WEBVTT - Choice Hotels, Alphabet, and Housing 0:00:00.120 --> 0:00:04.360 Bloomberg is now on your dashboard with Apple CarPlay and 0:00:04.360 --> 0:00:08.160 Android Auto. It gives you access to every Bloomberg podcast, 0:00:08.280 --> 0:00:11.560 live audio feeds from Bloomberg Radio, print stories from Bloomberg 0:00:11.640 --> 0:00:14.920 News in audio form, and the latest headlines of the 0:00:14.920 --> 0:00:18.640 click of a button with Bloomberg News. Now it's free 0:00:18.680 --> 0:00:21.439 with the latest version of the Bloomberg Business App. That's 0:00:21.680 --> 0:00:24.400 the Bloomberg Business App. Get it on your phone in 0:00:24.440 --> 0:00:27.760 the Apple App Store or on Google Play. Just download 0:00:27.800 --> 0:00:30.560 the app, connect your phone to your car and get started. 0:00:30.960 --> 0:00:34.400 And it's all presented by our sponsor, Interactive Brokers. 0:00:35.400 --> 0:00:38.600 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Alongside 0:00:38.640 --> 0:00:39.800 my co host Matt Miller. 0:00:40.200 --> 0:00:44.279 Every business day we bring you interviews from CEOs, market pros, 0:00:44.320 --> 0:00:48.160 and Bloomberg experts, along with essential market moven News. 0:00:48.720 --> 0:00:51.839 I'm the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:51.960 --> 0:00:54.560 you listen to podcasts, and at Bloomberg dot Com Slash 0:00:54.600 --> 0:00:58.000 podcast it is I guess kind of m and a Tuesday, 0:00:58.200 --> 0:01:04.400 Just Choice Hotels launches a hostile bid for Windom. You 0:01:04.440 --> 0:01:06.480 don't see this very often, so are you gonna exchange 0:01:06.480 --> 0:01:07.759 off for Gone? I don't know what's going on. 0:01:07.720 --> 0:01:09.399 With the Wall Street Journal putting out the story? 0:01:09.480 --> 0:01:12.000 Yep, Jody Lourie. She joins she's a credit analyst for 0:01:12.000 --> 0:01:15.000 Bloomberg Intelligence. Jody, can you explain what's happening here with 0:01:15.160 --> 0:01:18.160 Choice Hotels and Windom? 0:01:18.200 --> 0:01:21.039 Sure, Paul, So, I think the Choice situation is one 0:01:21.120 --> 0:01:24.880 of the more interesting ones that we've been following. Just 0:01:24.920 --> 0:01:27.920 as a quick recap, since the spring, Choice has been 0:01:27.920 --> 0:01:31.360 trying to court Windom into merging and Wyndham has said 0:01:31.360 --> 0:01:34.160 no multiple times. October seventeenth, they made it public and 0:01:34.160 --> 0:01:37.880 Wyndham said absolutely not. And now they're they're doing the 0:01:38.040 --> 0:01:41.200 nineteen eighty style hostile takeover. They're doing, you know, they're 0:01:41.280 --> 0:01:44.920 they're asking shareholders to feel free to exchange and get 0:01:44.920 --> 0:01:46.920 some cash or get stocked for the new company, and 0:01:47.160 --> 0:01:48.080 we'll see what happens. 0:01:49.080 --> 0:01:52.840 If you look at Wyndham stock ticker symbol w H here, 0:01:53.280 --> 0:01:56.360 it's just down about five tenths of a percent, up 0:01:56.400 --> 0:01:59.080 all about eleven percent year to deep. The walk is 0:01:59.120 --> 0:02:01.640 through the thought prop of shareholders right now. 0:02:03.080 --> 0:02:05.640 I mean, I think shareholders have to decide really what 0:02:05.840 --> 0:02:07.120 at the end of the day they want to get 0:02:07.120 --> 0:02:08.560 out of it. You know, if they think this is 0:02:08.600 --> 0:02:11.000 a good exit point, they'll they'll do it. If they 0:02:11.120 --> 0:02:15.080 really think that it's something that they'd rather just continue 0:02:15.120 --> 0:02:16.200 staying with Wyndham, they will. 0:02:16.480 --> 0:02:19.280 I mean from the bondholder's perspective, the key is. 0:02:19.200 --> 0:02:23.160 That for Choice, it's definitely a much less savory situation 0:02:23.280 --> 0:02:25.959 for bondholders because obviously they're going to take on debt 0:02:26.000 --> 0:02:27.680 in order to finance this, So they don't have enough 0:02:27.680 --> 0:02:30.160 cash on the Ballanjeet, nor do they generate enough cash 0:02:30.160 --> 0:02:31.600 flow to be able to pay for this. I mean, 0:02:31.600 --> 0:02:34.880 we're talking four or five could be up to seven 0:02:35.000 --> 0:02:37.359 or eight billion dollars if you know, in theory, if 0:02:37.639 --> 0:02:40.200 the whole entire offer gets accepted, you know, and they 0:02:40.200 --> 0:02:41.720 need to pay it in cash. 0:02:41.840 --> 0:02:43.080 I don't think it would get to that point. 