High country remains a desirable location for hotel development
March 20, 2017
Despite continued tourism growth in ski resorts, hotel developers are hesitant to build in the area. High construction costs and limited space to build on act as barriers in starting a successful hotel out in the mountains. But Ralf Garrison founder of DestiMetrics, a Denver-based resort analytics firm, said that it's also the seasonal business model that resorts have held on to for so long: businesses struggle to stay afloat when they're only busy for part of the year.
"The real challenge in the mountain resort industry is sustaining a solid, year round economic foundation," Garrison said.
Garrison said that hotels need to maintain an average of around 65 percent occupancy all year in order to sustain their businesses. For resort communities, there is a need to balance out the peaks of winter with the slower valleys in summer.
Despite barriers, some still consider Summit County a good investment for possible hotels. In December of 2015, the Hampton Inn opened in Silverthorne. A Residence Inn opened in Breckenridge at the end of 2016, replacing the Breckenridge Mountain Lodge. More recently, the town of Dillon's Planning and Zoning Commission approved plans for a six-story hotel. The hotel would be located at the entrance of the town, providing guests with views of the surrounding area. The hotel needs to be approved by the Dillon Town Council before moving forward.
Some of the towns in Summit naturally lend themselves to attracting summer guests because of their proximity to Lake Dillon. July and August tend to be the strongest months in the county, with other peaks during the three-day weekends for Memorial Day and Labor Day.
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The Hampton Inn is operated and managed through a franchise agreement with Hilton and Denver-based Silverwest Hotels. Ed Mace, Silverest's president and CEO told the Daily last September that the Hampton's first summer of business went better than expected. He was not available to comment on recent occupancy numbers.
In Breckenridge, there has been a 13 percent increase in year round occupancy numbers from 2016 compared to 2013. Austyn Dineen, the public relations manager at the Breckenridge Tourism Office, said that a large portion of the growth was due to summer visitors, which have grown 25 percent over the same time frame. Winter visits also continue to see increases.
"Seasonality is nowhere near what it used to be," said Brett Russell, the senior vice president of HVS Denver and director of business development for HVS.
As a company, HVS works with businesses within the hospitality industry, aiding them with finance and market research.
Russell added that if resorts can increase year round offerings, it can push marketing opportunities further into spring and summer, using Copper Mountain as an example. The resort recently approved new plans for an alpine mountain coaster and bike trail hoping to draw summer visitors.
"The more that happens the less seasonality there is, and (resorts) can drive rates in the summer," Russell said.
Despite an increase in visitors coming in for the ski season, resort areas have not increased their bed base — total number of available beds for tourists — using traditional hotels. Instead, the burden falls on timeshares and condos. Airbnb, VRBO and other online markets that allow property owners to rent rooms have also started to take on some of the increase.
Russell added that in Breckenridge, the market has been focused around short-term rentals for the last 20 years, and that online opportunities have added to that pool.
Garrison added that after the United States started to rebound from the Recession, there was a spike in demand for lodging. But real estate was never added to supply the demand, causing unit prices to go up. A larger bed base means more people can stay in the area, where they will likely shop or spend money at local restaurants. While the hospitality industry may have an indirect competitor in online rental companies, Garrison said that they build on the community economy as a whole.
"It's gotten more and more economically viable for somebody that owns their unit, or rents their unit out long-term, to move it over and make it available short-term," Garrison said. "Now we have a new source of beds during high seasons coming from the occasional use of a rent by owner. That's good for the overall community."