Coronavirus has already hit some local businesses. Others are watching and waiting
Miami sits some 8,421 miles from Wuhan, China, the epicenter of the global coronavirus outbreak. But in a world of global trade, it’s a surprisingly short hop.
In ways large and small, the coronavirus outbreak is already taxing the Miami and Florida economies. And its likely to increase, say business experts.
“Florida-China trade has been expanding and increasing,” said Alice Ancona, senior vice president and chief operating officer of World Trade Center Miami, a nonprofit that promotes and facilitates foreign trade. In the past decade, the value of exports from Florida to China has more than doubled. For Miami, the top items shipped from China include furniture, electronics, appliances and ceramic tiles; major Miami-area exports include aircraft parts, gold, scrap paper and food.
The coronavirus is projected to deliver another $35 billion hit to U.S. GDP in the first quarter, according to a Feb. 5 report from economic forecasting group Oxford Economics. With Florida comprising 5.1% of the total U.S. economy, that means the Sunshine State could lose as much as $1.75 billion as a result of the virus; about one-quarter of that would be concentrated in Miami-Dade and Broward.
The future is murky. The outbreak has spiked during Chinese New Year, a time when most Chinese usually go home or travel abroad. But many Chinese are now living in de-facto quarantines, as travel of any sort in the country grinds to a halt. All U.S. air carriers and many others around the world have suspended flights in and out of China indefinitely.
The question facing many U.S. enterprises with production ties to China is whether Chinese workers will be allowed to leave their homes to return to factories.
“We’re definitely in a period of uncertainty [not] knowing what the lasting impact will be,” said Mark Segner, vice president at Descartes, a digital global trade data platform.
TOURISM, REAL ESTATE
Florida tourism and real estate may already be feeling the effects, experts say. Florida, and South Florida in particular, has seen a burst of Chinese tourists in the past decade, Ancona said. According to the most recent data available from Visit Florida, more than 300,000 Chinese now visit the state each year; more than half head to South Florida. Their travel schedule overlaps with high season in South Florida, with an uptick during Chinese New Year.
While Chinese visitors account for a fraction — about 1% — of the Miami area’s international visitors, they spend an average of $3,400 per person. That’s more than the visitors of any other country tracked by Visit Florida.
And in certain cases, the amount spent significantly greater.
“Chinese visitors in particular often look to make investments when they come to Miami,” Ancona said. “They’ll look at the area and decide they like it enough to buy a condo or two.”
According to the most recent data from the Miami Association of Realtors, Chinese buyers made up 3% of the the county’s foreign-born real estate investors. The National Association of Realtors says the average Chinese real estate buyer in the U.S. spends $674,900.
Peggy Olin has first-hand experience working with Chinese investors. The president and CEO of OneWorld Properties, Olin helped sell the YotelPad Miami condo/hotel mixed-use development downtown to buyers from China, as well as Mexico and Colombia.
As the virus hit, Olin was recruiting Chinese buyers for the Legacy Hotel & Residences at Miami Worldcenter. The outbreak has complicated matters.
“We had a whole dog and pony show planned” for prospective buyers in Shanghai and Beijing that would have kicked off around Feb. 19, she said. “That obviously became impossible.”
Olin said she is now turning to video conferencing and drone photos to make her pitch. The double-digit time-zone difference does not help, she said.
CRUISING
The cruise industry, which employs more than 7,500 workers locally, is also starting to see feel a bite. Carnival Corp. and Royal Caribbean International have canceled sailings through spring.
Carnival Corp. has not yet said what impact the coronavirus will have on its earnings; the company is in a mandatory quiet period leading up to its next call with investors in March. The company is already weathering an acute outbreak on one its Princess brand ships, and a possible outbreak on a Holland America ship, both in Japan.
In an earnings call Feb. 4, Royal Caribbean Cruises Ltd. chairman and CEO Richard Fain said that canceled sailings had already cost the company millions.
“Unfortunately no one knows how this outbreak will play out and we don’t know how it will ultimately impact us,” Fain said.
But there is probably more pain coming, he said. “It seems likely that we will have to cancel more but we don’t yet know how many. We also expect that there will be an impact on future bookings in China, especially in the immediate aftermath of the illness. But again, we just don’t know.”
Cruise stock shares took a hit as it became clear a worldwide epidemic was unfolding, though they have since recovered some ground after Royal reported a strong quarter. On Wednesday, Wedbush Securities cruise analyst James Hardiman said in a note to clients that both Royal Caribbean and Carnival would likely see reduced earnings-per-share as a result of the cancellations.
FACTORY ORDERS
Like the rest of the U.S., many companies here rely on orders shipped direct from Chinese factories.
