Economic fallout still piling on mountain resorts | SummitDaily.com

Economic fallout still piling on mountain resorts

RALF GARRISON
special to the daily
Summit County, CO Colorado

The financial crisis and its related pressure on the marketplace has not abated, despite either the October bailout or prospects of the next one.

The recession is deepening, and the fallout is becoming clearer at both the consumer and business levels. Consumers continue to reduce spending and phrases like “frugal is the new black,” and “recession chic” are entering the lexicon.

As governments and multinational corporations take action to protect their assets, the downstream consequences may begin a cyclic downturn that would be challenging to reverse.

Businesses are swiftly changing their practices and focusing on cutting costs after apparently giving up on making their margins through revenue growth, which has been the pattern in recent years.

These cost-cutting strategies lead to layoffs, job losses and reduced consumer spending, which deepens and increases impact of fallout.

Although the ski industry historically has been considered recession-proof, recent data indicates that the old adage isn’t holding true this year.

“We’re all experiencing a different year this year,” said Lauren Pelletreau, spokeswoman for Copper Mountain. “Our staff is working extra hard to make it worthwhile for the people who spend the time and energy to visit.”

Pelletreau said the resort has been offering a number of special promotions, most recently a deal offering 50 percent of lodging and two-for-one deals on activities like tubing and session on the new Woodward at Copper action sports facility.

In part, the latest round of deals is aimed at Front Range skiers who have their spring break coming up in the next few weeks.

Pelletreau said the Summit Chamber has been encouraging members to find added-value features that don’t cost extra.

Congress approved a $785 billion economic stimulus package on Feb. 11 that was signed into law this week. This sweeping package can be seen as the launch of “Obama-nomics” (harder to pronounce and likely more difficult to implement than Reaganomics).

The package, which offers strong support for homeowner debt relief, was able to stabilize strong negative activity on financial markets. However, expectations for meaningful relief haven’t generated any positive economic results yet.

Stimulus funds that have been approved to date are expected to top $2 trillion in the coming years.

The unemployment rate rose dramatically again in January, with just under 600,000 jobs lost, bringing the rate to 7.6 percent, the highest since 1983. There are currently 11.6 million unemployed persons in the United States.

Although the wild market fluctuations of November and December have been replaced with news about the stimulus package, consumers remain wary of the markets and are limiting their spending. Consumer confidence dropped to a new all-time record low in January (37.7 points) and is down an average of 54 percent over the past four months from the same period a year ago.

Transportation and fuel costs continue to be linked as oil/fuel prices remain low. Sagging demand for air travel has resulted in a windfall of spring discounts for consumers, but pundits warn that this trend will not continue. They predict that airlines will reduce supply by cutting service until the supply/demand equation works in their favor.

While the continued low price of crude oil is contributing to lower consumer prices, retailers are reacting to consumers’ spending aversion, by rolling back prices in recent weeks to move inventory. The Consumer Price Index is currently at 210.2, a mere 0.1 percent higher than in January 2008, which means a flat inflationary rate of 0.1.

The travel price index, driven by lower fuel prices and decreased consumerism, was down somewhat in December 2008 from December 2007 and is currently at 233.1, down 5.5 percent from December 2007 and effectively reflecting a deflationary travel market. The silver lining of this trend is lower travel costs for hesitant consumers.

The winter season has reached “half time” (as of Jan. 31 bookings, the basis of this summary) and is tracking significantly behind last year’s pace. But uncharacteristically strong short-lead bookings have helped make the final results “less bad.”

Here is both a look back and forward to season’s end:

Looking back, January occupancy across all mountain-west destinations was at 50 percent, compared with 60 percent last year. It was compounded by a decrease in average daily rate of 7.9 percent. Bookings taken in January were down 18.9 percent from last year’s booking pace and were much softer than December’s pace, which ended down 7.1 percent. Reservations taken in January for arrival in January were up incrementally by10 percent, which was stronger than January 2007, but nothing like last month, when strong last minute bookings in December for December arrivals made a significant contribution to a “less-bad” outcome.

Looking forward, the entire winter season continues to lag behind last season, with occupancy down 18 percent and lodging rates down 8 percent based on reservations as of Jan. 31. February occupancy is off 20 percent, and March is down 29 percent.

In a wider look across the ski industry, analyst Nolan Rosall of RRC Associates said there are some bright spots. Innovative marketing and price breaks on ancillary activities like ski school lessons has likely helped some resorts from experiencing the worst-case scenario, he said.

At least a few resorts have bucked the trend and reported increases in skier visits, revenue and yield, Rosall said. Some are doing well compared to the average numbers from the past three to five years, he said.

But across the board, visits are down and revenues are down more than visits. People are taking shorter trips, looking for cheaper lodging and cutting back on extra expenses like ski school lessons, he said.

“Front Range skiing is still strong, and is helping mitigate the decline,” he said, adding that international visits have dropped off considerably from last season.

March, which is generally sees a bulge in destination visits, will be a critical month for ski resorts.

“The jury is still out,” he said.

Daily News reporter Bob Berwyn

contributed to this report.

The Mountain Travel Monitor is based on MTRIP’s advanced reservation data as of 12/30/08, submitted by lodging property

subscribers in the western United States and Canada. Data may not reflect the entire

Mountain Destination Travel Industry.

For further information contact MTRIP at info@mtrip.org or at (303) 722-7346.


Start a dialogue, stay on topic and be civil.
If you don't follow the rules, your comment may be deleted.