NWA firms review post-pandemic scene

Northwest Arkansas businesses and employment have recovered from the covid pandemic, federal government statistics show.

But in order to recover, they first had to survive, according to business owners interviewed.

“Us and Elite Cleaners are all that’s left” in Fayetteville, said Vickie Brannon, owner of Fashion Cleaners. An internet search for dry cleaners in the city showed few remaining competitors.

“Nationwide, about 50% of dry cleaners went out of business,” she said.

Owning the business location, having up-to-date equipment in good condition, having a base of loyal customers and being well-established for 33 years all contributed to Fashion Cleaners’ survival, Brannon said.

Survival for most businesses required adapting and making changes such as allowing employees to work from home, said Beth Lyman of United Building Maintenance, also in Fayetteville. Her business cleans offices. Some customers’ offices are still at one-third their capacity, she said.

“The employees who started working from home don’t want to come back,” Lyman said, a trend echoed by others interviewed. “Employers don’t want to make them come back, but have discovered a real productivity drop-off. I understand that. If I was working at home and saw a big pile of laundry at my house, I’d get up and do a load of laundry. My productivity would suffer.”

Businesses in the region whose leases expired or were otherwise in a position to reduce their office space simply made room for new business tenants moving in to thriving Northwest Arkansas, said Dan Douglas of Bentonville, a former state representative who is in the commercial real estate business.

“Let’s face it. Northwest Arkansas is an anomaly,” Douglas said.

The covid pandemic definitely hurt commercial real estate while it lasted, but owners who lease to businesses here are fortunate compared to other parts of the state and the nation, Douglas said.

“Tenants can just about name their price in Little Rock,” Douglas said. “It’s pathetic.”

Meanwhile, rents are going up in Northwest Arkansas, he said.

Some businesses never recovered fully despite advantages unique to Northwest Arkansas, said Nicos Nicolaou of Northwest Arkansas Vending in Springdale.

“I’d say we’re still down 20%, minimum,” he said. “We were down 50% and have recovered about 30% of what it was.”

The vending business outside Northwest Arkansas fared worse because the sector’s supply chains still haven’t recovered, he said. Nicolaou can reach suppliers in Tulsa, Little Rock and Columbia, Mo., but at a cost in transportation and time, he said.

The covid pandemic began in late 2019 in China. The health emergency it caused was declared over by the U.S. Department of Health and Human Services in May after more than 1 million U.S. deaths, according to federal figures.

The local industry hardest hit during the pandemic was leisure and hospitality — restaurants, hotels and tourism — as was the case in the rest of the nation, according to U.S. Bureau of Labor Statistics figures. Now the same sector is seeing a surge, according to federal figures and J.R. Shaw, executive director of Destination Rogers, which promotes leisure and tourism in the region.

City sales tax and advertising and promotion tax revenue drawn from hotels and restaurants are rising, he said. However, profit margins for the industry still lag from what they were before 2019, he said.

“These businesses are not making and banking what they were in 2019,” he said. “Are they as fully staffed as they were before? Very rarely.”

Finding employees remains a bottleneck, he said, but increased demand is clearly there.

“Demand solves all problems, whether you understand it or not,” he said.

Northwest Arkansas businesses overall are looking for employees — including some already on the payroll but out of the office, said Raymond Burns, president of the Rogers-Lowell Chamber of Commerce.

“There’s the expectation of being able to work from home and for flexible hours,” he said. “It’s a paradigm shift where, for instance, people expect to have to come into the office maybe three days a week. Even our own organization had to become more flexible.”

It’s hard to find workers, from information technology to manual labor, Burns said. An aging U.S. population and declining birth rates leave few options outside of reforming immigration, but immigration reform has been an intractable political issue, he said.

At least some of his business customers found they could do with fewer employees, Nicolaou said. He had to pay more to keep the ones he had, he said. Vending is very price-sensitive, he said, making it difficult to raise prices.

“I’m paying $18 an hour now, $4 more than before covid. Now, guess what my turnover is? I had 10% turnover a year in employees before covid. Now it’s 40%. Everybody’s needing labor and people leave for all kinds of reasons: hours, insurance, any number of things.

“The good news is the economy hasn’t slowed down,” Nicolaou said.

Professional business services — technical support businesses, management advisers and such as defined by the labor bureau — accounted for about 4,700 new jobs by the end of 2022 compared with the end of 2019, according to labor bureau statistics compiled by Mike Harvey, chief operating officer of the Northwest Arkansas Council.

Every sector tracked by the labor bureau showed an increase, with most showing increases of more than 5%, the bureau’s numbers show. The only sector showing less than 2% growth, at 1.6%, was local government.

“We’re all competing with the private sector, and the private sector pays more,” Springdale Mayor Doug Sprouse said. “For engineers and anything like that it’s very difficult to compete.”

It is also no secret that there’s a nationwide shortage of eligible employees, particularly in police work, he said.

“You have to convince people the size of that paycheck you get every week is not the only thing to consider,” Sprouse said. “Things like health and pension plans matter, too. Job security is another factor. We don’t have the ebb and flow as quickly as the private sector does.”

City councils and other local governing bodies have stepped up and increased pay, Sprouse said, but overall, cities in the region must make do with the employees they have.