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CSUSM Business Survey Says Consumer Confidence Remains High

Business leaders in San Diego County feel the economy is doing well despite concerns about the COVID-19 pandemic. While some types of business typically bustling in San Diego like tourism are taking some time to come back because of continuing pandemic concerns, companies in the biotechnology and medical device fields are gaining ground as is the craft brewing industry.

Overall, the confidence levels of owners and managers of different types of companies in San Diego County and some in South Orange County still remain high.

Those are some of the findings of the San Diego Business Confidence Index survey, a poll conducted during the fall quarter by data-seeking undergraduate students from the College of Business Administration at California State University San Marcos.

“There’s a lot of support for increased confidence,” said Bennett Cherry, interim dean of the College of Business Administration. “It’s hard to get a true feel because the students did this right before Omicron (the recent COVID-19 variant). There’s been definite improvement (in confidence levels) from 2020 but not so much since Spring 2021.”

Senior Experience Program

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As part of the university’s 28-year-old senior experience program, CSUSM business administration students conduct the opinion survey, asking owners and managers from different types of businesses – general business, craft brewing, tourism and biotechnology/medical devices — how they anticipate different work concerns and conditions in the next six months.

Each year the students aim to improve the project by capturing more participants, refining survey questions to match the current environment and exploring new industries.

 

For the fall, survey topics included employee retention, expected profits and revenue, demand, COVID-19 impact, government subsidies impact and operations.

The students reported the latest confidence levels of those surveyed in the general business category was 77.03; craft brewing 75.5, tourism 78.18 and biotech 80.13.

Participating businesses had from mid-October through mid-November to return their questionnaires. The students reported the highest response rate ever in the most recent survey.

The San Diego Business Journal has been sponsoring the biannual survey since 2015. Fall 2021 marked the 13th consecutive collaboration between the newspaper and university.

 

The business confidence index aims to provide information about future developments within the general business community, and three industry-specific San Diego County businesses.

The students in the spring of 2021 shifted one of its focus points to better capture present-day needs. The students closed out its look at the defense industry and moved it to the biotechnology and medical advice industry, and the fall 2021 students stayed with it.

The report said the change came as the students considered the higher concentration of San Diego County-based biotech firms because of the COVID-19 pandemic. The fall survey considered changes to business practices, new tech adoption, overall outlook, effects of the vaccine rollout and decline of government aid.

COVID-19 protocols also changed some of the ways the students were able to solicit surveys. Past surveys were done through email, phone calls and in-person interviews but few in-person surveys were conducted last fall because of health concerns.

A central component of the survey results is a Business Confidence Index. Survey authors use data collected in each of the four surveys to calculate a numerical score for each index. Scores range from 0 to 100, with 50 considered neutral and greater than 50 being optimistic about the economy.

Madele Flores, Jamie Noriega, Daniela Cruz Hererra, Sophia Lococo and James Kloss were the CSUSM students behind the report prepared for Cherry.

Faculty advisor Dr. Qi Sun provided feedback to the students during the project.

Flores, who grew up in Rancho Penasquitos and is a marketing major at CSUSM, said the team worked really hard on the project and had help from chambers of commerce around the county.

“We are really proud of the outcome of this project,” she said.

Noriega, an Oceanside native, Vista High alumna and finance major at CSUSM, said this project really it home for her, and helped her understand how professionals in the industry are really doing.

“It’s been interesting to learn about all the different industries and how they play a part in creating what we have in San Diego,” she said. “I honestly was overwhelmed with the amount of support and the ability of so many passionate professionals to go out of their way to do whatever it takes to share and present their findings.”

 

After a taped video presentation on Zoom by the students discussing their findings in December, Cherry asked the students if they were to invest in one of the industries they polled, outside of general business, which one would they invest in and why.

The students agreed that the highest amount of optimism and economy came from the biotech/medical devices industry, which some suggested could be related to an additional emphasis on the need for those kinds of companies during the pandemic.

