RESILIENCY AND INNOVATION

h i g h s & RESILIENCY AND INNOVATION: INDUSTRIES FACING BY KELLY MCCANDLESS, DIRECTOR; COMMUNICATION AND WORKFORCE DEVELOPMENT l o w s

In just a few short weeks, the world as we know it was turned upside down. Things that formerly brought stability and an opportunity to relax became a source of fear or anxiety. In the face of COVID-19, the world buckled in and settled down to wait out the risk.

While we as consumers waited, businesses everywhere shifted gears. They found innovative ways to deliver products and services while maintaining distance and following hygiene protocols, and created plans to ramp up business as soon as the proverbial doors opened once again.

Well, across Montana those doors are opening. As Phase II takes hold, some consumers are beginning to move through their fear and anxiety toward finding new ways to enjoy stability and relaxation in the ways they do commerce. But open doors and consumer activity looks different for every industry, and as we all continue to move forward, the outlook across the board is different.

We reached out to industry experts across our community to gain insight into fourteen different industries impacting Yellowstone County. Each was asked four questions:

1. What is the state of your industry now?

2. What trends do you see continuing?

3. Where do you see your industry one year from now?

4. If you had to rank the stability of your industry on a scale of 1 – 10 (10 being highly stable in the next 3-12 months), what number would you give it? (Stability Assessment)

Read on to learn from these experts and gauge how you can support industries across our area in the coming weeks and months.

CULTURAL ATTRACTIONS

KEVIN KOOISTRA Executive Director, Western Heritage Center Stability Assessment: 6 For institutions dependent on entrance fees and gift store sales there is clearly great concern. Most museums are dependent on the warmer tourist months of May through October to fulfill budgets. With tourism expected to decrease by 30% or more for the rest of 2020, proposed budgets will fall short. We continue to apply to state granting agencies, but expect and are already seeing far more competition for limited dollars. As a history museum, we are aware that the second wave of such a pandemic can be worse than the first. We are cautious until we can get a clearer focus – this may take several months and up to a couple years. The pandemic’s full impact requires time in order to fully assess our current historical situation. We are only in the beginning phase of dealing with this virus.

A lot depends on the science for dealing with the pandemic and then the comfort of people to interact with each other in various settings – we will not be going back to normal. Each event of this type reshapes a different future. Until then, we will continue to look at new ways to monetize our on-line presence and programming.

HOUSING + CONSTRUCTION

KIMBERLEY WELZENBACH Executive Director, HBA

Stability Assessment: 7.5

Residential construction, particularly in Yellowstone County, remained somewhat steady through April. However, most projects were underway Pre-COVID-19. Impacts on the next construction season this summer remain to be seen.

While home buyers report slightly more optimistic expectations for future housing availability, there’s no commensurate improvement in their affordability outlook. Job losses stemming from the COVID-19 pandemic contributed to a decline in U.S. median income and housing affordability the first quarter of 2020, according to an NAHB/Wells Fargo Housing Opportunity Index (HOI).

NAHB reported 61.3% of new and existing homes sold between the beginning of January and end of March were affordable to families earning an adjusted U.S. median income of $72,900. This is down from the 63.2% of homes sold in the fourth quarter of 2019 that were affordable to households earning the median income of $75,500.

New home sales were down across all four regions: 41.5 percent lower in the Northeast, 8.1 percent down in the Midwest, 0.8 percent down in the South and 38.5 percent lower in the West.

While we expect to see some further industry impacts, we remain

confident housing will be a sector that will help lead the economic recovery.

MANUFACTURING

BRYAN WOOD CEO, Woods Powr Grip Stability Assessment: 4 today, 8 within 12 months Nationally, manufacturing has taken a tremendous hit, seeing a loss of 1,330,000 manufacturing jobs in April. Local manufacturers are selling

to different customer bases in a variety of different industries. Because of this the level of impact on sales from one manufacturer to the next varies dramatically, from being completely shut down to no noticeable impact. Most of us are more dependent on the national economy than the local economy so if our sales have been impacted, we will continue to feel it until all states are able to open up more completely.

