Competition never greater for Aspen lodging industry
ASPEN – The Aspen-Snowmass lodging industry’s recovery from the recession isn’t expected to get any easier this winter due to increased competition within the towns and from outside ski resorts.
Several high-end hotels will open this winter, increasing the competition at a time when occupancies and average daily room rates are sagging, industry observers said.
The St. Regis Deer Crest will open this winter in Deer Valley, Utah, with 181 rooms. Dakota Mountain Lodge, in the Waldorf-Astoria Collection, is opening 201 rooms in Park City, Utah. Even a luxury property farther west – the Ritz-Carlton Hotel at Northstar at Lake Tahoe – will increase competition for Aspen customers coming from San Francisco, according to St. Regis Aspen General Manager Senih Geray.
Even if the recession wasn’t driving down occupancy rates, the supply would outpace demand for luxury-class, slope-side hotel rooms with the addition of those properties and other in recent years, Geray said. He wonders where the skiers will come from to fill all the rooms.
The competition is getting stiffer within Aspen-Snowmass as well. The 173-room Viceroy Hotel at Base Village in Snowmass will open early in the ski season. The Residences at the Little Nell, 26 fractional ownership condominiums, will be open for its first full winter at the base of Aspen Mountain. The 126-room Limelight Hotel will have a year under its belt this winter after reopening following a reconstruction.
“Finally, we’re seeing an increase in units in our community, and that’s a good thing,” said Bill Tomcich, president of Stay Aspen/Snowmass, a central bookings agency.
But the increase in supply comes on the heels of “softening demand,” Tomcich said. Average occupancy in Aspen and Snowmass tourist accommodations for June was down 9 percent compared to the year before. It was down 25 percent in July, largely because of the loss of group business in Snowmass Village, Tomcich said.
“If demand declines, you know what’s going to happen,” he said, referring to room rates.
The average daily rate in Aspen-Snowmass dropped 11 percent in June to $191, from $214 the year before. The average daily rate in July fell 13 percent to $213, from $244, according to statistics provided by Tomcich.
Winter rates are roughly double the summer rates in Aspen and Snowmass. The rates fell slightly last winter, and there’s a strong possibility they will do the same this winter. Travelers have turned into savvy shoppers.
“Everybody’s calling for deals and wondering what kind of rate they can get,” said Norma Dolle, owner of the Snow Queen Lodge. Dolle, who has been in the Aspen lodging industry for 38 years, said she has never seen customers as price conscious as they have been during this recession.
Dolle said she has reduced rates this summer, particularly for people looking for rooms at the last minute before trips. She has reduced rates that were already “reasonable.”
“It’s hard on us because you can tell they’re shopping around,” she said.
Lodging properties try to maintain their rates even in tough times. It is called rate integrity in industry lingo. Dropping rates makes it tough to raise them again once the economy recovers.
Geray said the St. Regis Aspen has maintained its retail rates even though occupancy has dropped during the recession. Industry studies show it can take four or five years to rebuild rates after they have been cut, he said. Properties cannot just raise rates by a drastic amount once economic conditions improve. They must be restored gradually.
Rather than drop rates, the St. Regis is focusing on packaging extra elements with a room, a strategy known as “value added.” It will add spa visits and possibly even lift tickets to spur business at certain times this winter.
Customers are more forgiving if the value-added discounts disappear than if rates soar drastically after they are cut, Geray said.
He believes the 2009-10 winter will be a “mirror image” of 2008-09, with a chance for February and March to be slightly busier.
Both Geray and Tomcich said Aspen has an advantage on the competition because the town is unique. Despite the drop in occupancy and average daily rates this summer, Aspen still performed better in those areas than other mountain resort destinations, Tomcich said. Visitors have always been willing to pay a premium for air fare and accommodations to visit Aspen, but even the premium price might drop this year.
“It’s never been more affordable for visitors to come to Aspen-Snowmass,” Tomcich said.