With a record 22nd hurricane now forming off the Florida coast, a Tuesday session at the DMA05 show in Atlanta outlined what pain direct marketers should expect to feel from the damage done by Katrina and Rita, and stressed the need for emergency readiness for the future.
In the short haul, customers pinched by higher fuel costs will have less money to spend on discretionary items. According to Nigel Gault, managing director of Global Insight's North American macroeconomics service, the Katrina and Rita storms caused $40 billion in damage to insured property and destroyed or damaged more than 300,000 homes. Some 200,000 to 400,000 jobs were lost, and the federal budget may have been hit to the tune of more than $100 billion.
The greatest economic hit will come from the damage done to the U.S. energy infrastructure, Gault said. A 19% reduction in the country's crude oil production, along with 11% of natural gas production and 10% of refining capacity, has created a spike in prices at the gas pump. While gasoline prices may drop back to $2.50 a gallon by the end of the year when imports hit the market, the prices for natural gas and heating oil will not see a decrease in that time frame and may go up by as much as 40% to 50%.
That means less money for discretionary purchases, especially in the Midwest, Gault told his audience. Even before the storms hit, Global Insight was predicting a drop in the growth of consumer spending for fourth-quarter 2005, down to only 2% growth compared to 4% in Q3 2005. Now, in the wake of Katrina and Rita, Global foresees almost no spending growth for the current quarter.
But there is good news in the coming reconstruction boom, which should kick in during the first quarter of 2006 -- at which time energy prices may start slipping from their heights, too.
Other panelists stressed the need for an integrated and well-considered disaster readiness plan. Katrina Lane, vice president of channel marketing for Harrah's Entertainment One, said four of the company's 40 casinos sustained serious damage due to Katrina, including some that had only recently been acquired in Harrah's purchase of the Caesar's brand. After the storm hit, Harrah's first move was to open lines of communication to 6,000 affected employees, through call centers and a password-protected Web site. Harrah's also announced that it would pay affected employees for up to 90 days during the recovery.
Another important move was to assemble a team of key decision makers who could make judgments about refunds, re-bookings and other allocations across Harrah properties. Functional experts were brought together to set up temporary call centers that could handle thousands of calls a day, and to ease the network strain by shutting off outbound e-mail and online reservation systems.
Finally, the Harrah's marketing department took it on themselves to contact guests whose reservations had been affected by the storms to offer them alternate accommodations. Lane says the company deliberated about this, not wanting to seem unfeeling in a difficult time. "We had to do a lot of apologizing to people who told us the last they were worried about was their reservation," she says. "But we also had customers who planned their year around going to properties like New Orleans."
Austin Bliss, president of Newton MA-based FreshAddress, a registrar of e-mail address changes, says his company decided to offer free e-mail append services and free change of address to non-profits during the emergency. Bliss says the company made sure to get buy-in from all 22 of its employees, since paying customers and thus sales commissions would be affected by this service. FreeAddress then floated the offer in the press and through the DMA before approaching non-profit organizations, to underscore the credibility of the offer at a time when scams were afoot.
