Houston business leaders mostly happy with economic outlook

By DAVID KAPLAN
Copyright 2004 Houston Chronicle
January 4, 2004


Houstonians kept asking, "When will the economy get better?"

The answer is, in 2004, according to many local business leaders.

Peering into the future, they have a generally bright take on the year's economic outlook.

They see greater demand for energy -- always nice news for Houston -- a rising stock market, heady days for high-tech firms devoted to high-speed wireless and Web services, tremendous business opportunity in China, more corporate megamergers and increased hiring as the economy improves.

On the downside, they foresee a worsening of the troubles in the health care industry, making life harder for employees seeking quality coverage for their families.

They also speculated on which parts of town would be hottest in terms of real estate.

And they veered outside the world of business to prognosticate on the fates of Bill White, George W. Bush, the Houston Astros and the Texans.

Bruce Williamson, Dynegy president and CEO

  • U.S. economy strengthens significantly first in terms of economic growth in Gross Domestic Product, followed by renewed hiring and reduction in U.S. unemployment.
  • Natural gas prices remain strong ($4 to $6 per thousand cubic feet) driven by strength in the U.S. economy in general as well as weather-driven demand spikes, which is good for Houston-based exploration and production companies and some energy merchants.
  • President Bush is re-elected in a relatively close, but not nearly as close as 2000, race against Democratic nominee Howard Dean

Legal affairs
Joe Dilg, managing partner of Vinson & Elkins in Houston

  • During the past year, energy clients sold assets and restructured their debt, so they are ready to expand with the new year. And with the stock market in better shape, initial public offerings will become popular again as a way of raising capital.
  • There's also growing demand in China and other emerging nations for energy, which is putting pressure on finding new oil and gas reserves.
  • If there is one worry, it's terrorism. Another terrorist act in the United States could throw a kink into the improving economy.
  • Barring that, it will be a good year.

Restaurants, entertainment and tourism
Tilman Fertitta, CEO, chairman and president of Landry's Restaurants

  • As the national economy totally rebounds, it will be a wonderful year for the stock market, which will easily go over 11,000, and technology stocks will thrive.
  • The Houston economy will be better next year from a hotel occupancy standpoint and consumer standpoint, and part of it has to do with the revitalization of downtown.
  • Under the leadership of Drayton McLane, Roger Clemens and Andy Pettitte will lead the Astros to the World Series.

Jordy Tollett, president of the Greater Houston Convention and Visitors Bureau

  • We're not quite there yet, but within 120 days, people are going to say, "It's a good time to be in Houston. Life is good." All we've been working on the past several years is finally coming together, like the Super Bowl, the 1,200-room Hilton Americas-Houston hotel and light rail. The streets and lights are going to work, and traffic will move better.
  • Bill White is young and energetic enough that he's actually going to make things happen, because he's going to put in the hours. He's not going to ask any city employee to work harder than he does.

Banking David Mendez, chairman of the Houston region of J.P. Morgan Chase Bank

  • Nationally, merger and acquisition activity is up. The capital markets have improved. Locally, deposit growth is good, and there is increased loan demand. The new year should be a continuation of 2003.
  • From the commercial side of Chase's business, the bank is projecting revenue growth across all businesses. The one area that will be noticeably different is the mortgage business. The auto finance side also will probably not be as strong as 2003. Because of that, the banking business won't be able to sustain the growth and momentum that existed in 2003.

Labor
Richard Shaw, secretary/treasurer of the Harris County AFL-CIO

  • Look for more union organizing activity this year, with a particular focus on the service sector, especially the hospitality and janitorial industries. Employees in both industries are largely immigrants seeking to improve their lives. That low-wage service sector is where organized labor has been growing.

The new Hilton Americas-Houston hotel agreed before it opened its doors that it would not oppose an organizing drive. If that is successful, a win at the Hilton will lead to other organizing efforts at area hotels.

  • With low interest rates fueling the demand for single-family homes, new restaurants and retail strip centers, look for new organizing activity in the construction industry, which is largely nonunionized.

Jose Benitez, organizer with the Working Families Association

  • This year's national election should boost the economy, as presidential elections have in the past. That will benefit immigrant workers in terms of being able to stay in the country and find jobs.
  • There will be fewer immigration raids, like the October deportation of janitorial workers at Wal-Mart stores across the country. As he campaigns, President Bush will want to avoid scandalous raids like that.

International trade
Carlos Lara, interim president of Houston's Hispanic Chamber of Commerce

  • A free-trade agreement between the United States and four Central American countries should give Houston's economy a lift. Congress is expected to vote later this year.
  • The United States is also negotiating a free-trade deal with all of the nations in Latin America, except for Cuba. If those two deals are approved, that should help local businessmen, exporters and importers, just like the North American Free Trade Agreement did. Houston is in a very prime location in the United States.

Technology
Bob Beauchamp, president and CEO of BMC Software

  • High-speed wireless and Web services will be the most important technology drivers for corporate spending and application rewrites.
  • There will be a significant increase in merger and acquisition activity across multiple industry sectors.
  • China's extraordinary economic growth will become the top macrobusiness story of 2004 and the decade that follows.

