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What’s in store for Aspen’s economy?

Aspen Times Weekly StaffAspen, CO Colorado

ASPEN – As the first big weekend of the summer season subsides, thousands of people up and down the Roaring Fork Valley are wondering what the season holds in store. Colorado’s unemployment rate continues to climb, but the weekend of June 20-21 saw huge crowds and successful events in Aspen and Glenwood Springs, lifting spirits throughout the valley.To help readers sort out all the conflicting signals, indexes and indicators, we decided to talk directly to knowledgeable business people, mostly locals, about their expectations for summer and the rest of 2009. We consulted folks in the retail, restaurant, lodging and real estate sectors. We spoke to the owner of a high-end memorabilia store and a prominent local gallery owner, along with a respected statewide economist.Perhaps it’s no surprise that we got conflicting opinions. And though there was a fairly consistent theme of cautious optimism, all of our sources laced their comments with words like “however” and “unless.” Nothing is ever certain in economics, but Aspenites are sensing (or at least hoping for) a new warmth in these first days of summer 2009.

A national economy rocked by a more than yearlong recession will undoubtedly impact the summer tourism season in Aspen, as visitors are projected to spend less money than in past years.”If you look nationally I think the rest of this year will be most likely still in recession,” said Tucker Hart Adams, president of The Adams Group Inc. in Colorado Springs. “There will be no noticeable growth. That probably has more impact on Aspen than any other place in the state.”She said tourists are likely to be more tight-fisted this season as they forego the high-end hotels, perhaps staying in nearby campgrounds or with friends and relatives who live in the area.Adams, known in some circles as the “Duchess of Doom” for her stern economic outlook, also feels that corporate activity will be less pronounced this season, from the glitzy golf outings to the “corporate jet kind of thing.” That will translate to lower hotel occupancy, in part because the corporate crowd tends to pump up those figures in summer.Another contributing factor to a less bountiful summer season for merchants is that the rich have seen their wealth slide considerably in the past year – particularly those people who are heavily invested in the stock market. “I think they have felt the pinch just like everybody else,” she said. “If you have gone from $100 million to $50 million that doesn’t mean you can’t put food on the table … everyone will be more cautious. They will spend more thriftily.”On the bright side, Adams said there are some things that bode well for Aspen’s summer tourism season, including fuel costs. The average price of regular unleaded gas was $2.556 in Colorado last week, based on data compiled by AAA Colorado. That was well below the average of $3.993 one year earlier.Nationally, the average price of regular gas stood at $2.674 per gallon last week. That’s down from $4.08 per gallon at the same time last year.”That is good news. An awful lot of people drive to visit Colorado,” Adams said. “So it’s not all gloomy.”-By Wyatt Haupt Jr.

Timberline Bank President Mike Taets says Aspen’s economy is experiencing a classic case of capitalism.Aspen’s reaped the gravy for years when the national economy was roaring and the wealthiest people in the country were attracted to the town. Now it is experiencing the painful side of the system, with a stagnant real estate market, sagging tourism and a culling of businesses.The good news is, the capitalistic cycles promise that Aspen will claw its way out of the trough and recover, just as it bounced back from other tough times. It’s just going to take time.”All you have to do is look at the past,” he said. The collapse of the saving and loan industry in the late 1980s paralyzed real estate sales and development. Today’s credit crunch and financial crisis among financial institutions has a lot of parallels.”We’re right back to where we were in 1988,” Taets said. “It’s probably going to take a similar amount of time to get through this.”Aspen’s economy fully recovered from the S&L debacle by 1996 or 1997, eight years or so after the problems surfaced. “We’re two years into this (recession), basically,” Taets said. “The first step in recovery is where it doesn’t get worse, and we’re probably there.” The next step is improvement.Although the economic signs aren’t as bleak as they were in March, there is a lingering uncertainty weighing on people. The prospects for this summer indicate “more of the same as we’ve been experiencing, and that’s why everyone is on pins and needles,” he said.Taets sees the real estate industry in a waiting mode. Everybody who had to sell because of their financial circumstances has probably sold or is close to it. Two-thirds of Aspen real estate transactions have traditionally been cash deals, indicating that a substantial number of sellers aren’t carrying debt and, therefore, aren’t under pressure to sell.Buyers are ready to pounce on good values, but they’re also waiting to see if prices drop further.”Buyers don’t feel a sense of urgency,” Taets said. “They want to be here but they’re taking their time.”Meanwhile, the construction trades are taking their lumps – just another symptom of supply and demand.”We haven’t had a natural culling out of the trades in the valley for some time,” Taets said. He views it as survival of the fittest. The established and respected carpenters, framers and tile setters who show up on time and do good work at a fair price will be fine. “It’s the Johnny-Come-Lately – he’s history,” Taets said.More businesses are likely to close and more valley residents will be forced to scramble to pay the bills, Taets said. “True locals will do whatever it takes because they’ve done it before,” he said.Ultimately, Taets said, Aspen’s future boils down to simple facts.”As long as we have capitalism we’ll have rich people,” he said. And just as it’s been for the last 60-plus years, some of them will be attracted to Aspen.”Aspen’s going to be fine because there’s no better place to be,” Taets said.-By Scott Condon