0:02:43.080 --> 0:02:45.520 We've been saying about four billion dollars and we're talking 0:02:45.560 --> 0:02:47.240 about six times leverage at least. 0:02:47.600 --> 0:02:50.160 Wow, that's higher than I'm sure you would like, and 0:02:50.200 --> 0:02:53.680 a lot of the bondholders would like, what's this, what's 0:02:53.720 --> 0:02:57.280 the rationale for Windom rebuffing Choice Hotels here? 0:02:58.840 --> 0:03:02.760 So I think for it's a less slam dunk of 0:03:02.760 --> 0:03:05.600 a situation, not that it's necessarily some dunk for Choice, 0:03:05.800 --> 0:03:08.480 but they see themselves as having a better company to 0:03:08.480 --> 0:03:10.480 some extent, you know, at least from a margin perspective. 0:03:10.520 --> 0:03:15.160 From a global reach, they definitely have different brands. You know, Choice. 0:03:15.240 --> 0:03:17.359 Choice is a little bit more concentrated in the US, 0:03:17.720 --> 0:03:20.080 and so for Choices perspective, they're saying, Okay, how do 0:03:20.120 --> 0:03:23.920 we grow globally? Well, Windom's a natural step for Windom, 0:03:23.919 --> 0:03:26.079 They say, well, we don't really see that as as 0:03:26.160 --> 0:03:28.720 much of an attractive situation for US, just to be 0:03:28.760 --> 0:03:30.480 the biggest in the US and then also have some 0:03:30.560 --> 0:03:32.600 international presence not really as compelling. 0:03:33.000 --> 0:03:36.960 What could be the potential regulatory issues that would be 0:03:37.000 --> 0:03:39.720 required for a potential combination like this? 0:03:41.160 --> 0:03:45.400 Sure, and Brian Eger and Jenrie actually wrote something on 0:03:45.520 --> 0:03:49.120 antitrust a few months ago, which is a fantastic piece, 0:03:49.160 --> 0:03:51.240 basically talking about the fact that you know, the deal 0:03:51.320 --> 0:03:51.920 might not go through. 0:03:52.000 --> 0:03:52.800 From that standpoint. 0:03:53.000 --> 0:03:55.080 Choice has made comments that they've been talking with the 0:03:55.120 --> 0:03:58.120 FTC and sort of trying to put that to rest, saying, hey, listen, 0:03:58.200 --> 0:04:01.720 this could get blessed by the trust regulator. Gods, But 0:04:02.320 --> 0:04:05.320 I think the key concern here is when you deal 0:04:05.400 --> 0:04:08.840 with hotels, if you have a consolidation of hotels, It 0:04:08.920 --> 0:04:12.800 certainly could potentially affect the consumer, right, the end consumer 0:04:12.840 --> 0:04:14.800 has less choice in the matter, no pun intended. 0:04:15.640 --> 0:04:19.400 Right, So I mean, just give us a what would 0:04:19.440 --> 0:04:22.360 this balance sheet look like if you were to kind 0:04:22.400 --> 0:04:25.800 of merge these two companies, because I'm just looking at 0:04:25.839 --> 0:04:28.520 it now, it looks like they're kind of three three 0:04:28.520 --> 0:04:32.359 and a half times that the ebitthought today. But what 0:04:32.360 --> 0:04:34.520 would it look like pro forman? Is that a problem? 0:04:35.480 --> 0:04:35.760 Sure? 0:04:35.880 --> 0:04:38.120 So, you know, we did a calculation a few weeks 0:04:38.120 --> 0:04:40.839 ago where you were talking about choice, just the inevitable 0:04:40.920 --> 0:04:44.360 potential that they could fall to high yield. And one 0:04:44.360 --> 0:04:46.520 of the things we looked at is from a leverage standpoint. 