Health care
Dan Wolterman, President and CEO of Memorial Hermann Healthcare System

  • Expect to see a shift in where and how patients obtain care. As a result of technological advancements, more and more care will be conducted in the outpatient arena, and increasing numbers of procedures will become minimally invasive.
  • Expect to witness more evidence of the crisis in health care, which is attributed to rising costs. Watch for the continued escalation of health insurance premiums, which will result in more Houstonians being uninsured and underinsured.

As a consequence of that trend, note how many more Houstonians will flock to the emergency rooms, worsening the already critical overcrowding situation.

  • Expect hospital budgetary pressures to continue to increase as Medicaid and other state programs continue to be underfunded.

Mike Snow, president of the Gulf Coast division of HCA, the nation's largest hospital chain · Hospitals will see an accelerating migration of diagnostic/invasive procedures to alternative settings, such as surgery centers, outpatient imaging centers and cancer treatment facilities. The migration will burden hospitals with reduced revenues to provide essential emergency, tertiary and charitable services.

  • An acceleration in the trend of placing more economic burden of health care on employees, driven by double-digit growth of health care premiums to employers and other issues.
  • Lower government spending on health programs because of budget deficits, placing more hardship on the poor and uninsured.

Real estate and development Ed Wulfe, president of Wulfe & Co.

  • The most real estate activity, both residential and retail, will occur in Houston's Northwest sector, along U.S. 290. More people will move to the urban core, and there will be more development there.
  • The importance of nanotechnology, biotechnology and other research areas at local universities and the Texas Medical Center will increase substantially, cultivating a sphere of influence that will eventually lead to new jobs and business.
  • With the groundwork laid over the past six years and a new mayor, City Council and private sector working well together, Houston will make major inroads in improving the city and its quality of life.
  • The Houston Texans will go to their first playoff game.

Kenneth Li, owner of Century 21 Southwest realty firm

  • Commercial realty activity will be strong in the Chinatown area along Bellaire Boulevard in 2004, a continuation of a trend that has been growing in recent months.
  • More home builders will be focusing on the starter home market next year as they address the huge demand for homes in the low end of the realty market.
  • Consumers should be feeling more confident in the economy in 2004, and real estate will be strong.

Ray Bailey, president of Houston-based Bailey )Architects · The entry of the Rouse Co., a large Maryland-based development firm, into the Houston market will have an impact on real estate development in Houston. Rouse typically creates huge developments with commercial and residential uses. It recently bought a controlling interest in The Woodlands, and separately Rouse purchased 8,000 acres near U.S. 290 for another major development.

  • The installation of new Mayor Bill White could inject some momentum into the effort to attract new businesses into Houston
  • .

John Daugherty, owner of John Daugherty Realtors

  • Stronger job growth should produce a lift to the Houston realty market in the year ahead.
  • Houston lost jobs in 2003, but it's expected that we'll add far more jobs in 2004. The housing market was excellent in 2003, even with the job losses. With the job gains anticipated in 2004, sales should be even better next year.

Small business

Celene Pena, owner Celene Floral Design

  • In the floral business, more people are using the Internet to order flowers, so that's made things harder. But January and February should be good because of the Super Bowl and Valentine's Day.
  • In general, it was a struggle for Hispanic business owners. This year will continue to be a challenge.

Eunice Drexler Scott, co-owner Drexler's World Famous Barbecue and Grill

  • It's going to be an up-and-down year. For some reason, a lot of people are still unemployed.
  • On the plus side, the Super Bowl looks good.

Timothy Susberry, shoeshine man, Duke of Hollywood Tailors

  • The economy is not likely to improve. There might be a little change, but there will be no cure for real problems: layoffs, low wages, long hours, taxes.

"The haves got, and the have-nots ain't got," he said.

Donnie Wicks, owner of Hot Bagels


  • Houston has gone through the worst of it. But the city is coming into a new age in which consumers may spend their money more wisely.

Jenni Tran-Weaver, co-owner of the Jenni's Noodle House

She's also a Continental Airlines flight attendant who took a voluntary leave of absence after 9/11 and recently received a letter from Continental stating that she and others on leave will be due back to work in June. Her husband, Scott Weaver, and their staff will continue to run the restaurant.

  • "I think 2004 is going to be awesome," she said.

Chronicle reporters L.M. Sixel, Ralph Bivins, Bill Hensel Jr., Jenalia Moreno, Shannon Buggs, Darrin Schlegel, Laura Goldberg and Nelson Antosh contributed to this story.

For more information on Jenni and her noodle house go to www.noodlehouse.com

PREDICTIONS FOR THE
NEW YEAR

Markets
The Dow Jones industrial average will hit 11,000
Energy
Natural gas prices will remain strong
Trade
China will gain in importance
Labour
More organizing in the hotel industry
Health Care
Workers will bear a greater share
Energy

 

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