Business hopes for boom, braces for bust
Economists who have studied the Vineyard's uncommon economic soup of tourism, construction, real estate, and services for wealthy seasonal residents say Martha's Vineyard enjoys a buffer against the more dire forecasts, but they agree that the economic turmoil coursing through national and world markets is already having a significant impact here.
Island businesses are bracing for a prolonged downturn in the local economy and scouring their business models for silver linings, following a decade of brisk growth.
A survey of business owners and operators, conducted by The Martha's Vineyard Times, found that there is common agreement that what's most important for getting the national economy back on track is something that doesn't cost a dime: confidence. The local economy may depend as much on what's on people's minds, as it does on what is in their checking accounts.
"People still make decisions about their discretionary use of time or money in emotional ways," said John Ryan, an economist who recently completed a comprehensive study of the Martha's Vineyard economy for the Island Plan initiative. "A lot of the reason why people don't spend money in a recession is that the emotion that drives them is fear." Economist Caroline Fenske, a writer and researcher on economic matters who gets a firsthand look at the Martha's Vineyard economy from her Edgartown home, said the unique nature of the Martha's Vineyard economy has some insulating effects that are comforting to local businesses. But she does not soft-peddle her judgment of the current troubles.
"It's a very serious economic situation," said Ms. Fenske. "Consumer confidence affects consumer spending, which will affect the retail sector and tourism. That really depends on how we feel. Do we feel secure, do we feel the government is going to step in and deter and outright depression?"
In the retail sector, most economic predictions are ominous. Last month the National Retail Federation said it expects holiday spending to be the slowest in six years, and that comes from a trade association trying to put the best of spins on the situation.
At Edgartown Books, manager and buyer Susan Mercier is getting ready for expanded winter hours with some concerns. In the past, the popular bookstore was closed in January, and open part-time in February and March. Last year, before the financial meltdown, store management decided to remain open full-time through the winter.
"It's a little bit daunting," said Ms. Mercier. "We're going to try and make it work. I've definitely had to reconsider my staffing for that time period."
Uncertain about the economy's effect on book sales, Ms. Mercier said she is looking harder for opportunities to sell outside the store at school and library events. "I'm being a little bit more aggressive," she said.
She is also seeing the flip side of the economic turmoil. Her suppliers are trying to sustain their own businesses. She gets calls from them daily, offering more lenient buying terms such as delayed billing and buying incentives. Trade associations are offering support, including stepped up marketing efforts and educational seminars on surviving a tough economy.
At Island Outfitters, an upscale clothing store in Oak Bluffs, hours and staffing haven't changed for the off-season, but the current economy may prompt deeper discounts if the store needs to clear inventory. Manager Cindi Stevenson also wonders whether tightening credit markets will put a crimp on ordering inventory for next summer's busy season. "If you're a small business," said Ms. Stevenson, "how much credit you're getting is going to affect what you can buy. You don't want to be spending your cash."
The construction and service sector is definitely feeling the pinch of a downturn, with contractors trimming staff and working harder to secure fewer projects, according to several local business owners. Economist John Ryan estimates that in the most recent quarter, there were 15 percent fewer construction jobs on Martha's Vineyard than the same quarter last year.
Matthew Tobin, owner and president of Tea Lane Nursery, says the prospects for the economy next year is not something that keeps him awake at night. He is optimistic that a new administration in Washington will generate enthusiasm through the winter. But he has taken steps over the past year to improve his company's debt structure, and he is focusing on basic services.
"For quite a while, we've worked hard at developing our maintenance accounts," said Mr. Tobin. "People are always going to need maintenance. Even though it might be lessened because of economics, they're going to need their lawns mowed, their gardens taken care of."
Mr. Tobin has also approached the holiday season a bit more cautiously, including the purchase of seasonal inventory. "I didn't' buy quite as many live trees, quite as many ornaments," he said. "We didn't get quite as many large trees, anticipating that people might want to step down one size and save $10."
At Hutker Architects, the economy is a topic of just about every conversation clients have with principle architect Phil Regan. While he says the firm still has plenty of work, for the first time in many years, there is a chance to take a deep breath.
"You're always planning at some level, but this gives us a perfect opportunity to get smarter," said Mr. Regan, who is encouraging his employees to learn more about sustainable construction techniques, healthy homes, green products, and energy efficient building. "We're trying to extend ourselves as much as we can, in fields that are relevant to what we already do."
Like many companies, Hutker is taking a hard look at salary increases. "We talked with everybody about the current situation and said we would like to see how the remainder of the year goes, and then talk as a group again right at the beginning of 2009 regarding any potential pay raises," said Mr. Regan. "The idea behind salary increases has not gone away, but we're going to be smart about it. We had full consensus. When you have 40 employees and you talk about the potential for no raises, you would expect you would have upset people, but everyone is smart enough to know what's going on. We're a profit-sharing company, if we don't grant raises, and we happen to have a good quarter, it will all come out in the wash and we'll wind up with larger profit shares."
At Building Shelter, an Oak Bluffs construction firm that handles custom homes, renovations, and additions, owner Ben Kelley says the company is still busy, but he is making preparations for what might be an extended rough patch. "Reduce costs, for one, and diversify," he said. "We're taking a really strong look at overhead. We take a look at our costs every week and find out where those can be reduced. I know we'll come out of this, and I want to be able to come out of this stronger."
John Leite of D&G Modular Homes says he hopes that home buyers will look to modular homes as the economy contracts. "There's a bigger bang for the buck," he said. Still, like most Island builders, he says business is down significantly. "Normally, we do 45 to 50 homes a year. Maybe we're doing a third of that, a little more. That's not just here, we do three states. You've got to be creative right now."
Art imitates economics
There is an undercurrent of concern among local artists and craftspeople. Francine Kelly, executive director of Featherstone Center for the Arts, is preparing for the organization's annual holiday gift show. While she always ensures a wide range of prices at the show, this year she is emphasizing the point to artisans who display their work at Featherstone.
"I have encouraged artists to make them as affordable as possible," said Ms. Kelly. "I think most people will probably be very cautious in their spending."
Several local artists supplement their incomes by teaching classes at Featherstone. Ms. Kelly is waiting to see how the economy may affect the level of interest this winter. "So far, so good. I will know at the end of the year what I'll be able to do in the new year," said Ms. Kelly. "Hopefully our annual appeal will bring in some funds, but I'm sure there will be need to cut back if everything is as dire as people have predicted. There are still lots of supporters who will donate to see that Featherstone continues to operate. We are the only year-round arts center on Martha's Vineyard. That gives us sort of special place in the local economy."
All economics is local
On a personal level, bookseller Susan Mercier says she is trying to do more shopping on Martha's Vineyard to support local merchants, and she is hopeful other Islanders will keep their dollars circulating in the local economy.
"It would be a perfect time to push the 'buy local' thing," said Ms. Mercier. "If we want to support the economy, the economy we should support is our own."
In studying the Martha's Vineyard economy, Mr. Ryan has documented the multiplying effect of local purchasing power. He says buying decisions create an interesting dynamic. People who usually support local merchants in boom times may feel lower off-Island prices override local concerns in a recession.
"That's probably true at an individual level, but when everybody makes that decision, it's not a good self-interest decision," said Mr. Ryan. "One hand washes the other, you're in it together. In hard times, it's actually more important."
No matter what the current economic upheaval portends, economist Caroline Fenske says businesses would do well to concentrate on the basics, advice that rings true for both boom and bust. "Be on top of your game, have the best product, have the best service," she says.