Robert Fine, Director of Economic Development

by Robert Fine, Director of Economic Development

As the Canadian economy continues its recovery, a number of other countries whose economies are stumbling are looking to Canada with envy. Some positive notes come from a new Bank of Canada survey suggesting that business optimism in Canada is rising sharply with heightened expectations for sales, hiring and investment.  The quarterly survey of senior management from 100 representative firms during February and March found the outlook for future sales to be among the most positive since the recession.  The Bank of Canada’s important measure of business confidence now sits at a positive 35;  just last January it sat at negative four. (The index is the difference between those seeing expanding sales and those expecting shrinking returns.)

The survey is backed by a strong March job report from Statistics Canada which claimed 82,000 jobs were created in March.  As Derek Holt, an economist with Scotia Capital pointed out, “The good Canadian news just keeps rolling.”

Contrast this with Ireland, once the Celtic Tiger of Europe.  Back in the 1990s, the Irish economy was the pride of Europe built on the back of a well-educated, highly-skilled workforce, a ready supply of labour, internationally competitive wage levels and an open economy that actively welcomed inward investment.  Multinationals saw Ireland as the perfect hub for their European operations.  Irish case studies on how to build an innovation-based economy and transform the quality of life for millions of citizens were shared world-wide.

By 2000 things began to change.  Another industry was becoming the driving economic force – that of construction and property development.  The Irish discovered credit and began buying real estate in the form of houses, apartments, offices and retail facilities. By 2007, the Irish were among the best paid workers in Europe, a fact matched by the country’s standard of living and housing costs.  At the same time, Ireland became one of the most expensive places in the world to run a business.  The global fiscal collapse in 2007/08 killed the ability to access credit which was followed by the lack of demand for commercial and residential properties.  And so went the Irish economy.

By looking at just one economic indicator – commercial property – the struggle taking place is apparent.  Commercial capital values fell in the first quarter of 2012 by 1.8 percent, meaning that with the exception of the fourth quarter of 2011, Irish commercial property has declined in value for 18 of the last 19 quarters.  Throw in an unemployment rate of 14.5 percent and a four year residential real estate value decline of 37 percent and it’s no surprise that at a recent emigration fair attended by the BC government, people seeking jobs in Canada lined up for four hours to make the appropriate contacts, and the police were even called in to contain them.

But don’t count Ireland out.  There are bargains to be had and as former US President Bill Clinton recently stated, “Real estate in Ireland is a steal.”  American companies were behind almost 40 percent of offices bought or leased in Dublin in 2011 and it looks like the trend will increase in 2012.

PayPal has just announced a new office in Dundalk that includes 1,000 staff and Google, Salesforce and Yelp are looking for extra space in Dublin.  Google already has 2,200 employees in Dublin and that number is expected to increase to over 3,000. LinkedIn leased space in Dublin in 2011 and has increased the number of employees from 30 to about 175 in the past year.  Just this week both Apple  and US pharmaceutical manufacturer Mylan announced an additional 1,000 jobs.  Facebook is also seeking to more than double the size of its European headquarters in Dublin.  The financial crisis in Ireland drove down commercial property rents as well as wages.  Ireland has become an extremely cost-competitive destination with an incredibly skilled labour force, attracting business away from America.

To help facilitate this trend, the economic development arm of the Irish government continues to be creative in attracting more firms into the country.   Connect Ireland has just launched a program to attract small and medium-sized companies that are expanding internationally to locate in Ireland and create new jobs. Its strategy is based on personal contacts: anyone who introduces a company to Connect Ireland which then creates jobs in the country will be paid a minimum of €1,500 ($2,000) per job, up to a maximum of 100 jobs, by the Irish government.  The reward is paid in two stages – 50 percent after the first year of the job’s creation, and 50 percent after two years.

How ethical, effective and economic this initiative will be has been the subject of much debate.  So far it has resulted in in people talking about investing in Ireland.  As the BC government continues to roll out the BC Jobs Plan including its six month report released earlier this month, I look forward to innovative ways to build on the strengths of the BC economy.  From a statistical perspective, we don’t want to be Ireland, but perhaps we could use some of their imagination.

Robert Fine, Director of Economic Development

By Robert Fine,

Director of Economic Development

Having just passed one of the busiest travel weekends of the year throughout the world, I am reminded how fortunate we are to have Kelowna International Airport, or YLW. Set aside the economic engine that YLW is and look to the access it provides to our residents, businesses and visitors; the airport is the glue that keeps the community together in its ability to compete globally.

