Will Eagle County fall into recession? Some national trends point that way
If we hit a downturn, it could be fairly brief
Is the U.S. headed for a recession? Maybe. How will it affect Eagle County? It’s hard to say.
Still, a number of economic fundamentals remain strong, even as the national real estate market slumps, interest rates rise and tech firms lay off thousands of employees.
4,602: 12-month high for the Standard & Poors 500 stock index, set March 29.
3,972: Index closing price Jan. 21.
3.25%: U.S. prime interest rate as of March 16, 2022.
7.5%: U.S. prime interest rate as of Dec. 15, 2022.
Sources: Yahoo Finance, JP Morgan Chase
Tom Foley is the senior vice president of business process and analytics for Inntopia, a lodging research firm. Foley keeps a close eye on trends both in resort areas and nationally.
Despite some areas of slowing, Foley said current economic conditions are pretty good.
Consumer spending is up nationwide, Foley said. “If consumers are spending, firms are hiring, he noted.” That hiring was reflected in 225,000 jobs added in the most recent report.
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Still, the nation’s stock exchanges are down significantly from 12 months ago. But that isn’t much of a reflection on actual economic conditions, Foley said.
“Wall Street is mostly a reflection of Wall Street,” Foley noted.
With all that in mind, Foley predicted that we’re likely to see something between a “slight recession and a soft landing.”
Florida-based economist Elliot Eisenberg keeps a close eye on the national economy. Eisenberg also sees a relatively minor recession on the horizon. While a number of indicators are fine, Eisenberg noted that the national housing market is in recession, as is manufacturing.
The big thing to watch is the services sector, the largest piece of the U.S. economy.
“If (services) dip, that’s a bad sign,” Eisenberg said, adding he isn’t yet ready to predict such a downturn.
But, he added, he’s nervous about falling confidence among consumers, households and small businesses. He also believes it’s time to start reversing interest rates
Resorts are different
Vail Valley Partnership President and CEO Chris Romer noted the valley has solid economic indicators, including sales tax collection, lodging occupancy and enplanements at the Eagle County Regional Airport.
“The one negative is inflation,” Romer said, adding that consumer spending is outpacing even that indicator.
Noting a fairly steady drumbeat of downbeat news from national news outlets, “I think we’re talking ourselves into a recession,” Romer said. He added he expects any downturn to be minor.
With a few exceptions, Eagle County has generally weathered recessions better than other areas, heading into a downturn later and coming back sooner.
The biggest exception came in 2008 and 2009. Then, a collapse in the real estate industry and the banks that financed that decade’s bottle-rocket-like upswing in prices brought values down almost as quickly as they’d risen.
This economic picture isn’t like that one, Foley said.
“The economic fundamentals were badly broken then,” he noted. Today, inflation — at 40-year highs — is being driven by “too many dollars in circulation,” he added.
But even with interest rates that have more than doubled for some borrowers, banks are still lending money.
Alpine Bank Regional President Michael Brown said that institution is still lending on both residential and commercial properties. Even with concerns that rising rates would put a brake on borrowing, Brown said there’s still “a lot of lending activity,” even at higher rates.
“Conditions in local markets are still pretty favorable,” Brown added.
Some will have money
Part of the reason some resorts fare better than other areas is the fact that some people have disposable income, even in a recession. That benefits vacation destinations.
Foley noted that resort guests are typically older, and more of those people are independently wealthy, and more likely to travel.
Fewer people may travel, but then it’s up to lodges to balance rates, staff and occupancy, Foley noted, adding that average daily rates for lodging have increased dramatically since the COVID-19 pandemic. That’s keeping revenue up even as occupancy dips.
Foley said higher rates are resulting in shorter guest stays. But, he added, “If stays are down 15% and (average daily rate) is up 18%, you’re still (profitable).”
Still, he added, higher rates can only be sustained so long, and lodge owners and managers may have to consider what the proper balance is between rate and occupancy.
While no one can tell what the coming months might hold, and while some measures indicate the U.S. is already in a downturn, we probably won’t know how severe a recession is until it’s over.
“The data just comes in too slowly,” he said.