General business

More than 1,800 businesses were contacted by the fall 2021 data surveyors

.

The students received 134 total responses, including some outside of San Diego County. This year’s request also went out to some businesses in South Orange County.

Not all businesses shared their locations, but of the 105 responders who did, two-thirds reported being in North County. Central San Diego had the next-highest number of responses with 18. South County had 11 and East County 5.

Businesses that shared their type of work included 14 in professional/financial services, 13 in nonprofits, nine in education, seven in advertising/media, seven in real estate and seven in health care.

The outlook of general businesses – determined on a 100-point scale where 50 represents zero net change — has been trending toward the positive since 2015, with an all-time confidence index high of 80.96 in spring 2021. The fall 2021 confidence level was slightly down from that at 77.03.

Regarding employment confidence, of 121 respondents, more than half said they expected their number of employees to increase over the next six months and less than 10 percent felt it would decrease. The confidence index for employment was 72.75.

Looking at revenue, of the 111 responses, 72 percent said they expected their business revenue to increase and 22 percent said they expected it to remain about the same. The confidence index for that question was 82.90.

Of 110 responses, nearly 60 percent said they expected profits to increase, with a little more than one-third saying they felt profits would remain steady. The confidence index was 75.45 for that question.

When asked how they felt about their business being able to get back to pre-COVID-19 levels, more than 30 percent of respondents said they anticipated returning to the pre-pandemic levels within six months, and another 20 percent said things would return to normal within six to 12 months.

Also related to the pandemic, two-thirds of the respondents said that despite concerns of new COVID-19 variants in conjunction with lifted pandemic restrictions, they still saw demand increasing. The students said looking at the responses to COVID-19 questions, businesses seem to have an overall positive outlook.

Craft Brewing

The students have been looking at this industry for nine semesters and said that craft beer continues to grow in popularity among residents and tourists. The fall 2021 report shows that the craft beer industry has contributed more to the economy as more breweries open or reopen during the pandemic.

In previous semesters, the craft been industry confidence index has nearly finished with the highest degree of all categories, including a peak high of 94.57 in spring 2018. It reached its low at 63.05 in the fall of 2020, likely related to the pandemic’s impact and social distancing concerns.

The data collectors were able to gather 42 responses, which included questions posed about the number of employees and projected sales revenue and profits expected in the next six months. Of the respondents, 23 were from North County and another 15 in central San Diego.

 

The fall 2021 confidence index was measured at 75.02, a significant decrease from the spring index results of 90.68.

Of the 42 responses, half said they expected their employment levels to increase, with 38 percent expecting their levels to stay the same in the next six months. That showed a confidence index level of 69.05 – another large drop from the spring 2021 index level of 91.17.

Looking at revenues, 81 percent of the respondents said they expected to see an increase in the next six months. The confidence index for this was 86.95, another decrease from the spring when it was 95.58.

For profits, half of the 42 responders expect their business profits to increase, and 38 percent said they thought it would stay the same, a confidence level of 69.05, again down from spring 2021 when it was 85.29.

The craft beer survey also asked businesses for their thoughts about returning to pre-pandemic levels of business. More than 40 percent said they thought it would be six to 12 months for a return to normal, with 24 percent anticipating business to return within six months.

More than 80 percent of those who responded said that the vaccine rollout and lifted restrictions made a positive impact on their business.

More than half the respondents said they had implemented new technologies that had made operations easier. Cited technology advances used included equipment upgrades, website features, merchandising, packaging, QR codes and curbside pickup.

Many cited marketing through social media as a positive strategy that helped promote merchandise, live events, new brews and food.

Asked about supply chain concerns impacting the prices of raw materials, more than 80 percent expected prices to increase.

Tourism and Hospitality

The tourism and hospitality sectors are responsible for bringing “millions” of tourists to the city, the students said.

 

Typically having business confidence numbers in the 70’s since the industry was included in the reports starting in 2017, the answers of businesses in the tourism industry from spring 2020 were at an all-time low of 29.76 and moved to 50 in fall 2020 before hitting an all-time high of 90.87 in spring 2021. The fall 2021 numbers were 78.18.

