The economic climate continues to improve slowly in the Quad Cities but challenges remain due to pressures that include lingering labor shortages, a slow supply chain system recovery and rising interest rates. Those were among the areas addressed by a panel of nine area business leaders who took the stage at the QCBJ’s 2023 annual […]
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The economic climate continues to improve slowly in the Quad Cities but challenges remain due to pressures that include lingering labor shortages, a slow supply chain system recovery and rising interest rates.
Those were among the areas addressed by a panel of nine area business leaders who took the stage at the QCBJ’s 2023 annual Mid-Year Economic Review. The wide-ranging conversation, which followed a keynote address by the Chicago Fed analyst Ellen Rissman, was moderated by Steve Sorensen, owner and managing director of Strategy in Progress.
Following is a brief sampling of what the panelists shared in response to Mr. Sorensen’s questions at the QCBJ event on Thursday, June 22, at Bally’s Quad Cities Casino & Hotel, Rock Island.
Jennifer Bennett, CEO of Shive-Hattery, said her growing architectural engineering firm “has not seen a significant slowdown yet but we are expecting it.”
She added: “We are seeing signs of an upcoming slowdown especially, particularly in the commercial market where interest rates are causing some slowness, but we’re still designing projects. They may not be going into production and they’re staying on the shelf and waiting perhaps for lower interest rates and perhaps for a more certain outlook in the economy.”
The firm works primarily in the Midwest, she said, where “we are a little bit insulated” from the economic and market changes that hit larger coastal population centers. And her firm and others around the nation have been boosted by recent major federal and state government investment in infrastructure projects.
That growing list of projects, however, also has shone a spotlight on the growing shortage of civil and electrical engineers. She cited a study by the American Council of Engineering Companies that estimates the nation is 82,000 civil engineers short of being able to complete the work that will be coming in the next five years. And that disparity is expected to get worse, she said, because “we’re retiring more engineers than we are graduating engineers.”
It’s not only civil engineers who are in short supply either.
“If you know any electrical engineers, we’d love to talk to them,” she told the crowd of Quad Cities business leaders.
Robert Erickson, president & CEO UnityPoint Health – Trinity, focused on the healthcare mergers and the economic pressures that prompt them. It’s a subject he’s well familiar with since the healthcare system he leads announced in March that it is exploring the formation of a new healthcare organization with New Mexico-based Presbyterian Healthcare Services.
Mergers have often happened in healthcare as providers seek ways to deal with rising costs and changes in technology and care, Mr. Erickson acknowledged. But he added “This is different; the sheer scope, magnitude and rapidity of how it's happening, it’s almost daily.”
And don’t expect those mergers to end soon, he said. Consider that, at the end of 2022, only 12-15% of healthcare systems were operating in the black. One reason for that, he said, is the escalation in the number of private equity firms entering healthcare and siphoning off more profitable out-patient services. “Many advancements in technology are happening outside of hospitals, and that’s great,” he said. “But hospitals still exist with their huge infrastructure and huge fixed costs for those who are really sick.”
Such challenges have led UnityPoint and others, he said, to “look at what levers we can pull to be sustainable. They include attacking the system's large overhead through mergers that allow systems to save money by buying in larger mass and centralizing back-office and other duties.” Those changes, he added, amount to “hundreds of millions of dollars of things that will be invisible to our patients.” What they will see instead is more dollars invested in staff, programs, services and crumbling infrastructure.
Healthcare systems also have been hard hit by a nationwide labor shortage worsened by competition from those multiplying outpatient businesses. UnityPoint has worked to meet the challenge by recruiting outside the area and the country. “At the high point, we had about 185 travelers from other areas,” Mr. Erickson said. The company also improved its retention rates and added innovations like automated patient self-check-in.
Delia Moon Meier, president of Iowa 80 Group, predicted some economic good news at the June 22 event. She said she expects gas prices to remain stable and the trucking industry to remain level or be down only slightly in the months ahead.
Ms. Meier has a unique vantage point from which to make such predictions. Her company runs Iowa 80 Truck Stop, which is not only a “gateway to Iowa” it welcomes 2 million visitors a year, about a quarter of whom are truck drivers.