0:04:46.560 --> 0:04:49.080 If you look at Bloomberg's MDL screen, So if you 0:04:49.120 --> 0:04:52.200 look at what consensus estimates are for twenty twenty four 0:04:52.240 --> 0:04:54.320 to twenty five, on the high end, we have over 0:04:54.400 --> 0:04:57.560 six times. Low end mid five times, both of which 0:04:57.600 --> 0:05:00.400 are above what the raiders have as their you know, 0:05:00.480 --> 0:05:04.120 their their threshold into high yield. And so that's you know, 0:05:04.320 --> 0:05:08.400 if we assume that four times that four billion dollars 0:05:08.480 --> 0:05:11.480 of debt that they could take on that could easily 0:05:11.520 --> 0:05:13.640 get them there. That would take quite a few years 0:05:13.680 --> 0:05:16.440 to repay, and I don't know if the regulators would 0:05:16.480 --> 0:05:20.359 be as or sorry the raiders would be as accepting 0:05:20.560 --> 0:05:23.320 of their story as they were with with Hyatt when 0:05:23.360 --> 0:05:25.039 Hyatt did the Apple Leisure acquisition. 0:05:25.760 --> 0:05:30.200 How would this merger better position the potentially combined company 0:05:30.240 --> 0:05:35.320 to better compete with other larger lodging rivals, including Marriott 0:05:35.400 --> 0:05:36.200 as well as Hilton. 0:05:37.680 --> 0:05:40.880 That is a great question, just so I think really 0:05:41.000 --> 0:05:43.320 at the end of the day, when you think about 0:05:43.680 --> 0:05:47.440 what's going on in this mid tier low tier, Marriott 0:05:47.480 --> 0:05:51.000 and Hilton are really expanding in big ways, both internationally 0:05:51.120 --> 0:05:54.640 as well as domestically, and they have been really just 0:05:55.320 --> 0:05:58.640 taking on three hundred four hundred new locations easily over 0:05:58.680 --> 0:06:01.440 the next year or so, and the brand new businesses 0:06:01.440 --> 0:06:04.960 that they have, and so they are blanketing the space 0:06:05.160 --> 0:06:08.880 and trying to really aggressively enter it. On the flip side, 0:06:08.960 --> 0:06:11.240 Choice has been entering the upscale, and so we have 0:06:11.480 --> 0:06:13.800 been seeing that a little bit mid tier upscale. You know, 0:06:13.839 --> 0:06:16.159 they bought Ratus in Americas. That was a big win 0:06:16.240 --> 0:06:18.200 for them in terms of that. But I think the 0:06:18.240 --> 0:06:21.200 industry as a whole is definitely getting a bit more competitive, 0:06:21.320 --> 0:06:23.880 particularly as we get to this post COVID time and 0:06:24.120 --> 0:06:28.160 consumers preferences has changed, Right, consumers are looking at airbnbs, 0:06:28.160 --> 0:06:31.200 but they're looking at these ability to be able to 0:06:31.360 --> 0:06:34.160 live in a more comfortable environment, have a kitchen if 0:06:34.160 --> 0:06:37.440 they want to have a little bit more affordability in 0:06:37.520 --> 0:06:40.240 terms of what they're doing. So I think we're seeing 0:06:40.279 --> 0:06:44.000 this amalgamation of businesses across the board. No one's going 0:06:44.040 --> 0:06:46.600 to stay in that upper tier only. They're going to 0:06:46.640 --> 0:06:49.279 try to span the whole entire economic scale. 0:06:49.800 --> 0:06:53.040 So stepping back, I mean I just booked a trip 0:06:53.120 --> 0:06:57.120 for Ireland in September of next year and there's only 0:06:57.160 --> 0:06:59.960 one slot left. I mean, it is out of control. 0:07:00.200 --> 0:07:03.320 So what generally speaking, I'm going back to the Homeland 0:07:03.400 --> 0:07:07.320 to see this. The peeps, yeah, they're psyched. I'm sure. 0:07:07.960 --> 0:07:10.240 Talk to us about the hotel business in general here, 0:07:09.960 --> 0:07:15.200 where are we now and kind of the recovery So, Paul, I. 0:07:15.240 --> 0:07:16.560 Mean, I think for hotels. 0:07:16.600 --> 0:07:18.160 So first of all, you bring up a good point 0:07:18.200 --> 0:07:21.760 that people are definitely international traveling much more this year 0:07:22.000 --> 0:07:24.600 into next year than they were last year. Right, people 0:07:24.640 --> 0:07:27.400 feel much more comfortable getting on the road going internationally 0:07:27.680 --> 0:07:30.760 and are doing so significantly while they can get you know, 0:07:31.400 --> 0:07:33.760 do it while you can and while you're living and healthy. 