Heightened sanitation practices and a general awareness of best practices to minimize transmission of viruses in the future will continue. Increased caution is also likely when considering capital purchases, especially until PPP loan forgiveness has been determined and everyone knows what additional debt load they have as a result of this economic slowdown.

Despite current challenges, I anticipate that most manufacturing will return to near pre health crisis productivity levels within the next year.

RESIDENTIAL REAL ESTATE

DEB PARKER President, Billings Association of Realtors Stability Assessment: Strong

Billings and our surrounding area are experiencing a very active real estate market due to a few different reasons. Interest rates play a major role in a buyer’s ability to buy even though financing has become more restrictive and higher credit scores may be required. In addition, our housing market is considered more affordable compared to other Montana cities and we attract out of area home buyers due to a diverse business and industry base. Our growth is stable and we are not a player in the excessive highs and lows of other Montana Real Estate Markets.

With an average sales price of $261,500 we have yet to see home sales falter through the pandemic. We have seen a 14% increase in sales year to date and a 3% increase in our average sales price. Home sales sit at approximately 800 from January to April of 2020 compared to roughly 700 last year. The obstacle we face is a lack of inventory for buyers. New home construction is strong in our area with the first 4 months of the year up over 2019.

It remains to be seen how the Covid-19 crisis could affect our market in the future but fortunately we are weathering it well at this time and we should see a busy summer home selling/buying market.

BANKING/FINANCE

BRIAN BROWN Market President, First Interstate Bank

Stability Assessment: 8 (well capitalized banks with good asset quality); 4 (not well capitalized banks with poor asset quality)

The financial/banking industry has been very busy helping get SBA PPP money out into the hands of the businesses in our community. The financial industry is cautiously optimistic that businesses will rebound, however, the truth is that we will see a large decline in our economic output (GDP) and our local and state economy will suffer to some degree. There will be businesses that will not recover in a lot of various industries…especially in the tourism/hospitality, food and beverage, and service industries. We have also seen commercial projects be put on hold for the time being. on loans and deposits. That said, with the uncertainty in the markets there will definitely be some projects that are cancelled and/or delayed so loan growth will be flat. Banks that are positioned well to be able to adjust deposit rates will be able to try to hold their margins. Even though rates are low there is a prediction of more troubled businesses and therefore more troubled loans which will stress some financial institutions.

AGRICULTURE

LIA BIONDO, JESS PETERSON, KELLY FOGARTY US Cattleman’s Association Stability Assessment: Challenged, but improving The COVID-19 pandemic has left the U.S. beef and cattle industry reeling from a lack of prtocessing capacity. Retailers across the U.S. have begun limiting consumer purchases of meat, while producers are facing an oversupply of live cattle and other livestock. The pandemic didn’t cause these underlying industry issues, but it did highlight several key opportunities for the industry to improve the processing system.

Consumers are seeking locally-grown meat right now to supplement what is currently available in the grocery store. We believe this trend will continue and Montana should be seeking opportunities to further connect local and regional food systems with consumers.

Though we have a nearly one million head backlog of ‘fat’ or fed cattle, our hope is that we can work with Congress to help small- and mediumsized processing facilities beak down regulatory barriers that inhibit their ability to operate at or above capacity.

There is much work to be done internally as we look to address needed market transparency and improvements in price reporting, which includes an effort to increase the cash negotiated trade of cattle procured by meat packers. In addition, advancing legislation that enables Montanainspected meat processing facilities to ship products across state lines could be a notable boost to both the Billings business community and the Montana cattle industry. There are additional efforts underway, but these are two critical policy items that need to be addressed.

LODGING/HOSPITALITY

JORDAN CLAYTON President, Yellowstone County Lodging Association

Stability Assessment: 4 The current state of hospitality is best described as ‘fragile’. Property management would normally plan strategies for the month and quarter but currently we are planning and projecting on a daily and weekly basis.

Booking windows are shortening to as little as day-of or day before. Some properties report higher bookings through third-party travel sites. In-person meetings are still being held, but with fewer attendees. Technological advances will most likely be at the forefront as a way of limiting human to human contact pushing hoteliers to discover new ways of providing a personalized service as advances bypass interaction with employees.

