Peering into Aspen’s hazy future
ASPEN The national economic tailspin has already busted the long-standing myth that Aspen is recession-proof.Now its testing another long-held theory about the areas fiscal strength, namely that Aspen doesnt get hit as hard as the rest of the country and bounces back more quickly.A lot of people hope the latter myth holds true in 2009 wage workers who survived a first wave of layoffs, contractors who wonder whats next after their current jobs end, shop keepers who have seen revenues plummet and real estate agents who havent been approached by prospective buyers for months.There is no denying that the Aspen economy which depends on real estate sales and development along with tourism is in a world of hurt. The dollar volume of Pitkin County real estate sales was down nearly 50 percent in 2008 compared to 2007. Aspen Skiing Co. reported that its lift ticket sales were down 8 percent during Christmas and New Years weeks, and the slopes felt unusually quiet through much of January. The local construction industry has been walloped by the slowdown, but recent employment figures arent available yet so the actual impact remains somewhat vague. Sales tax revenue figures for December arent available yet. Despite the poor performance in the last few months, many people expect things to get worse before they get better.This recession is totally different. Its something that none of us have ever lived through, said Klaus Obermeyer, who has been making ski wear as head of his namesake company since 1947. He has seen more ups and downs in the market than any business owner in Aspen.The big question for Obermeyer and everyone else is, how long will the recession last?That crystal ball is difficult to read, said Robert Ritchie, a real estate agent in Aspen for more than 30 years and a partner in Coates, Reid and Waldron.Nevertheless, The Aspen Times asked several local business leaders to share their thoughts about what they expect to unfold in 2009.
Timberline Bank President Mike Taets said the local effects of this economic downturn are tough to gauge because the affluent second-home buyers and tourists that visit Aspen were hit harder than usual. Typically the affluent are insulated from downturns that hit the little guy. This time it was reversed the rich were hit first. They lost big when their companies stock plummeted, their investments withered, or both.Taets believes the type of people that visit Aspen will ultimately weather the economic storm safely, but big financial losses will alter their spending habits.Youre probably not in much of a mood to spend $10 million on a second home in Aspen, he said.A lot of it has to do with perception: When a CEO of a struggling company spends millions on a vacation home, it sends the wrong message to that companys employees.Taets senses that real estate buyers are out there, watching to see how low prices go. They want 30 percent or so off the top prices from 12 to 18 months ago. Patient sellers arent giving in, so it creates a logjam.Sellers arent willing to sell at the prices buyers are willing to pay, Taets said.The logjam will break; he just doesnt know when.Ritchie subscribes to the same theory. He expects there will be a flurry of activity once buyers are convinced they are looking at the best possible deals. The benefit is to those who stay in the game, because the games not over, he said.Ritchie noted that Aspens average sales prices continue to rise despite the terrible sales volume. He is also optimistic about the future because his research of the markets history after the recessions of 1981, 1990 and 2001. In the five years after each of those downturns ended, he said, average home prices increased by 46 percent.The very clear message of the last three recessions is that this is an excellent time to purchase real estate in Aspen, Ritchie said.The Aspen real estate market faces a fundamentally different type of problem than most of the rest of the country. Home prices in some regions have tumbled lower than what buyers paid for them. In Aspen the market is frozen, but not drastically depressed.Taets doesnt expect foreclosures to be an issue in the upper valley. Two-thirds of transactions have historically been cash deals, he said, and most property is unencumbered by debt.
Only a few sectors of the local economy have been immune to layoffs health care and education come to mind. But few have been hit as hard as the construction industry. The usual frenzied pace of development has slowed to a trickle.Taets didnt sense that there will be a lot of projects breaking ground come spring. A prevailing attitude in the construction industry is, Im OK now, but Im not sure whats next, he said.Everybodys laying people off, said Rick Stevens, president of Aspen Earthmoving, which celebrated its 25th year in business in 2008. Private-sector work between Aspen and Carbondale is essentially frozen, he said, so the company has cast its net wider. Were going all the way out to Parachute.Bob Myers, owner of Myers & Co. Architectural Metals, said this downturn feels different from the others he has experienced since incorporating his company 30 years ago. The companys regional approach helped it deal with lean times. If construction was flat in Aspen, it was more active in Telluride or Jackson.We were always able to shift our marketing focus to the hot town, Myers said. There are no such options this time.Myers said he has retained all his employees in the shop and in the field, but he laid off some administrative help. He is staying busy enough with projects that were already lined up, but hopes for an improvement in the economy. The relief package planned by the Obama Administration could provide some help. One part of the plan is to supply federal dollars to states for public works projects. Myers said his firm could benefit by providing steel and labor on road and bridge jobs.
