Strong winter business drives lodging rates higher in Aspen, other resorts
A strong winter for the Western mountain-resort lodging industry will push room rates higher and entice property owners to scramble to supply more pillows in places such as Aspen and Snowmass, according to an industry analyst.
Ralf Garrison, director of Denver-based DestiMetrics, said earlier this month that his company’s research indicates that Western resort properties are headed for a record ski season in revenue and will flirt with a record in occupancy.
The higher demand in the lodging industry comes after years of static supply, Garrison said. The lodging industry was running strong prior to and through the 2007-08 winter, he said. The demand bottomed out during the recession, but supply kept increasing in 2009 and 2010 as developers finished hotel and condominium projects that were already underway.
Now the reverse scenario is unfolding. Demand roared back in 2013-14 and 2014-15 while little supply was added.
“The real estate pipeline was almost empty,” Garrison said.
The market forces benefit the lodging properties to the detriment of travelers, according to Garrison, because room rates are shooting up and will continue to do so. The price spike is particularly acute in Aspen.
The average daily rate charged by lodging properties in Aspen was by far the highest in Colorado during January. Aspen’s average was $519.80 per night. Vail was a distant second at $443.57, according to the Rocky Mountain Lodging Report prepared by the Colorado Hotel and Lodging Association.
Aspen’s rate increased $32.12, or about 6.5 percent, from the prior January, the report said. DestiMetrics’ research showed the average daily rate in Aspen from August through January — which included the fall offseason as well as the busy holiday period — was $378, up 3.2 percent from the year before.
“This is going to put pressure on other lodging in the valley,” Garrison said.
Just as changes in the real estate market spread downvalley from Aspen, the changes in the lodging market also will spread. Garrison predicted that market forces will entice rental-property owners in places such as Basalt and Carbondale to consider converting units to short-term rentals. It has the potential to take units out of the free-market, long-term rental pool, he said. Use of online rental services such as Airbnb.com also could increase.
A 110-room Elements by Westin hotel is being constructed at Willits Town Center and is scheduled to open by next ski season. The project was conceived prior to the recession but placed on hold. The timing of the developers appears ideal. A second hotel is being contemplated in downtown Basalt.
The city of Aspen doesn’t restrict property owners from renting out residences or rooms, but it requires them to buy a business license and pay the lodging and sales taxes. Property owners are prohibited from renting separate rooms to multiple parties in one residence, though the ability to enforce it is questionable.
For Aspen, the current trend of higher average daily rates could make it even tougher to attract younger travelers who will eventually be needed to replace baby boomers as they “age out” of skiing. Ski-industry officials spend a lot of time talking about the issue, but prices keep escalating.
For downvalley towns, the spreading demand for housing could add to affordable-housing shortages.
It’s uncertain how market forces will affect Aspen Skiing Co.’s pet project of updating the Aspen-Snowmass bed base. Skico CEO Mike Kaplan has said at a handful of public meetings this ski season that overseas tour operators Skico works with contend Aspen is falling behind the competition in quality of bed base.
Garrison said several resorts face an issue that the “bed base isn’t getting refreshed.” Older resorts in particular tend to have older bed bases. The problem isn’t unique to Aspen, he said.
Aspen appears on a solid roll of updating units. The Sky Hotel, Molly Gibson Lodge and Hotel Aspen have approvals to tear down, replace and add units. A big question will be how the average daily rates differ at those properties once they are rebuilt.
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