At this writing, the COVID-19 pandemic just drags on and on.
At some point, I need to get back to work, I told myself, so I got on a plane recently for the first time since ConExpo-ConAgg in mid-March, flew to a major metropolitan market, and drove a couple of hours to a prospective buyer’s headquarters with a colleague from my firm.
The trip was an eye-opener. The New Orleans airport was a ghost town; there were three people in the entire security queue. All the airport restaurants were closed but one, and forget getting a pre-departure cocktail, as every bar was closed at 5:00 p.m.
When I arrived at my destination, I found the same thing at the major airport where I landed, and the hotel situation was equally shocking … four people were in the house in a 300+ room hotel, according to the front desk clerk.
Right now, all 50 states have reopened, albeit at various levels of caution and rules regarding limited occupancy. But the one thing that rings true to me today, which I didn’t want to believe only a month ago, is that America is scared, and it’s going to be a long time before we get back to normal.
Empty airports and hotels speak volumes about America’s fears, despite an economy desperately trying to reopen.
The Hurricane. In August, those of us who call New Orleans home will mark the 15th anniversary of Hurricane Katrina, and I have now come to terms with a harsh reality: like the Katrina aftermath, the post-COVID-19 economic recovery is going to drag on for a very long time, and life won’t be back to normal for a couple of years.
And my eternal optimism aside, I am frankly concerned the record aggregate production figures we were enjoying in the first quarter of this year won’t return to those levels until life gets back to normal many quarters from now.
A global pandemic is a different kind of catastrophe. Unlike Katrina, officials had time to prepare, and people are stuck in their homes, not displaced from them. COVID-19 will leave buildings, though perhaps not businesses, intact. Yet in both cases, government solutions are encroaching on private civil society with potentially devastating consequences.
In post-Katrina New Orleans, city leaders championed eminent domain to take over communities badly damaged by floodwaters. Military police barred residents from entering neighborhoods deemed too dangerous. As government continued to occupy these areas, either literally or through policies that delayed the return of residents and businesses, the likelihood of a robust recovery dimmed.
It was only after civic and community leaders took charge and commanded the multiple tentacles of the recovery that things started to get better. The same needs to happen now, and we need to get government mandates out of the way.
The Reality. An emotional setback for the citizens of New Orleans came in the fall of 2005, just several weeks after Katrina, when a delegation of emergency managers from Japan with extensive experience in earthquake recovery visited our city, toured the devastation, and announced their findings: it would be 10 years before the city recovered.
That pronouncement took the wind out of our sails. Within two years, things were back to some semblance of normal, and I would say the city’s recovery was at 80% after five; but to get to 95%, as the Ninth Ward and parts of St. Bernard Parish never came back, really took the 10-year recovery period the Japanese delegation had told us to expect.
Much of the delay in the Katrina recovery was due to the physical rebuilding required of almost every structure in the city. Fortunately, that will not be the case here, but the economic damage will take a long time to recover from, and we have no precedent to predict when life will return to “normal.”
Aggregate producers will have to take all this into account as they size their businesses and cost structures to reflect the realities of the months, and maybe years, that lie ahead.
About the Author
Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers & acquisitions. He has a career spanning almost five decades, and volunteers his time to educating the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at pvillere@allenvillere.com. Follow him on Twitter – @allenvillere.