0:07:34.360 --> 0:07:37.920 So that said, I mean, I think for hotels, a 0:07:38.000 --> 0:07:41.480 lot of them were affected very quickly by the pandemic, 0:07:41.520 --> 0:07:46.080 but recovered pretty quickly by the pandemic. Case in point, Marriott, Hilton, Hyatt, 0:07:46.080 --> 0:07:49.120 they all levered up with their revolvers and then. 0:07:49.280 --> 0:07:50.400 Quickly paid them back. 0:07:50.640 --> 0:07:54.480 Now, Hilton has stayed high yield rated because they haven't 0:07:54.520 --> 0:07:56.720 really made the commitment to want to be investment. 0:07:56.400 --> 0:07:59.000 Grade, but Hyatt and Marriott have. 0:07:59.080 --> 0:08:02.240 Gotten multiple notches of upgrade and have been in a 0:08:02.320 --> 0:08:05.840 much better spot. That said, there is some concern for 0:08:05.920 --> 0:08:09.800 the overall industry, particularly in the US, about financing. So 0:08:10.440 --> 0:08:14.240 these hotel companies are you know, they're just brands. They're 0:08:14.280 --> 0:08:17.880 managing these businesses, right, most of them are so asset light, 0:08:17.960 --> 0:08:21.640 I mean choices one hundred percent asset light. But Marriott 0:08:21.640 --> 0:08:24.000 and Hilton and Hyatt have moved that way and are 0:08:24.000 --> 0:08:27.480 about ninety or so you know in terms of assets 0:08:27.520 --> 0:08:31.280 that they don't own but manage. That said, they are 0:08:31.320 --> 0:08:34.000 all sort of looking at ways to sort of grow 0:08:34.080 --> 0:08:37.040 their businesses, think about their businesses and think about their 0:08:37.080 --> 0:08:39.920 ballon sheets at the same time, but also trying to 0:08:39.960 --> 0:08:46.240 help out the the hotel owners, meaning those you know 0:08:46.360 --> 0:08:50.120 a mom and popper rite who owns a hotel decides 0:08:50.160 --> 0:08:53.320 to go with Marriott. Marriott then manages it. They have 0:08:53.360 --> 0:08:55.719 to get financing. They do it from local banks and 0:08:55.800 --> 0:08:58.800 credit unions, and so earlier this year we definitely saw 0:08:58.840 --> 0:09:01.600 a little bit of a concern related to them getting financing. 0:09:01.880 --> 0:09:04.720 That is certainly eased, but it's in the back of 0:09:04.720 --> 0:09:05.520 people's minds. 0:09:05.920 --> 0:09:08.559 Talk to us about how much the extended stay and 0:09:08.600 --> 0:09:11.160 economy lodging competition has heated up. 0:09:12.480 --> 0:09:16.120 Yeah, so extended stay and economy lodging certainly areas of 0:09:16.200 --> 0:09:19.760 growth these days. Maybe less so as we head into 0:09:19.800 --> 0:09:22.160 next year the following year, but there is that narrative 0:09:22.200 --> 0:09:25.760 around the infrastructure bill and the fact that we'll have 0:09:25.880 --> 0:09:29.400 so many people working on projects and using these extended 0:09:29.440 --> 0:09:30.400 stays as that option. 0:09:30.720 --> 0:09:32.440 There's different types of extended stays. 0:09:32.480 --> 0:09:35.160 There's the one that are ten days or more, and 0:09:35.200 --> 0:09:38.040 then there's the ones that are more shorter term extended stays. 0:09:38.280 --> 0:09:40.079 A lot of people like to lump them in together. 0:09:40.400 --> 0:09:43.000 Choice and Windham like to talk about how their extended 0:09:43.000 --> 0:09:45.640 stay is different than what Marriott and helt in our building, 0:09:45.679 --> 0:09:47.360 but I think it's a matter of time before you 0:09:47.440 --> 0:09:51.280 have these larger companies sort of looking into those areas. 0:09:52.080 --> 0:09:54.200 Jody, thanks so much for joining us. I always appreciate 0:09:54.200 --> 0:09:56.840 getting your thoughts there. Jody Louri. She's a credit analyst 0:09:56.840 --> 0:09:59.920 a Bloomberg Intelligence covering the lodging space, amongst others. 