A study done last year demonstrated that YLW is responsible for 1,400 direct jobs which represent 1,290 direct person years of employment, $120 million in gross domestic product (GDP), $300 million in economic output and $70 million in wages – and these are just the direct impacts.  With a record number of passengers in February and numbers on track to exceed 1.4 million passengers in 2012 YLW is a success.

But like the planes themselves, the airport keeps moving.  As part of the Drive to 1.6 Million Passengers Airport Development Program, Phase 1 of the Kelowna Air Terminal Building Expansion Project has begun.  The project consists of an expansion to the north of the terminal to provide a new Canadian Border Services Agency (CBSA) Primary Inspection area for screening international arriving passengers.  It’s a one storey addition that includes a screening hall, mechanical and electrical room which will serve the north half of the terminal, public washrooms and an extension to the airside corridor.

It is all about making the airport more efficient and a better experience for its customers.  And as the air becomes more accessible, the choice of airports can become a part of the decision process.  Last week, Frommer’s – world-renowned travel experts since 1957, released their list of the worst airports in the world.  For those who have travelled extensively, this list is not likely to provide any surprises.

At the top of the list is a Chicago airport, and no it’s not O’Hare, one of the world’s busiest, but Midway. The ranking comes as a result of Midway being American’s worst airport for on-time departures according to the most recent Federal Bureau of Transportation Statistics data.  The alternative secondary airport, “Paris” Beauvais, the departure point of choice for the “cheepie” airlines like RyanAir and WizzAir (I kid you not) landed in second place.  Close to 75 km north of Paris, the airport is cited for its box-like construction, “the lack of seating, lack of services, and general half-tent, half-warehouse atmosphere.”  The airport is referred to as taking the bait and switch approach because when you book a ticket you think you’re arriving in Paris and you’re not.  As well, it lacks a rail link to Paris and closes overnight, so if your flight is delayed you might end up sleeping on your luggage in the parking lot.

Back on American soil, the top 12 list is littered with more American airports.  New York airports, all run by the Port Authority of New York and New Jersey make up a quarter of the list.  The worst on time arrivals at Newark Airport Terminal B, and a lack of food choices makes planning for a journey a bit more complicated.  Those of you who have flown into New York via LaGuardia know the airport itself is not so bad, it’s getting to and from the airport that is a problem, with no rail link and congested terminals. At JFK, Terminal 3 was deemed to be the worst single airport terminal in America, and probably in the western world.  With never ending immigration lines in what only could be described as a dark and damp basement with few food and drink options, it remains an embarrassment to one of the world’s greatest cities.

Other notables on the list include Amman Jordon’s Queen Alia Airport.  It was given lousy ratings for amenities and services travellers expect to find such as clean bathrooms, places to rest, children’s’ play facilities and service counters.  No surprise it’s nicknamed the “hold it” airport.

Paris – Charles de Gaulle Airport, Terminal 3 wins a spot for being one of the worst airports to connect to other flights.  The number of terminals and shuttle buses make it a traveller’s nightmare.  Jomo Kenyatta International Airport in Nairobi was

built to support about 2.5 million passengers and has now reached just under 5 million passengers.  A rebuilding program started seven years ago is not even half finished. Moscow Sheremtyevo Airport Terminal B/C in Russia made the list for “anything where you have to interact with airport staff: their attitude, their language skills, and the speed with which they process passengers.”

So count your blessings if you can avoid these airports and look at the success and improvements that have made Kelowna International Airport a good place to spend time.

YLW continues to rank in the top five airports in an ongoing customer satisfaction survey conducted by the Airports Council International that benchmarks the facility against 38 airports in its size category world-wide.

Robert Fine, Director of Economic Development

Retailers Using Technology to Make Buying Easier

by Robert Fine

With the recession behind us for now, a lot of interest has turned to an economic recovery that won’t necessarily be consumer driven.   With rising household debt in Canada at levels greater than in the US, warnings have come from the Bank of Canada about the need for Canadians to curb borrowing in order to buy consumer products.   And perhaps consumers in BC are starting to listen.

After four straight monthly increases, retail sales in BC slipped 1.4 percent in December.  Gains were seen in Nova Scotia (+2.4 percent) and PEI (+1.4 percent) while Saskatchewan (-3.5 percent) saw the most significant decline.   Weak sales in the automotive sector (-1.0 percent) and at gas stations (-1.1 percent) were major factors in the overall slip in retail sales at the national level (-0.2 percent).  These results have caused retailers to become more efficient and more creative in how they engage their customers.