Montana is ideally located for road trips to those who wish to see natural wonders! Because of this, we are confident that travel will be on the rise one year from now. We foresee vacations closer to home such as road trips or, if flying, destinations in which travelers can fly direct.

h i g h s & l o w s Our industry is vulnerable and mirrors the strength of our economy. continued demand for telehealth use. People appreciate the convenience When the economy is flourishing, hotels are full and capturing revenue. and our providers have another way to take care of patients. Conversely, when the economy slows, travel for business and leisure is the first expense on the chopping block and the hotel industry sees immediate affects. COVID-19 has profoundly changed our industry, but at the same time it is critical that we keep providing the care people need and deserve. We can expect health care to continue to find new and innovative ways to BUSINESS/PROFESSIONAL SERVICES care for patients while ensuring the safety and wellbeing of our staff and communities. GABRIELLE WALKER RESTAURANTS/BARS/CASINOS Business Support Manager, Avitus Group SEAN GRAVES Stability Assessment: 8 Owner, Montana Brewing Company & Hooligans

I believe businesses all around the nation will find creative ways to continue the work-from-home movement as a way to empower their teams...

Our industry has had to adapt to a COVID-19 safe environment. Internally, safety for our employees has been the priority. We converted over 150 employees to work-from-home environments without compromising our service levels. Externally, we’ve focused on helping small businesses survive, which includes everything from stimulus loan guidance to navigating the new HR workforce laws.

This pandemic forced many professional organizations to shift quickly to a remote workforce to survive. I believe businesses all around the nation will find creative ways to continue the work-from-home movement as a way to empower their teams, as well as to decrease the costs associated with commercial office space and the resources needed to support it.

We believe our industry will recover well. The services offered within our service-model are specifically designed to help companies “get back to business” as quickly as possible. As the dust settles and business owners explore new ways to optimize their operations, the need for administrative service support is certain to be on the forefront of their minds.

HEALTHCARE

DR. SCOTT ELLNER CEO, Billings Clinic Stability Assessment: 8 Health care is constantly changing. Today, health care organizations across the country are thoughtfully and carefully adapting operations with COVID-19 as a part of our daily lives, even as questions remain about the pandemic’s lasting impact. Now more than ever, we must continue to care for patients while ensuring the safety of our staff and the communities we serve. Virtual care continues to see wider integration across health care and increased use from patients. It allows providers to securely meet with patients in their homes, using technology they already have. Billings Clinic has considerably increased our virtual care visits and we expect Stability Assessment: 3

The restaurant industry is on the verge of a major collapse. With limited seating, no events, no sports, and more people staying at home, your favorite bars and restaurants are hanging on by a thread to stay open. Only businesses that can be creative and adapt to new guidelines will survive. The community support has be overwhelming, but when our industry can only operate at 50 or 75 percent it will be very hard for many to make it through this.

Stronger cleaning guidelines will remain in place forever. Takeout business will be a bigger part of all restaurant sales. People are getting used to takeout, and they love the ease of getting quality meals at home while supporting the community.

One year from now I expect our industry will be hurting. We don’t anticipate having a profitable year. I anticipate numerous bars and restaurants to permanently close. The guidelines to control the pandemic handcuff most restaurants to be profitable and retain quality employees.

Our community is doing a fantastic job of supporting the restaurant industry through this incredibly difficult time. The support has been out of this world. I gave the stability of the restaurant industry a 3 because we have the potential to be closed down at any time. If we go into another situation where we have to shelter-in-place, I don’t see most restaurants

being able to reopen. A second closure would devastate our industry.

NON-PROFITS

ERIKA WILLIS Executive Director, Tumbleweed Stability Assessment: Challenged, but building efficiencies

Successful nonprofits are innovative and agile, able to pivot and respond to change. Overall, the nonprofit industry is adapting, however, there is a tremendous amount of uncertainty regarding resources. Many nonprofits rely on a community response to support their mission. With the loss of opportunities for fundraising events and changing financial situations for ongoing donors, the unknowns are many. The stresses and needs of vulnerable populations have also changed and increased. Nonprofits, specifically social service providers, are handling more clients with more intense needs with fewer resources, including staff resources.

in which services are provided. This has created an incredible opportunity for the sector as a whole to evaluate where strong collaborations can be built and where to consolidate programs that are duplicated, leveraging resources in a more effective way. I see this continuing. I also see that high needs for vulnerable populations are going to increase as well as staff shortages.