The group initially sent out its questions to 146 businesses, but only had 36 total responses. Twenty of the responders came from central San Diego.

Flores said the low participation numbers for this industry are likely related to respondents not being able to remain anonymous when providing answers.

“A lot of the hotels when you try to contact the local ones, they are part of corporations,” Flores said. “So if you want to contact individual hotels through a phone call or in person, the survey is no longer anonymous.”

Previous surveyors looked only to hotels to calculate the confidence index, but for the fall 2021 group, the survey list was expanded to include amusement parks, tour groups, and boat, car and bike rental companies.

The tourism and hospitality confidence index for fall 2021 dropped nearly 13 points to 78.18 from a high in the spring 2021 of 90.87, which was the highest index since this sector was included five years ago.

Looking at employment concerns, of 29 responses received, 55 percent said they expected their employee numbers to increase in the next six months. The confidence index for this was 75.90.

Of 20 responders, 2/3 of them said they expected their firms’ sales revenue to increase in the next six month. At 75.85, the confidence index level for that question was 20 points lower in the fall 2021 than it had been in the spring.

Asked about profits, of the 29 businesses that answered, more than three-fourths said they expected their firm’s profits to increase. The confidence index was 82.80 for the fall, which was higher than the average, but less than it was in spring 2021.

The COVID-19 pandemic has challenged most of the hospitality industry, but of the 29 who responded, 45 percent said they expected to return to pre-pandemic levels in one to two years. Ninety percent of respondents said the vaccine rollout and lifted COVID-19 restrictions had a positive impact on their business.

 

Asked how implementing new technologies helped, nearly 40 percent said they made operations easier, and include mobile check-ins, cloud systems and tele-meetings as newly added tech. More than 50 percent of the respondents did not implement any new technologies in their business.

Asked how they see demand for business services changing in the next six months because of new COVID-19 variants and lifted pandemic restrictions, nearly 70 percent said they still anticipated increasing demand.

Biotechnology and Medical Devices

The newest category, biotechnology/medical devices, was added for the first time in the spring and in the fall, students reached out to new companies and saw a huge jump in the number of responses.

 

The spring group was only able to elicit 15 responses. By forming new relationships with more biotech/medical device companies, the fall team collected 62 responses, lending more accuracy to the final results.

More than half of the businesses that answered said they were located in central San Diego, with 16 percent of the responders in North County.

Student researchers left out service providers and focused primarily on reaching out to producers, distributors and manufacturers in the biotechnology and medical device category.

Key findings included 71 percent of biotech/medical device companies expecting to increase the total amount of their employees in the next six months. About one-fourth felt employment levels would stay the same. The confidence index was 83.90 for the employment category.

For revenues, 63 percent of respondents said they felt there would be an increase in next six months, 34 percent expected it to stay the same, a 79.85 confidence index.

Looking at profits, 60 percent of those who responded said they saw an increase in the next six months, and 34 percent said they expected it to say the same, a confidence index of 76.65.

Seeking to understand the effects of the pandemic in the bioscience community, 33 percent of those who responded said they expected business to return to pre-pandemic levels in less than six months. Another 30 percent of respondents said they anticipated a return to normal in six to 12 months.

Surveyors also found that 77 percent of the respondents said they saw a positive impact in vaccines and lifted COVID-19 restrictions in business operations; about 21 percent said they saw no impact on business operations.

Asked if they implemented any new technologies and if they had an effect on business operations, 40 percent of the businesses that answered said they had not implemented any new tech. Of the 60 percent that did use new technologies, including Zoom and Microsoft Tools, more than half said that those made their operations easier.

Surveyors also tailored other questions specifically to the biotech/medical device industry, including seeking to understand investment in research and development. Of those who answered, more than half reported an increase in R&D.;

Another question asked to this group was about expected investment funding. Those who answered said that in the next year, nearly 60 percent expected investment funding to increase.

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