One is City Furniture. President and CEO Keith Koenig said he has heard from his China-based suppliers that even after the conclusion of Chinese New Year on Feb. 8, many workers plan to stay in their home cities instead of rejoining crowds of factory workers on the coasts.
And once it becomes clear that factories are not operating at normal capacity, he said, there will likely be a pile-up of orders.
“There’s going to be back orders, and more customers who are expecting to get product [in coming weeks and months] are not going to get it,” he said.
That hasn’t happened yet. World Trade Center Miami said there had not yet been an impact on shipments into PortMiami or Port Everglades.
Andres Ochoa, president of SAP USA Truck & Auto Parts, which also imports from China, believes most local suppliers have a cushion of about one month. So far, he said he has not had to make any adjustments to his business. But firms that require orders on short notices will likely run head-first into supply-chain issues caused by the virus.
“When a large region of China is closed off [for so long], it definitely distorts manufacturing,” he said.
For now, its business as usual for clothing company Perry Ellis International, a company representative wrote via email; the company purchases some goods from Chinese manufacturers. However, the company said, some factories in China have delayed opening up for two weeks after the Chinese New Year, which may delay arrival of goods for late spring and early autumn.
Jason Prescott, CEO of JP Communications owns business-to-business websites including Manufacturer.com and TopTenWholesale.com, along with the Apparel Textile Sourcing Trade Show. He regularly works with Chinese manufacturers, who feature prominently in his trade shows, including one staged in Miami.
Prescott said is now wrestling with day-to-day uncertainties of whether the Miami show planned for May will take place. He said he’s already lost money on canceled or renegotiated contracts. Even if the virus were to suddenly subside, he fears it may continue to cast a shadow on the willingness of Westerners to interact with Chinese — meaning lost business opportunities for both.
“[Chinese] aren’t going to want to come to a trade show where it feels like they’re not wanted, or where they might be greeted like some bacteria,” he said.
At the same time, the outbreak may have the effect of accelerating a shift, already underway, to sourcing raw materials from outside China, he said.
LOCAL OPPORTUNITY
For some companies, the outbreak is bringing a boost in sales.
Drugstores and medical suppliers nationwide — including South Florida — have sold out of face masks. And two South Florida companies say they’re expecting an increase in demand for their sanitization products.
Fort Lauderdale-based Ocean Bio Chem Inc. subsidiary, Star brite, Inc., manufactures Performacide, a surface disinfectant available at major retailers. According to the Environmental Protection Agency, it and some other products contain a chemical formula that can kill pathogens like coronavirus. In the past two weeks, shares in Ocean Bio Chem have surged as much as 36% in the past two weeks on light trading, reflecting a predicted uptick in sales.
“It’s a pretty unique product,” said Bio Chem chairman and CEO Peter Dornau.
Meanwhile, a Miami-based startup called Touchland is claiming it has seen 200-300% daily average increase in sales of its Power Mist hand sanitizer product since the virus began to spread — as well as a 130% increase in average value order, equating to $109 per order. Waiting-list orders now total more than 10,000, the company said. Brick-and-mortar stores that sell Touchland include national outlets Ulta and Urban Outfitters.
LOSSES MOUNT
For Bill Kelly, president of the Florida Keys Commercial Fishermen’s Association, the impact of the coronavirus outbreak was immediate. Eighty percent of the Keys’ spiny lobster exports go to China and the broader East Asian market. After the Chinese government imposed an import ban on foreign seafood as a preventative measure, lobster prices fell from $10.50 to $6.
“It was brutal,” Kelly said.
His organization represents 650 fishermen, all of whose livelihoods will be impacted should the epidemic continue to spread.
“It could cost a lot of jobs,” he said.
In addition, South Florida is now home to the largest group of Amazon re-sellers in the U.S. These are individuals who operate full or part-time businesses from home using Amazon’s website and fulfillment platform to sell goods they broker.
The unofficial leader of the group, called Wizards of Amazon, is Carlos Alvarez. Alvarez says that the shutdown of factories across China will end up putting the livelihoods of dozens South Florida re-sellers on the line.
“If [workers] don’t return from Chinese New Year in the next three to four weeks, it could be catastrophic,” he said.
Alvarez himself sells a line of wine aerators. He estimate he has $100,000 at risk.
He said he has been in direct contact with his Chinese suppliers and is Alvarez is optimistic it will be contained sooner than some might think.
But if it is not, it won’t just be at-home resellers who will be impacted.
“Anybody that sells products, whether online or off, whether you’re a traditional retailer or in e-commerce--everyone is relying on China,” he said.
This story was originally published February 7, 2020 at 6:00 AM.