In the increasingly competitive retail market, retail leaders are focusing on ways to make buying easier for consumers, specifically by using new technologies.   The International Council of Shopping Centres just held a summit to look at the next wave in technology for the retail sector.  Many retailers have already harnessed the power of technology.    UPCs (bar codes), in-store information tools such as scanners and information kiosks, self-service technologies, mobile marketing and online shopping are some of the applications being used around the world to revolutionize the world of retail.

These days, basic technology applications such as e-newsletters and email are merely starting points.  In 2011, the top 100 retailers by e-commerce revenue sent recipients an average of 177 emails per person, up 87 percent from 2007, however this use of technology has not proven overly effective.  The rates at which recipients open emails and click on links have declined; in the first six months of 2007, consumers opened 19 percent of the retail emails they received and clicked through to the website 3.9 percent of the time.  By the first half of 2011, those numbers shrank to 12.5 percent and 2.8 percent, respectively.

Reaching customers and providing new ways of connecting with them has become more challenging but innovative retailers are stepping up to the challenge.  In South Korea, for example, commuters can now visit a wall-length billboard on a subway platform designed to look like a line of supermarket shelves at Tesco Homeplus; they can then scan codes on the products with their smart phones to fill their online shopping carts and Tesco delivers the items to shoppers’ homes within a day.   Taking advantage of commuter wait times has resulted in improved sales for Tesco.

At several restaurants in the US and other parts of the world, patrons can place their order using custom iPads instead of traditional menus, preview of how their dishes will look, specify how they want their food cooked and add items at whim without waiting for servers.  Some of the same eateries use such “menuPads” to cross-market items from their online stores, particularly bottles of wine for home delivery.   Sales associates walking the floor toting iPads to facilitate multichannel sales is now a reality in a number of UK department stores.

Retailers are also working on making the process of buying easier through the use of tap and go technology.   Proximiant has developed a secure way for retailers and shoppers to track purchases and earn loyalty rewards, and cash rebates and coupons without paper receipts, time-consuming sign-up requirements or membership cards.   Retailers of any size can now provide customers immediate access to a variety of programs using a phone-sized USB interface.   Using a newly developed phone application called “Digital Receipts” consumers can record all their purchases at the time of sale so that they can manage their personal spending, collect loyalty points and receive cash back without having to carry paper receipts around.   The real bonus here comes in the form of privacy – consumers can do all these things without having to provide any personal information.

Some would say the retail future looks more intrusive, however.   If you are bothered by airport scans, you may want to pay attention to what the folks at Saks Fifth Avenue are working on.  Using technology found on an Xbox, body scanners measure a woman’s precise dimensions and display a digital screen of her wearing a garment she likes, showing how it would appear on her as she moved and how it would look in different colors and print styles.

Technology is definitely behind the next wave in retail and it will be particularly interesting to see which retailer’s best capture the attention of digital consumers.  Those who sustain themselves will demonstrate their ability to adapt to changes in consumer behaviour, enabling their customers to not only purchase – but also combine social, mobile and local strategies on their digital platform.   Now that’s something I can buy.

Robert Fine, Director of Economic Development

by Robert Fine

The Central Okanagan Economic Development Commission (COEDC) has released its draft Strategic Plan.  It outlines the direction and scope of activities that the Commission sees as being crucial in continuing to grow the economy by enhancing existing business, and attracting new and appropriate investment while facilitating a healthy business climate.  New activities include focusing on attracting non-location specific entrepreneurs to the Okanagan from Western Canada, assisting farms in shifting to agritourism opportunities, and expanding efforts to retain youth in the community through the Okanagan Young Professionals Collective.

The consensus of the COEDC board – and reaffirmed by the Regional District and municipalities in the Central Okanagan – is that keeping young people in the community should be a priority. Providing our youth with the opportunity to thrive in the Okanagan and build a life and family here in the Okanagan is fundamental to keeping our economy vital and having a labour force in the future.

As the most recent census demonstrates, our growth rate was the fourth highest in the province, driven by new migrants into the Kelowna CMA, as we have no net population increase as deaths outnumber births.  The arrival of UBC Okanagan has helped keep our growth rate at about two percent a year.  A study by masters graduate student Emma Talbott, however, points to the fact many of the roughly 5,000 students who come from outside the region do not plan to remain here.