With the real estate sales and development industry reeling, Aspen may come to rely a bit more on its roots as a tourist destination. Real estate evolved into the dominant economic force about a decade ago, but this downturn highlights the importance of diversity.The average occupancy in Aspen has been around 10 percentage points behind last years levels throughout the ski season. Nevertheless, a town 75 percent full is better than no tourists at all.Taets likened Aspen tourism to Rodney Dangerfield it gets no respect. Were going to come to appreciate that we have tourism here, he said, noting that the loss of jobs would be even tougher if tourism positions didnt absorb some of the workers.Skico Senior Vice President David Perry said the slowdown should force Aspen to take a good look at itself. Its time to think about what we really are, which is a ski town, he said.Aspens track record of success in the real estate market boils down to the same qualities that make it a successful tourist destination its a ski town at its core. So strengthening Aspens status as a ski town can only help its business prospects for the future, he said.But it is inevitable that tourism will take its lumps like the rest of the economy. The Skico brass expects skier and snowboarder visits to drop between 5 and 15 percent this year from the prior season. Perry fears the full repercussions of the national economic slowdown havent been felt in Aspen yet. The companys marketing department is starting to make plans for the 2009-10 ski season a difficult task given the volatility of the last four months and an uncertain future.Thats exactly what were struggling with, said Perry, stressing that flexibility will be the key. Were going to have to adjust our plan and adjust our marketing.
If its tough for the Skico to plan ahead, then imagine the stress that small-lodge operators and other business owners are facing. The Limelight Lodge reopened in November after demolishing its old structure and being closed for construction for two years. After investing millions of dollars in the new complex, Dale Paas and the other owners must contend with an anemic economy.So far, Paas said, the winter has gone pretty well. But there has been one definitive shift in his customers behavior. The lead time for reservations has really shortened, Paas said. Travelers are assessing their financial situations and determining at the last minute whether or not they can go on a ski trip. I think theres just a lot of apprehension out there, he said.Prospective guests dont appear to be price-shopping. There is almost a feeling of, If Ive got a job, Ill pay the price, Paas said.His family has owned the Limelight for 50 years, so they have a good repeat clientele. Nevertheless, lower average occupancies might be a reality in the Aspen lodging industry for the foreseeable future, Paas said. The last-minute bookings make it challenging to operate a business. Its hard to staff without knowing how many guests are coming.We dont know when to give time off and we dont know when to have them work overtime, said Paas said. But overall, hes optimistic about the Aspen lodging industrys prospects.Aspen Velo owner Mike Wampler didnt have to contend with the immediate fallout of the recession. He closes his bike shop for the winter. Nevertheless, Wampler said he will make assumptions about summer business based on how retailers fare over the next two months.So far this winter, he is hearing from retailing colleagues that it has been hit or miss in Aspen. Some shops are holding their own; others are down. If February and March sales are down 10 to 15 percent, then that is what hell plan for during the summer.But Wampler also believes that consumer confidence is one of the biggest problems with the economy. He noted that 93 percent of U.S. residents are employed and the vast majority are making their mortgage payments. Confidence is shaky because people fear what could theoretically happen to them. Once those fears ease, he believes, spending will resume.I think youll see retail coming back late summer to early fall, said Wampler.Obermeyer, who supplies ski wear to hundreds of retailers across the country, said his customers are managing to pay their bills so far, and orders are being written for next winter. Sport Obermeyer offers retailers a strong, desirable line of clothing, he said, so retailers strive to stay in good standing with the company. But smaller ski-wear manufacturers that arent as well-established wont fare as well.Some of our competition is going to go out of business, he said.When pressed to read his crystal ball, the 89-year-old Obermeyer said there will likely be further economic declines before it gets better. But ever the optimist, he believes Aspen and the ski industry will remain strong, even if the national economy is weak. Aspen relies on wealthy clients who will fare best in a recession.Taets agreed, noting that Aspen wont be hurt as badly as other tourist destinations and the real estate market wont get hit as badly as some overbuilt markets.We might be the tallest midget, I dont know, Taets said. I think well be OK.email@example.com
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