MALAISE—Summer of Discontent

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More than the average summertime blues, the economic slowdown has been felt at all levels

Jeronimo Feria can measure the uneasy state of L.A.’s economy by the clock on the wall.

After a full day’s work at Action Messenger Service, the 37-year-old Los Angeles resident often will hang out at the company’s Hollywood office, waiting for some after-hour calls, hoping to make a few extra bucks.

Those calls used to come in as fast he could handle them during the tech boom, before it began tailing off last year. Now, this summer, Feria can watch the clock inch toward midnight sometimes without a single call.

“I really have more than a full-time job, but I’ve got to pay the mortgage,” says Feria, who supports a wife and two children. “It’s just not as good as last year.”

Action owner Arthur Ruben only admits to business being off 5 percent, but acknowledges that he and his employees are working harder to maintain the accounts they do have and find new ones to replace those they’ve lost.

“Lots of businesses are counting their money,” he says.

Call it what you want, but the Los Angeles economy has clearly caught more than just a case of the summertime blues. And messenger services are not the only ones suffering. Telltale symptoms, both obvious and subtle, are cropping up elsewhere on the business landscape.

Freight carriers are seeing the volume of cargo they are hauling regionwide tail off. Hotels are experiencing a sharp decline in business travelers, resulting in dropping occupancy rates despite a steady stream of tourists.

The business lunch crowds at some restaurants are thinning out noticeably. And the middle-of-the-road rental cars favored by traveling executives are stacking up on lots as cheaper subcompacts zip out the door.


Thinner publications

Even the Wall Street Journal isn’t as hefty as it used to be, with Dow Jones & Co. publishing fewer pages given a 30 percent decline in advertising. Other business media are far from immune.

“July was a small decline and August is going to be a whopper,” said Lorry Lokay, president of Business Wire, the San Francisco-based service that carries company press releases. “And there is no sign this is going to change this year or early next.”

The nation may not be in an official recession, buoyed as it is by consumers’ willingness to pile up debt, spend their tax refunds and enjoy some of the cash from the mortgage refinancing boom. But that has been little relief to many Los Angeles businesses this summer, who are feeling the economic equivalent of a general retreat. The drawbridge has been raised. The cash drawer is under lock and key.

Take the Park Hyatt Los Angeles in Century City. It’s getting by on a still abundant stream of tourists, but the sharp cutback in corporate travel spending has been felt.

“Companies are not going to lay off 5,000 people, and have an incentive trip to Los Angeles,” said general manager Cormac O’Modhrian. “There is a significant impact to our business. These are tough times, but we have to manage.”

The hotel would not release occupancy figures, but hotel industry statistics compiled by PKF Consulting show that June occupancy rates fell 8.8 percent countywide. The decline was more precipitous downtown, where the occupancy rate for rooms over $85 plunged 18.7 percent. Also seeing double digit drops were Beverly Hills and the Westside, including Santa Monica.


Rental-car business hit

Related travel businesses aren’t doing much better.

Budget Rent a Car of Beverly Hills can’t keep its subcompacts in stock. And there are still plenty of the ultra wealthy willing to pay top dollar $1,000 or more a day for Ferraris, Bentleys and the like. But a full-size car like a Ford Crown Victoria? Take your pick.

“It’s just not as hectic as it usually is,” says Sarah Neal, a Budget manager. “We are usually crazy busy.”

Meanwhile, airport business is off perhaps 20 percent for City Cab, a Sun Valley-based company that serves Los Angeles, Burbank and Ontario airports, said owner Scott Schaeffer.

“The infrastructure costs don’t go down, so everyone has to work harder,” he said. “If the drivers are used to making ends meet in five days, now they have to work six.”

But it’s not just out-of-towners whose penny-pinching ways are putting a crimp on the local economy. Local companies are also clamping down.

Ca’Brea, an upscale La Brea Avenue restaurant, has seen its weekday lunch crowd drop from an average of 100 to 120 diners, to 50 to 70 this summer.

“Our business is way down. It’s a dud,” said manager Carol Williams. “The whole month of July was the worst.” And it’s picked up little in August.

Rick Royce’s barbecue catering company has felt it too. It normally does its biggest business in the summer, but with corporations cutting back on special events, Royce has seen his business drop 25 percent.

“The personal side has been good, but the corporate has tailed off,” said Royce, whose Rick Royce Premier BBQ has done about 150 events this summer, about 50 less than last year.

The cutback on spending has even affected parking companies, which are getting hit on two fronts: lots serving retail areas have been experiencing less traffic, while owners of office buildings are looking to reduce costs associated with their garages.

“People are looking to cut everything, and one of the first places they look is parking,” said Ben Akbary, owner of Quality Parking, a Los Angeles company that operates lots, garages and valet services. “The building owners call and say, “Cut your fee, or cut your overhead.”

That’s prompted Akbary to reduce the number of attendants who serve certain garages.

Sam Sahab, owner of Prestige Parking, another Los Angeles parking company, has noticed slower vehicle turnover in lots he operates near the downtown jewelry and garment districts.

“I have a strategy. We try to add more services. At certain locations we are adding free car washes,” he said. “We have to come up with solutions.”

The slowdown also has caused businesses to reduce spending on more core, though not essential, expenditures. The Mid Valley Chamber of Commerce knows all about that.

Earlier this month, the chamber went an entire week without receiving a single membership renewal in the mail. Moreover, the percentage of businesses that are not renewing for reasons other than closure or relocation has doubled, causing the chamber to hire more salespersons.

“I need to tap all the elements,” said Nancy Hoffman, chief executive of the Van Nuys based organization. “They are working harder to bring in more clients.”


Lighter freight volume

Of course, businesses are going to find ways to trim expenses when revenues are falling. And the volume of freight carried by Tri-Modal Distribution Services, Inc., a Carson trucking and warehouse company, is probably a good measure of that.

The company’s trucks carry a variety of freight, including international goods via the South Bay ports, general merchandise that crisscrosses the country and regional cargo.

While some areas of its business have held up, others have distinctly slowed down, including its regional business-to-business shipping, which owner Greg Owen estimates is off 15 percent to 20 percent. He said he has informally polled other area companies and found the same for them.

“It’s just kind of mediocre,” Owen said.

Luckily, Tri-Modal’s major international account is Payless ShoeSource Inc., whose cheaply priced foreign-made footwear sells well during good times, and as well, if not better, during tough times.

“It’s non-recessionary,” he said. “We don’t have all our eggs in one business.”

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