Ms. Talbott, as part of her Master of Arts degree in interdisciplinary graduate studies, conducted a survey of graduates and alumni at the University of British Columbia’s Okanagan campus and found the majority of them are leaving the area after graduation – not because they want to but because they feel they need to.  Of the students surveyed who graduated in 2011, 51 per cent said they were going to leave the area. The number for alumni seeking to depart came in at 67 per cent.  Talbott’s study cites the most common reasons for the move as lack of career opportunities in their chosen fields, the high price of housing and the high cost of living in our area.  While the results were not surprising, they are worthy of discussion.

In terms of opportunity, the Kelowna and the Okanagan is the small business hotbed for Canada.  Recent studies by the Bank of Montreal, the Canadian Federation of Independent Business and Stats Canada data clearly demonstrate that we have more entrepreneurs per capita than any other region and over half of the businesses in the Region are operated by a sole proprietor.  The lack of head offices in the Region and its continued emergence as a high value lifestyle community will never facilitate the level of opportunity that students will find in large cities.  We need to do a better job of linking our existing firms, through both the University and Okanagan College to the areas of expertise that we graduating them in and better match academic and job clusters that exist in the Okanagan.  Recent announcements from Armor Works Canada, a protective equipment manufacturer and Bardel, an animation firm point that there are indeed opportunities here and the engagement of young, skilled graduates will enhance their business prospects.

One of the surprising conclusions found by Ms. Talbott in her report was that of attitude. Her feeling is that quite a few people said the attitude of Kelowna is part of the reason for young people departing.  The students interviewed found this attitude quite stifling and not forward thinking.

There is also a need for local companies to hire experienced employees, meaning graduating students will have to leave the Region to get the experience necessary to do the jobs available here.  Those graduates that stayed said they did so because they had a job, but the majority of those who found work locally said they secured those jobs as a result of knowing someone at the company.

The COEDC considered many of the same issues as Ms. Talbott identified when we rolled out our Okanagan Young Professionals program last year.  We are now adding more resources to continue to make young professionals more connected to the community and each other and see this as a priority.  We will be establishing a mentoring network in 2012 which links successful young professionals with graduating students, and continue to work as a clearing house of activities and organizations aimed at creating volunteering opportunities, networking and social connection for young people.  We will be co-hosting a TedEx event aimed at giving communities, organizations and individuals the opportunity to stimulate dialogue through a combination of live presenters, conversations and connections.

Clearly there is a lot we can do – and much we cannot – in terms of youth retention.  The structure of our local economy is one we can attempt to influence and change, but this is highly challenging.  How we connect with youth and employers and how we look to young people and their interests is something we have more control over.  Let’s work on what we can influence, and continue to make the Okanagan Valley a more welcoming place for young graduates.

by Robert Fine

Robert Fine, Director of Economic Development

With the massive growth in smartphone and tablet computers, there should be little surprise at the growth in apps.  The term “app” is a shorthand version of “application” used by the IT community for the past 30 years.  In recent years, it commonly refers to mobile applications; the term has, however, become newly popular for mobile applications in smartphones and tablets that can run on the internet and your computer, phone and other electronic devices.

An analysis by the mobiThinking compendium shows how much the influence of smart phones and apps has grown.  Mobile app demand appears to be the primary driver.  The number of phone users in North America is estimated to be 260 million.  Among these, the number of smartphone users jumped by ten percent through July of last year, according to a report by metrics company, comScore Inc.  The result has been smartphones capable of taking us away from our desktop and laptops and allowing us to be fully functional, from booking travel to researching products we may want to purchase.

And purchasing we are.  Last year’s study, “Mobile Movement: Understanding Smartphone Users” by Google showed that three quarters of all smartphones users have made a purchase as a result of using a smartphone.  The report also showed that while purchases may not be made directly through the smartphone, 67 percent of consumers research on their smartphone and then buy in a store; 23 percent research on a smartphone, visit the store to check out the product, then purchase online on their computer, and 16 percent research on their smartphone, visit the store, then purchase on their smartphone.

Mobile apps are also driving the purchase of smartphones: in the last year, one third of US smartphone users made a purchase using an app, from retail to restaurant transactions.  The connection between individuals and individual business is now primarily built via apps and smartphones.  This is a key component that retail and non-retail businesses should be aware of.  So apps are the way of the future – or are they?

A report released last month by the Pew Research Centre’s Internet Project shows the continent’s love of apps may be waning.  Like the impulsive shopper, the desire to load as many apps on one’s phone or tablet eventually wears off and it’s starting to happen.  Just like the argument made by those who download movies and music, when apps are free people will grab them and load up a phone with them just because they are available, not necessarily because they are needed.   New numbers suggest that only 68 percent of smartphone users open five or less apps at least once a week.  Approximately 17 percent don’t use apps at all.

