Vail Valley, mountain resort economy still lagging
Vail, CO, Colorado
The economic news remains bland as weary messengers deliver a continuously unfavorable message. A metaphor using the green-yellow-red traffic light is being used to illustrate, with a lighter touch, this month’s information. Even so, after adding a bit of good news to last month’s “green light” segment, there is little besides “red-light” news.
The recent July 4 holiday weekend brought brisk business to many mountain resort communities and the American greenback was more in evidence than any time yet this summer – and is pretty much the only evidence of the color green in this month’s monitor. Hopeful signs of improving market conditions from the last several months failed to materialize.
Here’s a look at some broad economic indicators:
Dow Jones Industrial Average
The Dow continues to display characteristics of being “on edge,” reacting quickly but indecisively to positive and negative news. Between June 1 and July 14, the market swung a range of 592 points (7 percent of its current value) and was unable to sustain growth or decline for longer than four days.
In these 29 days of trading, 15 were declines and 15 days were advances. As this pattern continues, it is increasingly challenging for experts within the financial industry to provide clear guidance on investor direction, further adding to the economic uncertainty.
Consumer Confidence Index
Consumer confidence continues to show signs of being cranky by reacting sharply to both positive and negative news cycles and economic forecasts. Negative earnings reports and continued increases in unemployment negatively impacted the index in June after three consecutive months of increases, including a rebound from an all-time low of 25.0 points in February.
The recent increases in the index and relatively small decline experienced in June indicate that consumers are feeling less anxious than six months ago despite ongoing negative economic impacts such as increased unemployment rates.
Travel Price Index
The Travel Price Index, which had been held at bay for several months during the winter due to sharp declines in lodging rate, airfares, and gasoline prices, continues to react to overall increases in travel-related costs.
Crude oil prices, and subsequently aviation fuel and gasoline, while well below 2008 record levels, have increased steadily in the past six months and are being reflected as an upward force. Additionally, the discounts being offered industry-wide on lodging, while still dramatic, have settled down somewhat. This index increased in May for the fifth consecutive month. It is now just below November, 2007 levels.
Year over year
It was nearly a year ago that the economic storm clouds on the horizon turned into a perfect storm. Now, statistical comparisons of year-over-year performance begin to reveal the current down market activity compared to the (start of) last year’s down market, making it possible for reasonable benchmarks to be assessed.
While most economic outlooks expect 2009-10 to be on par or better than last year, reasonable comparisons are not yet available and forthcoming results should prove interesting. In the meantime, the yellow light is blinking and vigilance and a steady hand is being recommended to all tourism-dependent businesses.
What does it mean?
Despite both negative and cautionary macro indicators, the stage remains set for a “less-bad” summer than the winter that proceeded it:
• Transportation prices are staying down, drastically below the oil-driven peak of about a year ago.
• The “stay-cation” moniker that emerged last year at about this time, looks to be more like a “close-cation” as people are traveling but staying within about a one tank drive from home.
• Summer mountain vacation offerings are well suited to the market and accommodate last minute decisions, provide great value and provide many choices within the one tank epicenter.
Even so, Mountain Travel Research Project mountain market indicators as of June 30 remain all red and consistent with national trends:
• June occupancy and rates were down, generally continuing the trends of last winter.
• Reservations taken in June for arrivals in June through November were down 15.7 percent on a year-over-year basis.
• Reservations taken in June for arrivals in June have stayed essentially flat with June 2008.
Overall, summer business (May through November) continues to show significant declines from last summer to date with no indication yet of an improving market or more optimistic consumers.
• Although destinations are working to hold rate on advance bookings, they are ultimately proving to be unsuccessful and are suffering the double blow of both decreased rates and a more dramatically decreased occupancy.
• As in June’s booking patterns, there is no indication that bookings are coming with the shorter lead times typically true in summer booking patterns but a clear look at July next month will help clarify any emerging patterns.
While the data presented here is an industry-wide view, there is significant variance between participating destinations and clear winners can be seen in a careful assessment of the results. For example: individual family vacations and those based on reunions and special occasions appear to be holding best, while group/conference and luxury travel segments are weakest.
Looking forward further, school summer breaks are ending in early August in some districts, setting the stage for a shorter family vacation window, a trend that has continued to shorten summer peak periods for several years.
Having the right product in the right place also requires the right message to the right audience at the right time, an admittedly tough combination. Recommendations are for continued diligence until market conditions provide some relief and we can shift to a green light. Hopefully, those market improvements will materialize shortly and with sufficient time for a full speed approach to the winter booking season.
There you have it.
Ralf Garrison is a founding partner of the Mountain Travel Research Project, or MTRiP, which tracks economic conditions at mountain resorts. To learn more, to to http://www.mtrip.org.