E-mail this page Reader Comments (below)

By Staff reports Sunday, February 25, 2007

TOURISM

Tourism, the largest single contributor to MaineÕs economy, is always a wild card.

A rainy, cold summer can put a damper on a well-planned marketing effort if, for instance, a family in Massachusetts sees a bad weather forecast and decides to stay home.

That said, stepped up marketing will be important in 2007, according to an outlook developed by MaineÕs Center for Tourism Research and Outreach. ThatÕs because slower economic growth is projected for New England, and that could make MaineÕs primary visitors a little tighter with a dollar. The impact would be felt most at inns and hotels.

On the plus side, falling oil prices are taking some of the sting out of a fill-up. The largest share of Maine tourists arrive by car, so stable gasoline prices would help.

MaineÕs tourism industry also can look forward to a change in direction, with a new state tourism director coming aboard. Patricia Eltman was picked last month to replace Dann Lewis, who held the post nearly 12 years and had been under fire for his response to criticism involving the stateÕs advertising contract. Eltman most recently ran a public relations firm and has a close relationship with the state Democratic Party.

Ð Tux Turkel

REAL ESTATE

Will 2007 be a better year for MaineÕs housing market?

That depends on whether youÕre buying or selling a home.

If youÕre looking to buy, things look pretty good now. Sales dipped statewide by roughly 7 percent in 2006, so thereÕs plenty of inventory.

Strong supply is putting downward pressure on prices in some markets. Despite that, median prices statewide actually edged up last year almost 1 percent Ð to $192,519 Ð compared to 2005.

ThereÕs little doubt, though, that a price correction is under way. It just depends on when the market bottoms out. As long as interest rates stay low, some Realtors say, prices could hit a low point by midyear and start to rebound in 2008.

Alan Peoples, president of Home Sellers of Maine, puts it this way: ÒThe good news is that the bad news is mostly behind us. The fact that sales are down will turn out to be good for the real estate industry in the long run, as it will hasten a needed price correction.Ó

Ð Tux Turkel

TRANSPORTATION

MaineÕs railroads and ports are looking at a stable year with hopes for only modest growth. ThatÕs because their top customer, the forest products industry, is looking at a stable year with hopes for only modest growth.

ÒWe are dependent on the health of the whole forest products spectrum,Ó explained Richard Rushmore, an executive at the Montreal, Maine & Atlantic Railway, which operates two lines in northern Maine.

More than 60 percent of the railroadÕs freight is made up of forest products, such as woodchips, lumber and paper.

A key issue: Will another Maine paper mill close this year? That would hurt the railroad that serves it.

Businesses that transport people, though, anticipate brisk growth, such as Concord Trailways, which provides bus service between Portland and Boston. The company, which has seen ridership increase more than 50 percent since 2003, has expanded its parking lot and is benefiting from many people choosing public transportation over automobiles for longer trips.

The Portland International Jetport saw record-breaking passenger volume records during the last four months of 2006.

The Cat, the high-speed ferry that connects Portland and Bar Harbor with Yarmouth, Nova Scotia, will increase the number of weekly visits to Portland from three to four.

The Portland Ocean Gateway, a passenger ship terminal under construction, is scheduled to berth its first cruise ship in October. The terminal will also allow the city to expand its cargo operations.

Truckers have some good news. Construction will begin later this year on a new bridge across the St. Croix River, connecting Calais with St. Stephen, New Brunswick, as well as a new, more efficient border-crossing facility.

Also, this year in Gilead the state will rebuild a section of Route 2, an important segment of the east-west corridor.

Ð Tom Bell

TECHNOLOGY

2007 could be a big year for MaineÕs technology community. MESDA: MaineÕs Software & Information Technology Industry Association, has two ambitious initiatives on the table that promise to be exciting.

The group has proposed creation of an investment pool of $500 million for private equity investment in Maine software, IT and related technology start-ups: $400 million would come from allocating 5 percent of the stateÕs pension fund to invest in technology companies and $100 million would be capitalized by third-party investors. MESDA director Joe Kumiszcza said thereÕs already been substantial interest from the venture community.