0:10:01.600 --> 0:10:04.960 You're listening to the team Ken's are Live program Bloomberg 0:10:05.080 --> 0:10:08.480 Markets weekdays at ten am Eastern on Bloomberg dot Com, 0:10:08.520 --> 0:10:11.679 the iHeartRadio app, and the Bloomberg Business App, or listen 0:10:11.720 --> 0:10:14.000 on demand wherever you get your podcasts. 0:10:15.640 --> 0:10:17.720 We all learned a new term, which is supply chain, 0:10:17.760 --> 0:10:21.160 and how fragile the global supply chain is, and we 0:10:21.240 --> 0:10:25.280 had no idea what was going on. Thankfully, we started 0:10:25.280 --> 0:10:28.320 talking to somebody he really does and he was very 0:10:28.440 --> 0:10:31.280 very good to us during the whole pandemic, giving us 0:10:31.440 --> 0:10:33.760 kind of a real explanation what's going on the global 0:10:33.760 --> 0:10:36.360 supply chain. That person is Gene Soroka. He's the executive 0:10:36.360 --> 0:10:39.120 director of the Port of Los Angeles. He joins us 0:10:39.160 --> 0:10:41.880 live here in the Bloomberg Interactive Brokers studio. Port of 0:10:41.920 --> 0:10:46.120 Los Angeles, the busiest container port in North America, so 0:10:46.280 --> 0:10:48.319 absolutely right on the front lines. Jane, thanks so much 0:10:48.320 --> 0:10:51.199 for joining us here. It seems like, well, let me 0:10:51.240 --> 0:10:53.840 ask you, are we back to quote unquote normal in 0:10:53.920 --> 0:10:55.600 terms of that global supply chain? 0:10:56.040 --> 0:10:58.319 Yeah, Happy holidays, just and Paul. Great to be back 0:10:58.360 --> 0:11:02.640 in New York. Generally speaking, Yes, All the vital statistics 0:11:02.679 --> 0:11:05.080 in Los Angeles, just use that as a barometer of 0:11:05.120 --> 0:11:08.440 the nation's supply chain look great. Cargo is flowing smoothly, 0:11:08.520 --> 0:11:12.080 and there is capacity available as the market picks up, 0:11:12.120 --> 0:11:14.760 which we project at will again in twenty twenty four. 0:11:15.320 --> 0:11:18.439 Overall global trade is down about five percent. Here in 0:11:18.480 --> 0:11:21.520 the US, imports are down about eighteen percent. So some 0:11:21.559 --> 0:11:25.160 of the entanglements we witness during the pandemic have been 0:11:25.240 --> 0:11:27.280 worked out. A lot of thought went into it, but 0:11:27.360 --> 0:11:30.760 also eased by that lower volume gives us a chance 0:11:30.800 --> 0:11:32.520 to kind of catch our breath and fix some of 0:11:32.520 --> 0:11:33.679 the things that needed work. 0:11:34.040 --> 0:11:36.400 What does holidays shipping look like right now? And what 0:11:36.400 --> 0:11:39.240 does that tell us about the direction of the economy. 0:11:39.640 --> 0:11:43.800 Yeah, compared to years pastes even in recent memory, inventory 0:11:43.880 --> 0:11:48.359 levels across the nation look good. In store fulfillment. Fulfillment 0:11:48.360 --> 0:11:50.840 centers themselves also look good as far as getting the 0:11:50.880 --> 0:11:53.440 products that we want when we order them or go 0:11:53.520 --> 0:11:55.839 to the store. At the Port of Los Angeles, we've 0:11:55.840 --> 0:12:00.000 seen four consecutive months of year on year gains, steady 0:12:00.120 --> 0:12:03.400 improvement trying to fuel that US economy and what we 0:12:03.400 --> 0:12:06.560 hear from the retailers, we had a good Thanksgiving weekend 0:12:06.679 --> 0:12:11.040 from Black Friday through Cyber Monday, about an eight percent uptick, 0:12:11.360 --> 0:12:13.600 and those experts are calling for about a three to 0:12:13.720 --> 0:12:17.079 four percent gain in overall holiday sales when everything is 0:12:17.080 --> 0:12:17.920 said and done. 0:12:18.120 --> 0:12:20.559 So we hear on Global Wall Street have been hearing 0:12:20.559 --> 0:12:23.640 about a recession for eighteen months that hasn't really shown up. 0:12:23.960 --> 0:12:25.719 What do you see in your data? What do your 0:12:25.760 --> 0:12:26.760 customers tell you? 0:12:27.080 --> 0:12:29.600 We don't And if you keep talking about it, you 0:12:29.720 --> 0:12:32.200 probably talk yourself into it, as you both have seen 0:12:32.240 --> 0:12:37.360 for a long time. But by technical standards and the definition, 0:12:37.559 --> 0:12:39.800 we had a recession last year Q one and Q 0:12:39.920 --> 0:12:43.880 two with GDP declines in that first and second quarter. 