The Big Easy's Biggest Challenges


By Brian Grow, with Timothy J. Mullaney and Adam Aston New Orleans was their destination, until it was submerged. The 17 cousins, uncles, and friends from across the country had planned a three-day trip in October to the Big Easy, capped off by a National Football League game at the Louisiana Superdome. They rented $150 hotel rooms and shelled out $45 a ticket for the game. Hundreds more would be spent partying in the French Quarter.

But after Hurricane Katrina sank their plans, they canceled the trip on Aug. 30. Instead, they'll spend those dollars in Tampa Bay. "We don't feel with all the damage that they'll even be able to open the city," says Michael A. Merbach, one of the planners.

Will New Orleans ever reopen? Hurricane Katrina smashed homes, halted business, closed the port, and crushed the city's tourist trade. Last year visitors spent $4.9 billion cavorting there -- 44% of the state's tourism take. Now, with 80% of the city under water, those revenues could evaporate, along with $158 million in state tax revenues. Trade, which employs 95,000 in the city, could be stymied for months. About 30% of the $25 billion in insured losses occurred in New Orleans proper, say insurance analysts.

UPENDED. Bringing tourists -- and residents -- back to New Orleans could prove tough. The tourist business, which employs 84,300 people, is petering out fast. Airlines have been forced to cancel flights, and hotels have halted bookings. Officials at Omni Hotels in Irving, Tex., which owns two New Orleans properties, canceled all reservations through Sept. 24.

Worse, the convention business has been upended. The AARP was due to hold its annual meeting there in late September. Registration had hit 25,000. "The question was: Would New Orleans be a bigger draw than Las Vegas last year?" says the AARP's Nancy Thompson. "Now we'll never know."

Another danger is that locals who got away won't come back. Glenn Gardner, 35, grew up in New Orleans but moved out after college. Now his parents are holed up at his house in Marietta, Ga. Friends with businesses back home, he says, fear what kind of mess they'll return to. His parents have nowhere to make a fresh start and will return. "Young people are asking: 'Why should I move back?'" says Gardner.

"BOWL OF FUTILITY." Some lament that New Orleans did not take better care of itself. The state loses about 17 coastal miles each year as erosion and overbuilding smooth out shoreline curves. With a poverty rate of 23.2%, New Orleans is one of America's poorest cities, with a median annual income of $31,369, just 70% of the national average. Much of the damage from Katrina fell on the poor. "It's insane to flush more money into this bowl of futility," wrote an anonymous blogger at buzzmachine.com on Aug. 31.

It's not as if New Orleans hasn't tried. It spent billions to shore up its 2,000 miles of levees, sea walls, and pumping systems. A $14 billion, 30-year program in the 1990s, dubbed "Coast 2050," aimed to refill marshes and shore up coastal islands to provide more barriers against storms. But it languished because of the high cost.

Now engineers say it could take three to six months just to figure out the scope of Katrina's damage. Beyond insurance payouts, rebuilding is expected to run into the billions.

FRONT AGAINST THE STORM. For centuries the Netherlands, a sinking country on the edge of a rising sea, has coped with such woes. The constant threat of floods has seeped into the national psyche. A corps of civil servants maintains the dikes, barriers, and pumping stations that keep the nation dry. The centerpiece: massive barriers that protect the coast from rising tides when the North Sea grows stormy.

Katrina may well be motivation enough for New Orleans, with the help of the rest of the country, to build up similar, if costly, defenses.

Grow is a correspondent in BusinessWeek's Atlanta bureau, and Mullaney and Aston are reporters in New York


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