ÒThat is earth-shaking news for our industry sector,Ó said Kumiszcza. ÒWeÕll finally have the investment to move forward, to let companies stay in the state of Maine.Ó

MESDA also is working on a software testing and usability lab to be based in Westbrook, and has pulled in the Westbrook Regional Vocational School, York Community College and the University of Southern Maine as potential partners.

In other areas, alternative energy technology companies will continue to be hot, and solar power is really hitting the mainstream, reported John Ferland, president of the Maine Center for Enterprise Development.

ÒThereÕs a lot of activity right now in R&D and early-stage development with biofuels Ð thatÕs an emerging area. ItÕs important to the state of Maine because of our forests and agricultural lands and our rural communities and the core competency of the university,Ó said Ferland. ÒThere will be a lot of evolution in that arena, certainly over the next year.Ó

Ð Matt Wickenheiser

MANUFACTURING

Contrary to popular belief, manufacturing isnÕt dead in Maine. Companies that innovate, are increasingly efficient and have opened new markets have survived declines and theyÕre looking to hire.

ThatÕs the message MaineÕs manufacturing sector wants to get out in 2007.

ÒWhat we see on the street is thereÕs a lot of good things going on. Manufacturing companies looking toward innovations and supply chain efficiencies are doing well,Ó said Rosemary Presnar, operations manager with the Maine Manufacturing Extension Partnership. ÒYou just canÕt survive on cost-cutting.Ó

Maine lost 22,000 manufacturing jobs from January 1998 through December 2006, according to the U.S. Department of Labor. Despite those losses, manufacturing remains a vital part of MaineÕs economy. In 2005, Maine manufacturers exported more than $1.8 billion of the $2.3 billion in total goods shipped out, according to the U.S. Department of Commerce.

But labor statistics donÕt always tell the whole story, said Lisa G. Martin, head of the Manufacturing Association of Maine (formerly the Metal Products Association). The association is working with the state Department of Labor to refine how numbers are presented.

While there have been declines in jobs, there are still a number of companies that need skilled workers, said Martin Ð but itÕs hard to convince people to go into a field thatÕs seen a lot of negative press.

ÒThe most prevalent issue is finding skilled workers,Ó said Martin. ÒThese jobs are very high-skill, high-wage.Ó

Other initiatives for 2007 include forming a self-funded health plan to lower health-care costs, said Martin, and looking at a cluster development plan that will encompass aircraft/aviation, metal products, composites and information technology.

Ð Matt Wickenheiser

HEALTH CARE

Consolidation continues to be a major trend for MaineÕs $8 billion health-care industry. Family doctors and specialists in increasing numbers are giving up on the idea of running their own businesses and are opting instead to work as employees of multi-specialty groups like InterMed or for one of the stateÕs 39 hospitals.

Physicians find they can make more money, have better access to expensive medical technology and have fewer billing headaches if they work for an institution, said Gordon Smith of the Maine Medical Association.

More than 40 percent of the licensed physicians in the state now work as employees. That percentage was in the low 30s just four years ago, said Mary Mayhew of the Maine Hospital Association.

ÒGenerally, hospitals are going to be playing an ever-increasing role in providing a broader array of services,Ó she said.

But that consolidation may lead to fewer consumer choices and less competition in the marketplace, said Gino Nalli, chair of the graduate program on health policy and management at the Muskie School of Public Service at the University of Southern Maine. As result, he said, there may be increased political pressure to protect consumers by regulating both prices and capital investment.

In other trends, Maine businesses that provide health insurance coverage for employees will continue to limit their costs by insisting that employees pay a bigger share of the bill. Many employers are moving towards insurance plans that have high deductibles. They also are establishing medical savings accounts, which allow employees to set aside money for out-of-pocket health-care costs, without paying federal taxes on that money.