0:12:44.240 --> 0:12:47.040 Since then, the numbers are all over the board, unlike 0:12:47.120 --> 0:12:50.840 what we've witnessed in recent memory. But the jobs report 0:12:50.880 --> 0:12:55.000 easing inflation. We think that interest rates have peaked now 0:12:55.280 --> 0:12:58.720 and with eight point seven million jobs open around the country, 0:12:58.760 --> 0:13:01.720 although off their highs, still a lot for that US 0:13:01.760 --> 0:13:04.520 economy to fuel in servicing those of us who are 0:13:04.559 --> 0:13:08.360 buying and going out for experiential plans with our family 0:13:08.440 --> 0:13:08.920 and friends. 0:13:09.360 --> 0:13:13.400 What lingering issues still haven't been resolved yet from COVID 0:13:13.400 --> 0:13:15.600 when it does come to those supply chains. 0:13:15.960 --> 0:13:20.040 The interconnectivity, the dependencies that we all have on each 0:13:20.040 --> 0:13:23.240 other in our business jes, there are about twelve nodes 0:13:23.280 --> 0:13:25.360 in the supply chain that have an impact of what 0:13:25.440 --> 0:13:28.200 we do with the ports, yet we're so visible, So 0:13:28.400 --> 0:13:32.640 drawing people together for better collaboration absolutely key. We cannot 0:13:32.640 --> 0:13:36.600 work in silos. Second, this information sharing concept that we 0:13:36.720 --> 0:13:40.160 pioneer at almost a decade ago has to become mainstream. 0:13:40.480 --> 0:13:42.920 And if you're going to share information to make sure 0:13:42.920 --> 0:13:45.800 that those handoffs are succinct, you've got to protect that 0:13:45.920 --> 0:13:48.600 data through cybersecurity and resiliency. 0:13:48.800 --> 0:13:49.080 All right. 0:13:49.240 --> 0:13:53.120 Map go, which was just critical during the pandemic. We're 0:13:53.160 --> 0:13:56.120 talking about the supply chain. You can filter it to 0:13:56.120 --> 0:13:58.319 see the ships at port all around the world, including 0:13:58.320 --> 0:14:01.199 Los Angeles and Long Beach. You guys look pretty good there. 0:14:01.240 --> 0:14:03.320 I mean, it's a wholly different story than what it was. 0:14:03.800 --> 0:14:06.640 You know, at the peak of the supply chain issue. 0:14:07.520 --> 0:14:09.160 Talk to us about that. When stuff gets on the 0:14:09.559 --> 0:14:13.240 gets into your port, I kind of forgotten you, you explained 0:14:13.280 --> 0:14:15.880 to us before it's got to get loaded, unloaded, put 0:14:15.920 --> 0:14:18.640 on a transport. How is that whole supply chain working, 0:14:18.720 --> 0:14:21.040 getting stuff once it's off one of those big ships 0:14:21.080 --> 0:14:22.280 out to America. 0:14:22.400 --> 0:14:24.320 Yeah, better, Paul, but still a lot of work to do. 0:14:24.920 --> 0:14:27.920 And if you've seen one port, you've seen one port. 0:14:28.040 --> 0:14:31.120 We're a gateway. We unload that entire vessel when it 0:14:31.160 --> 0:14:33.440 comes in, load it back up to head to Asia. 0:14:33.760 --> 0:14:37.920 Our productivity at twelve thousand container units loaded on and 0:14:38.120 --> 0:14:40.480 off a vessel at Los Angeles is the best in 0:14:40.520 --> 0:14:43.240 the business today. But that cargo has to move off 0:14:43.240 --> 0:14:46.320 that terminal tarmac, and with the benefit of history, that's 0:14:46.360 --> 0:14:49.280 what slowed us down the most. During COVID, cargo was 0:14:49.320 --> 0:14:51.960 sitting at the port. Some used it as a warehouse 0:14:52.000 --> 0:14:54.880 because they were buying their goods just in case, not 0:14:54.960 --> 0:14:58.320 necessarily just in time. But all the vitals today look great. 