So are apps simply a novelty?  Not likely, according to the international market research firm, ACNielsen.   Android phone users spend upwards of 90 minutes a day on their phones, with about an hour of that time devoted to apps usage.  Apps that are retained on smartphones at a rate of 30 percent overall are considered successful (the industry refers to them as “sticky”).   For the ACNielsen folks, the number of apps that are downloaded is not important – it’s the number that is ultimately retained they’re interested in.  Up to 90 percent of all apps downloaded are eventually deleted.

For businesses to stay relevant there is a strong argument to be made for staying focused on creating a useful app.  The COEDC will be launching our new app this year providing a convenient way for smartphone and tablet users to access key economic information on the Region.  The good news is that there are many talented app developers now operating in the Okanagan.  The excuse that it’s too difficult to build one no longer applies.

Happy 2002!

Robert Fine, Director of Economic Development

by Robert Fine

With 2012 underway, the speculation continues as to what kind of economic recovery we can expect.  In my last column I cautiously suggested that we will see economic growth similar to what we saw in 2002, considered by many to be a typical economic year before a five-year boom took place in the Okanagan valley.  Between 2005 and 2007, for example, the Central Okanagan economy grew on average of 11 percent per year.  This unsustainable growth created housing shortages and labor market challenges and generated significant levels of income for all levels of government.

Residents of the Okanagan quickly became accustomed to a boom, boom, boom economy which showed no signs of faltering.  But falter it did – the global meltdown precipitated by the collapse of the US housing market and international banks brought a hasty retreat of the prosperity in the fall of 2008.  Unfortunately, many of us became addicted to the growth and that growth became the new normal.  Think of coming off the Connector and hitting the couplet in West Kelowna – you have just dropped from 110 km to 50 km per hour and it feels like you are barely moving.   The economy can feel like it as well.

A look at key economic indicators in 2003 (data from the previous year) and numbers from 2011 (in the Economic Development Commission’s 2012 Economic Profile to be released next month), shows an amazingly similar set of economic conditions, a pattern also evident during the first two years of the past decade.

Population grew at 1.6 percent versus the 3.4 percent estimated in 2011.  The unemployment rate stayed at 9.7 percent compared to 8.1 percent currently.  Labour participation grew from 63 percent to 69 percent, meaning there are more people in the labour force.  When looking at the total number of people employed in 2002 versus 2010 (the last numbers we have), there was an increase of 36 percent while population of the Central Okanagan grew by only 20.2 percent.  In other words, job creation outgrew population by almost two-to-one.

Household income increased by 3.1 percent in 2003 while edging up 2.5 percent in 2010.  Building permits, accounting for inflation, came in at $183 million in the City of Kelowna, reaching $264 million.  On a down side, housing starts tumbled from 987 to 600 last year, while MLS sales about 500 greater than in 2002.

Clearly, there are differences in the economy and it is a case of both good and bad news.  More people are working.  We do not know the wages of the new jobs that have been created and if they are of equal or greater economic value.   What we do know is that residential housing is playing a less significant part in the current economic model.  While population growth has rebounded, excess inventory is impacting the growth in housing.  The housing sector and all those that rely on income from it including suppliers, builders, marketers and realtors are feeling the pinch to some degree.

The return to the boom years of mid-decade is not likely to return in my lifetime.  Globalization has changed the equation.  The 2002 economy may be the 2012 economy.  Not everyone will benefit from our new economy but in real terms, we are doing better than many places.  This is not to suggest that individuals and firms are not struggling. This is not 2007 and we are all readjusting to the “old new reality.”  Firms I have met with in the past year call this the worst market seen in 20 years of being in business.  The manufacturing employee who finds there is no work and no new opportunities is not imagining this scenario.

As a community, we need to continue to be receptive to new business opportunities, be strategic in the approach we take in seeking new investment, and keep our existing businesses strong by listening to their concerns and acting on them.  In the month ahead, the Economic Development Commission will release it 2012 Strategic Plan.  It has been created with the input of hundreds including individual business owners we have met with through our one-on-one site visits, participants in industry sector roundtables, community discussions and significant input from a dedicated voluntary advisory board.  Economic development today is about looking forward and seeing what the next trend is and what role we can play in that trend.  It has become a considerably more challenging task of late, but one that we are in a good position to take advantage of …stay tuned.