult, particularly by Stuart “Neil” Fisher, a Florida real estate investor whose company is called Two Canal Street Investors. The company was one of five finalists for the city’s 99-year lease of the building with a $228 million proposal. Fisher slowed the procedures with lawsuits and appeals about the bidding process. By year’s end, however, the road blocking efforts seemed to be running out of steam.
The building is owned by the New Orleans Building Corp., a property development arm of the city. The city and NOBC have insisted the lease selection process was open, fair and resulted in a deal with the highest benefit to local taxpayers.
A recent press release from the city stated: “The Carpenter/Woodward (Four Seasons) proposal maximizes the NOBC’s return on investment by creating good-paying jobs — including more than 1,600 temporary construction jobs and 450 permanent jobs — and will be a demand generator that attracts further investment across the city.”
Once completed, the new hotel will anchor development along that stretch of the riverfront.
The Slowdown Continues With Hollywood South
By Kim Singletary
In the summer of 2015, the passage of ACT 134 officially limited the film cap to $180 million — a drastic change to an industry that spent $246 million in the state in 2013 and $222 million in 2014.
It didn’t take long for Louisiana to feel the effects. Filmworks, a 37-acre movie production studio that opened in 2014 went from booking films before it was even officially open to closing its doors for good on March 31, 2016.
Louisiana Economic Development Secretary Don Pierson reports film business in the state has declined by 80 percent since the changes were made.
Hits to the industry have rippled outward, affecting businesses like Ricca’s Architectural sales in New Orleans. In the Biz film column this past May, Store Manager Julie Ricca noted that the film industry both saved her family’s business in the wake of Hurricane Katrina and continued to provide a crucial source of revenue until the changes went into effect. “In the last 10 years, the industry made up, I’d say, about 40 percent of our clientele,” she said.
In the August issue film column, Mark Backus, sales and design for OPA Signs & Graphics, reported that 25 to 30 percent of the sales at his company from 2011 to 2014 came from filming projects. He noted visits from productions to his business had gone from six or seven a week to maybe once a month.
The issue is one of state vs. local — incentives are paid by the state, but benefits are primarily reaped on the local level. While proponents of the changes assert that with every dollar the state spends on film only 23 cents comes back in tax revenues, Robert Vosbein, president of the Louisiana Film & Entertainment Association noted in his president’s letter in June that, “Local economies enjoyed an average infusion of $6 to $9 for every $1 the state spent to encourage film and television production.”
Within a month of the start of the 2016 fiscal year, the cap was tapped out, but many say it’s a good sign that the state is paying out and clearing the backlog of credits — hopefully helping to restore faith. While the list of productions in 2016 doesn’t stretch as long as 2014 and previous years, as of late November — according to FilmNewOrleans.org — it did include 14 feature films and six TV series, including season three of NCIS New Orleans, four independents and a TV pilot.
Cuba Gets Closer
By Keith Twitchell
Cuba may not yet be fully open to American business, but with momentum in that direction, profound benefits could accrue to the New Orleans regional economy.
Gov. Edwards, Mayor Landrieu, other government officials and numerous private sector representatives all visited the long-isolated island nation in 2016, so clearly the doors are opening.
“The city of New Orleans and Cuba share cultural and commercial connections that date back to our city’s founding in 1718,” observed Rebecca Conwell, senior advisor to the mayor for economic development. “As the United States continues to increase diplomatic relations with Cuba, we remain poised to develop robust trade relations and cultural exchanges that will subsequently increase overall economic activity for our city, state and region.”
Added Mayra Pineda, president and CEO of the Hispanic Chamber of Commerce of Louisiana, “Cuba historically was a very important partner for Louisiana. It is very early in the process, and many changes still need to occur before open trade develops, but Louisiana needs to be alert and ready to position itself as a logical option.”
The most obvious beneficiary would be the Port of New Orleans. Michelle Ganon, vice president of public affairs for the Port, commented that, “it would be a really wonderful growth opportunity for the Port if the embargo was lifted, for regular trade as well as for the cruise business.”
In addition, noted Michael Hecht, president and CEO of Greater New Orleans, Inc., “as the Mariel Port for transshipping is built out in Cuba, this can benefit New Orleans. Enormous ‘post-Panamax’ vessels will unload their cargo at Mariel, then the smaller ships will make their way up the Mississippi to New Orleans – adding to our cargo business.”
Agriculture is another sector that stands to benefit from more open trade. As Hecht pointed out, Louisiana already has more agricultural exports to Cuba than any other state, led by rice. Additional opportunity sectors, according to Jerry Bologna, president and CEO of JEDCO, include “exporting manufactured foods, destination healthcare, and distribution and logistics businesses, both exporting and importing.”
Cuba remains a very poor nation, which puts some limits on the economic opportunities, but unquestionably if Cuba is open for business, that is good for Louisiana business.