0:14:58.360 --> 0:15:00.880 If we can get that cargo off the property in 0:15:00.960 --> 0:15:04.120 two to four days by rail and truck, then you're 0:15:04.160 --> 0:15:07.680 really starting to see the capacity gains that we all look. 0:15:07.560 --> 0:15:10.400 For when it comes to inflation, everyone talks about obviously 0:15:10.440 --> 0:15:13.480 goods versus services. Do you have a gauge whenever it 0:15:13.560 --> 0:15:16.320 comes to shipping to tell us what exactly that looks 0:15:16.400 --> 0:15:18.360 like when it comes to the difference between those two 0:15:18.680 --> 0:15:20.800 and how that obviously impacts inflation. 0:15:21.240 --> 0:15:25.120 Yeah, big topic today just supply versus demand to capacity. 0:15:25.560 --> 0:15:28.600 Right now, we've got the liner shipping companies who are 0:15:28.640 --> 0:15:32.920 based in Asia and Europe bringing in new capacity, larger ships, 0:15:32.960 --> 0:15:36.920 more fuel efficient, more clean for the environment, and those 0:15:36.960 --> 0:15:39.200 purchases were made with a cycle time of about three 0:15:39.240 --> 0:15:41.280 and a half four years. We're starting to see that 0:15:41.320 --> 0:15:44.560 tonnage come in as global trade has moderated and in 0:15:44.600 --> 0:15:48.520 some cases declined. So you've got excess capacity, lower demand. 0:15:48.760 --> 0:15:51.200 Prices are in the favor of the American importer and 0:15:51.200 --> 0:15:52.320 exporter this coming year. 0:15:52.760 --> 0:15:55.080 So, Gene, you guys at your port have a great 0:15:55.200 --> 0:15:57.840 view on China. So much of that trade comes into 0:15:57.880 --> 0:16:02.520 your port from China. It's route. What's your view? What 0:16:02.560 --> 0:16:04.280 are you seeing from China in the activity coming out 0:16:04.320 --> 0:16:05.360 of China in terms of trade. 0:16:05.440 --> 0:16:08.720 Yeah, on the business side, many of the folks that 0:16:08.760 --> 0:16:11.960 we deal with are talking about a China plus one strategy, 0:16:12.040 --> 0:16:15.680 not putting all your eggs in one basket. The geopolitical 0:16:15.760 --> 0:16:18.400 issues scare a lot of people and make them nervous, 0:16:18.480 --> 0:16:21.520 but also just good business practice, says I got to 0:16:21.520 --> 0:16:23.200 be able to move my sourcing out a little bit, 0:16:23.280 --> 0:16:26.320 similar to when I lived in China during SARS twenty 0:16:26.400 --> 0:16:29.320 years ago, a lot of the same discussion. So we 0:16:29.360 --> 0:16:33.040 are seeing growth in Southeast and South Asia. The Port 0:16:33.080 --> 0:16:36.200 of Los Angeles year end twenty twenty two, about fifty 0:16:36.280 --> 0:16:38.800 seven percent of all of its cargo emanated from her 0:16:38.920 --> 0:16:41.320 was destined to China. We'll close this year at about 0:16:41.360 --> 0:16:44.160 fifty three percent of our business with China, so it's 0:16:44.160 --> 0:16:46.280 moved down a little bit, but has not fallen off 0:16:46.320 --> 0:16:48.160 a cliff like some had imagined. 0:16:48.280 --> 0:16:50.600 What about Europe? 0:16:50.680 --> 0:16:55.120 Europe very small percentage. Our theater is the Transpacific. Second 0:16:55.160 --> 0:16:58.200 market is the West coast of South America. With respect 0:16:58.280 --> 0:17:01.440 to perishable fruits and vegetables, that's really our strong point. 0:17:01.560 --> 0:17:03.880 About three to four percent of all the products that 0:17:03.920 --> 0:17:06.800 we move in and out emanate from Europe. More natural 0:17:06.800 --> 0:17:09.720 trade lane is across the Atlantic to the East Coast 0:17:09.800 --> 0:17:11.240 and Gulf Coast ports of the US. 0:17:11.400 --> 0:17:15.080 So when the West Coast ports were having some challenges 0:17:15.119 --> 0:17:17.560 with pro productivities. I remember you coming in here saying 0:17:17.880 --> 0:17:20.040 some shippers were even going to take the extra costing 0:17:20.080 --> 0:17:22.399 maybe go through the Panama Canal and go to the 0:17:22.400 --> 0:17:25.600 eastern ports, like you know, Savannah or New York or whatever, 0:17:25.960 --> 0:17:29.320 New Orleans A. Have you got that business back, because 0:17:29.560 --> 0:17:31.879 we were just mentioning off air. I just saw a 0:17:31.920 --> 0:17:35.240 photo of a gazillion ships trying to get in and 0:17:35.280 --> 0:17:37.800 out of the Panama Canal because it's low water level. 