In addition to its Walcott, Iowa-based massive truck stop and tourism destination that also includes full services for truckers, Iowa 80 Group owns and runs the CAT Scale Company which boasts 2,200 locations serving truckers across the U.S. and in Canada.
Her overall company, which supports the supply chain, had seen a loss of business due to the pandemic bottleneck, she said. But signs are that those problems are leveling off.
Gas price stability also has been a pleasant surprise over the past two years after a period of constant change, Ms. Meier said.
At the same time, however, another major challenge for businesses like hers has gotten worse: the labor shortage. “We’ve got to figure out how to do more automation in just about everything,” she said. A growing number of retirees coupled with the reduced number of people entering the workforce already has led to a reduction in services. Menus, for example, have gotten smaller as fewer remaining workers, including owners, work harder. “That’s the biggest thing holding us back,” she said.
Jake O’Rourke, COO and vice president of O’Rourke Sales Co., got one of the night’s biggest reactions when he confirmed for the crowd that the appliances, electronics and gadgets Christmas gift-givers will be searching will be in stock this Black Friday.
That’s because after a period of supply-chain and COVID-19 instability, product and inventory have begun to stabilize at all seven of the Davenport-based wholesale distributor’s appliances and electronic locations across the country. What does that inventory include? O’Rourke’s 100 employees distribute just about “anything you plug in your house,” Mr. O’Rourke said.
After coping with a business environment that has been flat year over year, he said, O’Rourke is seeing a growth in units available. “It’s something we’ve been looking forward to,” he said.
“We’re starting to see inventory levels starting to rise and the overall labor market in our industry to kind of flatten,” he added. That means inventory will be in stores when and where it's needed.
Higher interest rates will have an impact on his business, he acknowledged, but it won’t be noticeable to consumers. Distributors and retailers will simply make smaller purchases over the year rather than stockpile inventory all at once. You’ll see smaller trucks, he told the crowd, but there will be more of them showing up delivering goods.
Visit Quad Cities President & CEO Dave Herrell told business leaders that neither the nation or the Quad Cities is getting back close to pre-COVID-19 tourism levels. In 2019, he said, visitors spending in the QC stood at a record $1.2 billion. In 2022, “the bottom fell out” and nonresident spending fell to $950 million.
Still, he said, the community is “making positive headway” after the rapid fall of tourism visits and spending, which both hit records in 2019.
Pent-up demand has created a positive rebound where leisure travel is stronger, and more business leaders are traveling to meetings, he added, but there’s a long way to go. “The challenge for the Quad Cities as it relates to the visitor economy is we need to press on the gas as it relates to marketing even more,” he said.
“We need the business community really to promote outbound travel and inbound travel because that helps everyone,” he said. “We also need to continue to do the things that we need to do to invest in our product.”
One key to tourism growth in the region is growth in riverboat cruises. Not only do the new national cruise lines, which opened their QC season late last month, diversify the QC tourism asset portfolio, he said, it’s “a great chance to activate'' one of its biggest assets. “We all love the Mississippi River. It’s an amazing story to tell and we need to continue to invest in riverfront development.”
There’s a lot of pent up demand for river cruises post-COVID 19, he said, and the region’s partnerships with the American Cruise Lines and Viking Cruise Lines has seen dramatic results. Viking Quad Cities trips, for example, already are sold out in 2023 and 2024.
Those new QC cruise lines are “very unique global enterprises,” he said. “They’re advertising the Quad Cities in Vienna, Shanghai, São Paulo, and all over, and you cannot afford that kind of brand building.”
In 2023, the Quad Cities boasted 46 river cruise dockings and disembarkments. This year it will reach a total of 52. “The demographic of people connected with river cruises are people looking at the Quad Cities in a unique way,” he said. “They’ve got a family value sheet. They’ve got the discretionary income to be investors. They might have kids that are looking at higher educational opportunities … They might have the ability to buy buildings.”
That’s why it’s critical for leaders to look at the quality of the QC visitor experience to determine ”how we deliver those memories in a very sort of unparalleled way.”
