Vail Valley Voices: Is crystal ball clearing?
Vail, CO Colorado
VAIL, Colorado – The accumulation of national and local economic trends are giving a clearer indication of the shape of the “new normal” economy.
The conundrum for Vail is by spending down cash reserves, can a bridge be built to the new normal? Some see mounting evidence that the historical “qualitative” expectations of Vail customers and property owners could go by the wayside.
The days are numbered, they say, when local government can, with shrinking revenues from nearly all sources, afford to generously subsidize itself and the business community based on increased fees, taxes, franchising public assets or spending down reserves. Others disagree, seeing the need to build the bridge, hoping for a stronger turnaround sooner rather than later. Some predict that a restructuring of expectations, obli-gations and responsibilities will result.
The town reports overall July sales tax decreased 19.4 percent from July 2008 with retail decreasing 14 per-cent, lodging decreasing 23 percent, food and beverage decreasing 14.4 percent and utilities/other (which is mainly utilities but also includes tax-able services and rentals) decreasing 35.8 percent.
August estimated sales tax collec-tions are down 20.9 percent from August 2008. As of late August, the town reported all revenues funds year- to- date from the same period in 2008 were down 24 percent and down from budget projections of 2.7 percent for the same period. Revenues are consistent with the town’s projections; budget- cutting measures remain under considera-tion.
SnowSports Industries America, a national trade association, reports that loan rates to finance inventory purchases are increasing, putting ski- resort retailers under further stress. The rescue from near bank-ruptcy of CIT, a bank specializing in lending to small business, has made credit much harder and more expensive to obtain. As of August, after thin equipment sales in the 2008- 09 winter season, alpine-ski- equipment orders are down nationally more than 20 per-cent and snowboard 30 percent in dollars compared with last season’s orders.
In the good- news category, SIA says that the National Oceanic and Atmospheric Administration pre-dicts that heavy early and late snow could occur in the central Rockies because of the El Nino pattern in the central Pacific Ocean. Vail Resorts is reporting a 14 percent increase in Epic Pass sales compared with this time last year. On the downside is the potential impact from the swine flu, should it become epidemic, in Vail’s air- travel destination- guest markets. Also, there have been no known public reports on how local health officials and business leaders would respond to a widespread outbreak.
• Real estate market: Real estate sales are experiencing a modest increase. Statistics released by the Board of Realtors show 77 residen-tial properties went under contract between Aug. 10 and Sept. 10. That compares with 22 contracts between Jan. 1 and July 10. Many sales are for properties costing less than $ 500,000. Some higher- end properties are reporting increased inquiries. According to a local real estate analyst, the dollar volume of total sales through August was run-ning 35.5 percent of last year and only 25.8 percent of the record year, 2007.
• Eagle County unemployment rate drops for two consecutive months: Eight hundred fifty- one jobs were added back into the Eagle County labor force from June through the end of August. The increase is likely summer seasonal jobs in the resort-services and con-struction industries. Unemploy-ment numbers reached an all- time high of 2,800 in May.
• Vail Resorts fourth- quarter report: Vail Resorts confirms an expected 52.4 percent decline in 2009 profits from 2008. The compa-ny’s net real estate revenues were down 37.2 percent. It is seeing improvement in traffic from buyers interested in its real estate proper-ties. Revenue projections for 2010 reflect a shift in reliance from real estate to tourism products. The company moved to contain opera-tional costs earlier in the year through a 2 percent to 12 percent reduction in executive salaries and a freeze on merit increases. Skier visits to the company’s Col-orado resorts were down 5.3 percent from the prior year. The decline was less than other Colorado ski resorts. Companywide, total lift-ticket revenues were down 8.4 percent. Vail’s skier visits were the third highest on record. The company continues its value- added marketing strategy through the Epic Pass and other incentive programs.
• Vail Local Marketing District – summer lodging report: As with last winter, Vail’s lodging is down but ahead of the industry. The Vail Local Marketing District reported that, compared with 2008, in June, July and August of 2009, average lodging occupancy was down 11.4 percent, 8.9 percent and 21.1 per-cent, respectively. The average dai-ly room rate for the same period was down 7.5 percent, 12.5 percent and 8.9 percent. Vail’s average lodging occupancy leads in a comparison with average occupancy figures from 15 mountain resorts for the same period: June, 34 percent to 27 percent; July, 48 percent to 40 per-cent; and August ( projected), 36 percent to 27 percent.
PKF Hospitality Research, a national consultancy firm reporting on countrywide hotel trends, while seeing improvement, forecasts an average occupancy of 54.9 percent for 2010, well below the historical average of 62.2 percent. Average daily room rate is expected to decline 10.4 percent. Both average occupancy and room rates are pro-jected to turn upward in late 2010 or 2011.
The town proposes to reduce the VLMD’s budget by 12.1 percent from $ 1.9 million in 2009 to $ 1.75 million in 2010. Some believe the amount is insufficient to mount an effective summer marketing cam-paign, which is the mission of the VLMD. Advocates, including mem-bers of the VLMD advisory board, are promoting an increase in the lodging tax to boost revenues avail-able to the town of Vail for market-ing. The VLMD is a function of the town of Vail and funded by a lodging tax. Others question the effective-ness of the VLMD, believing that a more diversified nongovernmental approach to business promotion should be pursued.