0:17:37.880 --> 0:17:40.680 So that's not an option anymore, is it really? 0:17:40.800 --> 0:17:40.919 Now? 0:17:41.119 --> 0:17:43.360 Issues are popping up left and right, and now we're 0:17:43.400 --> 0:17:45.000 just a little more attuned to them in the supply 0:17:45.119 --> 0:17:48.040 chain with so many eyes on the system. We completed 0:17:48.040 --> 0:17:51.240 a thirteen month contract negotiation with our dock workers back 0:17:51.240 --> 0:17:54.440 in the summertime. Since that contract was ratified, we've seen 0:17:54.480 --> 0:17:56.520 about four and a half to five points of market 0:17:56.520 --> 0:17:58.879 share come back to the West coast of the US. 0:17:59.280 --> 0:18:01.600 There is good events from importers that they're moving a 0:18:01.600 --> 0:18:04.080 little bit more cargo via the West Coast because the 0:18:04.200 --> 0:18:07.560 transit uncertainty going through the canal with its low water 0:18:07.680 --> 0:18:09.679 levels right now is a little bit too much of 0:18:09.680 --> 0:18:11.840 a risk. Even though you can buy yourself up in 0:18:11.880 --> 0:18:15.040 the queue A little bit. That doesn't apply to everybody 0:18:15.080 --> 0:18:18.400 going through there, and coming up election year, a lot 0:18:18.440 --> 0:18:21.119 of folks will be looking at that policy and perspective. 0:18:21.600 --> 0:18:23.480 And the dock workers on the East and Gulf Coast 0:18:23.520 --> 0:18:26.720 will be negotiating their contract coming up this summertime. So 0:18:26.760 --> 0:18:27.960 a lot to keep in view, right. 0:18:27.920 --> 0:18:30.840 Especially when it comes to those contract negotiations. Do you 0:18:30.960 --> 0:18:33.240 see any sort of sticking points that could cause any 0:18:33.240 --> 0:18:36.919 sort of concerns and potentially what that can affect when 0:18:36.960 --> 0:18:40.000 it comes to obviously the port and what that means 0:18:40.040 --> 0:18:41.040 for shipping. 0:18:40.880 --> 0:18:44.159 Well across America, we saw a summer of discontent Jess, 0:18:44.560 --> 0:18:48.879 and a lot of final negotiations and contracting in the 0:18:48.920 --> 0:18:52.159 favor of labor and the employee. I don't see that 0:18:52.200 --> 0:18:54.800 any different on the East Coast. It's folks that work 0:18:54.840 --> 0:18:58.399 through the pandemic day and night, fearless of health and 0:18:58.480 --> 0:19:01.520 safety issues, trying to keep the American economy moving, and 0:19:01.560 --> 0:19:02.880 their payday is due. 0:19:03.080 --> 0:19:05.320 Yep, thirty seconds. What brings you to New York Other 0:19:05.359 --> 0:19:06.080 than New York? 0:19:06.200 --> 0:19:08.479 A couple of industry events wanted to talk with you 0:19:08.560 --> 0:19:11.320 all and kind of give you a layout here of 0:19:11.440 --> 0:19:13.040 what we're looking like towards the end of the year, 0:19:13.119 --> 0:19:16.320 the holiday season, and I'm optimistic about twenty twenty four. 0:19:16.440 --> 0:19:19.639 We've got a relatively early lunar New Year February tenth, 0:19:19.800 --> 0:19:22.359 and I see the calendar of supply chain falling a 0:19:22.359 --> 0:19:25.119 little bit more normally next year with an uptick in 0:19:25.119 --> 0:19:26.399 cargo through the port of La. 0:19:26.440 --> 0:19:28.199 Jeane Sroka, thank you so much for joining us. We 0:19:28.280 --> 0:19:30.280 really appreciate you coming in today and during really the 0:19:30.320 --> 0:19:32.439 last several years when everybody was trying to get a 0:19:32.440 --> 0:19:34.840 handle on what the supply chain issues, what the issues were, 0:19:35.400 --> 0:19:37.159 and how they were going to play out. Jeans Chorroka, 0:19:37.200 --> 0:19:39.240 Executive Director, Report of Los Angeles. 0:19:39.359 --> 0:19:42.440 You're listening to the tape Kent's are Live program Bloomberg 0:19:42.560 --> 0:19:46.159