Also, demand for health care and expensive new technology will continue to surge as the stateÕs population ages. At the same time, the stateÕs health-care workers are also aging. The result: There is an increasing shortage of health-care workers, including doctors, nurses, assistants and technicians.

At the political level nationally, there will be more interest in establishing a single-payer health-care system, and many large employers are starting to see the benefits of such a system, Nalli said. ÒThere is a growing perception that the issue of providing cost-effective quality health care is larger than any single company or state can manage,Ó he said.

Ð Tom Bell

RETAIL

Wal-Mart begat Home Depot, which begat Target, which begat KohlÕs É.

The list of retailers that have moved into Maine is the past decade or so has astounded Tom Yake, a retail analyst from Kennebunk. He noted that Maine is a small state, with a total population thatÕs less than many cities and incomes below the national average, yet it has continued to attract chain stores, which now dot the landscape from Bangor to Kittery.

ÒHereÕs a state that seems somewhat economically deprived and seems to not have the population to support the stores É and you look at this now and see all the growth,Ó Yake said.

Yake suspects that many of the retailers saw how well Wal-Mart did in Maine after first entering the state in the mid-1990s, then decided if there was market enough for the worldÕs biggest retailer, there might be room for one more. That has led to the market becoming more fractured, with stores locating away from the stateÕs traditional retailing center in South Portland to set up shop in Augusta, Topsham and Biddeford.

Now that consumers in most of the stateÕs major population centers have a range of chain stores to chose from, Yake thinks there will probably be a pause in all the growth to allow the shopping demand to catch up to the supply.

ÒWeÕve got just about all the majors in southern Maine,Ó he said. ÒYouÕd think that we would be saturated.Ó

The only major new development on the horizon is CabelaÕs, one of the countryÕs most successful hunting and fishing equipment retailers, which will begin building one of its large stores in Scarborough this year. CabelaÕs stores are considered destinations in themselves, attracting people from a considerable distance who travel specifically to shop there.

CabelaÕs stores often feature restaurants, museum-quality displays of stuffed animals in natural-looking habitats and large aquariums; the chain is expected to compete with Maine-based Kittery Trading Post and L.L. Bean for customers.

Bean, in the meantime, will continue to expand outside the state as it adds new stores in the mid-Atlantic and Northeast states, seeking to complement its catalog and online business with greater in-person retail sales.

Ð Edward D. Murphy

BANKING

The major news in banking in 2007 will be the loss of any fragments of local ownership of the last big Maine-based bank.

TD Bank of Toronto plans to complete its acquistion of TD Banknorth this year, buying the 43 percent of the stock that it didnÕt purchase when it bought a majority stake in the company two years ago. The deal means any remaining stockholders Ð including quite a few in Maine Ð will have to sell their shares to the Canadian bank.

Jim Ackor, an analyst who follows bank stocks for RBC Capital Markets in Portland, said the shift should be mostly invisible to customers and employees because the two banks operate in different countries. That means some jobs canÕt be shifted and TD BankÕs lack of a branch network in the U.S. means TD BanknorthÕs locations will be maintained.

ÒIt may very well be that consolidation of back-office positions could lead to minor job losses,Ó Ackor said, Òbut the management of TD Banknorth and its operations will be still largely be based in Portland.Ó

There are few others changes expected in Maine-based banks, most of which are smaller, community operations. But one issue all of them are dealing with is tight profit margins because of unusual interest rates, Ackor said.

Banks normally borrow money short-term and lend it out long-term Ð a good practice because, typically, the short-term interest rates the banks pay are lower than the long-term rates they charge borrowers.

But for the past few years, the reverse has been true and some banks have had to tell stockholders that earnings are being held down because of the situation, known as an Òinverted yield curve.Ó

Ackor said he doesnÕt expect the rates to change significantly, at least in the first half of the year, so Maine bankers might not be so cheerful for a while.

ÒWe donÕt expect any changes,Ó Ackor said, but for most banks, Òthe vast majority of the damage has been done.Ó

Ð Edward D. Murphy