OPINION: Five takeaways on the 2015 Flathead economy
In 2015, the Flathead Valley hit its stride in a more sustained economic recovery and showed the trends that will carry us into the New Year. Here are five takeaways on the Flathead economy and what they mean for 2016.
1. Non-resident tourism growth accelerates
This past year, Flathead became the top county in the state for tourism revenue according to Montana’s Institute for Tourism and Economic Research. Glacier National Park set an all-time attendance record of 2.3 million visitors, despite a major fire season, and Glacier Park International Airport is poised to announce an all-time high when December boardings are recorded. These are all good signs for job growth in the tourism and hospitality industry.
Unsurprisingly, hoteliers took notice and have 325 new hotel rooms under construction with openings scheduled in 2016. Industry analysts project continued visitor increases in 2016 with the 100th anniversary celebration of the National Park Service driving interest in a park system jewel, Glacier National Park.
A question mark for 2016 is the exchange rate impacts of the Canadian dollar. With currency trading at $1.39 Canadian to $1 U.S., retailers and hoteliers reported slower Canadian spending in 2015 with headwinds projected to continue in 2016.
2. Mergers, acquisitions shake up local economy
Higher regulatory costs, lower commodity prices, and tightening margins drove an unprecedented merger and acquisition environment in the Kalispell area in 2015.
In the financial sector, First Interstate Bank acquired Mountain West Banks; Glacier Bank purchased Community Banks of Polson and Ronan along with other out-of-state banks. Banking associations expect further consolidation due to higher regulatory costs associated with Dodd-Frank rules and other factors.
Federal rules and rate structures are also driving strategic alliances in the health-care industry. Kalispell Regional Healthcare and North Valley Hospital recently announced a closer operating partnership. At the same time, health care witnessed surging employment both during and after the recession.
Plum Creek Timber Company announced that it will merge with Weyerhaeuser Company in a $8.44 billion transaction to form one of the world’s largest forest products companies. The closing is expected late in the first quarter or early in the second quarter of 2016.
3. Kalispell evolves into a regional trade center
This past year, Kalispell continued its evolution as a trade center, supporting job growth in the higher wage paying sectors of health care, business, and financial services.
Commercial and infrastructure improvements are a good indicator of future job growth. With the 2015 addition of Ulta, Dress Barn, Michael’s and Discount Tires, Spring Prairie III will be completed with the addition of Montana’s first Chick-fil-A in 2016, and work has commenced on 250,000 square feet of retail, restaurant, and hospitality space in Spring Prairie IV.
Kalispell’s public infrastructure improvements also support the region: Construction has begun on the $34 million final segment of the bypass; the city was awarded a $10 million grant for rail infrastructure; Flathead County is completing $10 million in building improvements; Kalispell Regional Healthcare added 30,000 square feet of medical space; and, Flathead Valley Community College announced its intent to construct a 100-bed student housing unit. Look for the construction and real estate industries to pick up the pace in 2016 as volumes, pricing, and jobs approach 2008 levels.
4. Manufacturing, innovation is strong
With the Applied Materials-Tokyo Electron merger off, Applied appears to have steadied its pace in a highly volatile industry.
The wood products industry is slowly recovering as national markets return and it is still a major component of the Flathead economy. Wood products companies continue to take advantage of new technologies to realize efficiencies in production.
Some newer manufacturing industries are trending up such as wineries, breweries and distilleries. Flathead Lake Brewery and Pub opened in an expanded facility in Bigfork and Spotted Bear Spirits opened its doors in Whitefish, adding to a robust market segment.
Look for strong niche manufacturers like Nomad Global Communications, Hurraw! lip balm, and SmartLam cross-laminated timber to continue innovating, investing, and creating new jobs in the year ahead.
5. Energy news is mixed
In the energy sector, EPA’s proposed Clean Power Plan could be the most significant economic event to occur in Montana in more than 30-years according to the Bureau of Business and Economic Research. The bureau estimates that 7,100 jobs and $500 million of payroll would be lost within the three years of implementation. Colstrip may face a partial shutdown. Look for more on this in 2016.
Lower gas prices have resulted in job losses in Eastern Montana and are negatively impacting the state budget and Canadian exchange rates. At the same time, reduced prices at the pump have helped keep business and family costs down and have fueled visitors coming to our area in record numbers.
Conclusion
Look for for steady growth in the Flathead economy of 3 percent, according to the the Bureau of Business and Economic Research. This projection anticipates continued job growth in health care, nonresident travel, wood products, construction, and other manufacturing.
Best wishes to the business men and women of the Flathead for everything you have accomplished in 2015 and for a prosperous and healthy 2016.
Joe Unterreiner, of Kalispell, is president and CEO of the Kalispell Chamber of Commerce and the Kalispell Convention and Visitor Bureau.