In a year, I see the sector even more efficient and collaborative. We will be forced to leverage resources in even more creative ways.

EVENTS

TIM GOODRIDGE Assistant General Manager, MetraPark; Owner, Montana Blues Fest Stability Assessment: 5

The event industry is coming out of hibernation and figuring out how to start holding safe events again. It’s all about risk management now. How do we begin to safely host the events where people gather to celebrate, cheer and enjoy communal experiences? Everything needs to be reimagined from the new safe capacity of a venue to the frequency of sanitation. Things we didn’t even think about in the past now need to be considered. The collaborative attitude that has emerged as a result of this crisis will result in the quick adoption of successful practices.

Sanitizing venues and organizing the flow of people attending events will likely be a permanent change. This is a good thing and will improve the experience of events beyond the crisis.

With all we will have learned, and after taking into account the results of the measures tried in a variety of venues across the country, I predict the industry will have stabilized a year from now and be in a position to plan strategically again. Where that will be is difficult to predict but it will be a way forward and a way forward is a gift.

HIGHER EDUCATION

CHANCELLOR DAN EDELMAN MSU Billings Stability Assessment: 4 The state of higher education is uncertain at this juncture. Typically, higher education does well in recessions since people return to school to retool their skills or move into a new career entirely to become marketable again. The Coronavirus pandemic, however, is not your typical recession and the ramifications have devastated and continue to devastate many higher education institutions. Many larger and reputable institutions with sizable endowments have had to close entire departments, layoff faculty and staff, or shut down entirely due to the pandemic. Higher education now needs to retool to remain competitive and marketable to people and the workforce. Online learning will get bigger and better. MSU Billings has been a leader in online learning in the state for over a decade and our transition to online courses mid-spring went much better than expected. This is partly because all our courses have an online learning “shell” or platform in place

whether the course is online or not. Having these shells already in place made the transition easier than other institutions who did not. Another trend I see continuing are campus activities and services remaining online permanently, such as virtual campus tours, virtual new student orientation, online advising and academic support appointments, and student telehealth appointments, to help limit the spread of COVID-19.

One year from now MSU Billings will still here and a vital resource for everyone and our workforce.

RETAIL

BRAD GRIFFIN President, Montana Retail Association Stability Assessment: Challenged but resilient

To say that retail is struggling would be an understatement. According to the US Census Bureau, retail sales in April were -16.4% from March. And March -8.3% from February. These grim statistics are historic month-tomonth drops and extremely damaging to the entire retail sector. However, it’s hardly a surprise since many non-essential stores were closed.

There were some categories of retail that have experienced sales increases, most notably grocery stores and beverage stores (I’m assuming liquor stores) were up 13.3%. The other winner of course is online sales, which were up 21.2%. This is an extremely concerning development because as people were sheltering in place and ordering products from their favorite online store, the online shopping habit was only further entrenched.

I am buoyed by the resiliency of the retail and the restaurant sectors. According to the National Retail Federation, the retail and restaurant sectors directly employ 111,000 Montana citizens with another 45,000 jobs supported. Their combined economic footprint is $3.5 billion in direct GDP and almost twice that, $6.9 billion in total GDP. These two sectors are extremely innovative and will pave the way towards our economic recovery in Montana. I encourage everyone to shop and eat locally to help our neighbors and friends in these industries get back on their feet. Our

economy is depending upon you! The mixed outlook reflected here offers an excellent place to begin conversations. Differing experiences and opinions exists across like industries. As with all challenging situations, communication, shared experiences and understanding can go a long way. Look for these experts in future communications as we begin industry discussions and share outcomes and needs with the community.

The Billings Chamber exists to support business, and we encourage you to do the same. As a community, it is more important than ever that we all work together to support businesses across industries to help ensure their survival and uplift our economy.

Connect with these stories and more at BillingsChamber.com or by joining us on Facebook.