JUST WHAT PAIN CAN DMERS expect in the wake of Hurricanes Katrina and Rita? Speakers at DMA05 pondered that question as Wilma, the 22nd hurricane of the year, was forming off the Florida coast.
In the short haul, customers pinched by higher fuel costs will have less money to spend on discretionary items. Katrina and Rita caused $40 billion in damage to insured property and destroyed or damaged more than 300,000 homes, according to Nigel Gault, managing director of Global Insight’s North American macroeconomics service. 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 continued. A 19% reduction in the country’s crude oil production, a 11% drop in its natural gas output and a 10% falloff in refining capacity have created a spike in prices at the gas pump.
That means less money for discretionary purchases, especially in the Midwest, Gault said. Even before the storms hit, Global Insight was predicting 2% growth for the fourth quarter, down from 4% in the third. Now, in Katrina and Rita’s wake, Global Insight foresees almost no growth in spending for the current quarter.
But there’s good news in the coming reconstruction boom, which should kick in during the first quarter of 2006. At that point energy prices may start slipping from their heights, too, Gault added.
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, reported that four of her company’s 40 casinos sustained serious damage due to Hurricane Katrina, including some that had only recently been acquired in Harrah’s purchase of the Caesar’s brand. Harrah’s first move after the storm hit 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 to make judgments about refunds, rebookings and other allocations across Harrah properties. Functional experts were brought on 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, Harrah’s marketing department took it upon itself to contact guests whose reservations had been affected by the storms and offer alternative accommodations. Lane said the company deliberated about this, not wanting to seem unfeeling in a difficult time.
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