Opening a new business in this economic climate might seem bold, but for some longtime Aspen restaurateurs, it’s a sign of the times.”I would say it’s grounded confidence,” said Elizabeth Plotke, co-owner of Gisella, a new Italian restaurant on Main Street.Gisella is in the same location of the former Gusto, which Plotke and Luigi Giordani founded nine years ago. They are the same duo that opened Campo De Fiori 16 years ago and have subsequently opened two other Campo locations in Vail and Denver.”Gusto had a long good run,” Plotke said. “We wanted to go out on top.”Gisella won’t be open for lunch like Gusto was – one likely sign of this past season’s economic challenges.Gusto’s lunch was popular with locals, Plotke said, but there were too many overhead costs to keep it economically feasible.Gusto’s sales were down 10 percent this season and Campo saw about an 8 percent drop. “We still had people but they were spending more conservatively,” Plotke said. “But I think even if the economy stays the same, people are ready to start spending money.”Plotke doesn’t appear concerned about the low sales – both Aspen restaurants have grown over the years.”Our goal has been not to lay off anyone,” she said, but hours have been reduced for some staff members at Gusto. The downturn forced the business to run more efficiently, cut unnecessary costs and negotiate aggressively with vendors.”We were running it really tight … our chefs really buckled down,” she said. “It was incredible to see how bad it could go so quickly.”In their latest venture, Plotke and Giordani have brought in a new partner, Colleen Delia. The new general manager of Gisella is Marcelo Ferreira, who has run Cache Cache for the past six years.The same chef from Gusto, Jorma Cox, will prepare Gisella’s fare, inspired from the Italian regions of Liguria and Campania.Plotke said they’ve put a “huge investment” into Gisella, including a complete renovation of the restaurant’s interior and an extensive wine list. The 20-page list will be overseen by sommelier Corey Campbell.”Everyone who worked on this put a lot of love into it,” she said. “We are all shooting for perfection with this.”She noted that future success for Aspen restaurants hinges on that approach.”For all of us, this is our chance to prove ourselves,” Plotke said. “This is the moment to shine.”-By Carolyn Sackariason

Veteran real estate agent Robert Ritchie usually finds the silver lining in the market, and he is characteristically bullish about the prospects for an economic recovery in Aspen.But Ritchie acknowledges it will take time.”The reality is, it’s going to be a long, slow recovery to get to where it’s been,” said Ritchie, a former partner in Coates, Reid and Waldron and a current broker at Mason & Morse Real Estate. “The clouds on the horizon aren’t going to dissipate quickly.”It is going to take time for the Aspen market to bounce back, he explained, simply because a high percentage of the typical buyers don’t have the leverage they once had. A buyer from Houston, for example, cannot leverage a business to purchase a dream house in Aspen right now because of the credit crunch.Ritchie believes sales activity will remain slow this summer. Most properties don’t have a loan on them. Therefore, most owners aren’t facing pressure to sell. He said there have been two to eight listings withdrawn every day for the last few weeks.Buyers are frustrated that the Aspen prices haven’t fallen more. They are used to plummeting prices in their home areas and want greater discounts, Ritchie said.There are some distressed properties in Aspen that are being offered at discount rates. Spec-home builders are being forced by banks to sell property, often at discounted rates, to get the loans off their books. Realtors in Aspen are showing the same 20 or so properties offered at discount rates, Ritchie said. Once the distressed properties sell, prices will eventually increase.That leads to Ritchie’s conclusion that, in the long term, the market prospects are “probably excellent.” His research shows that six years after the start of each of the last three recessions, the average single-family home price in Aspen soared 46 percent. He analyzed the recessions of 1981, 1990 and 2001.Ritchie doesn’t believe this recession will prove any different. “History just repeats itself,” he said, noting that it is a question of when the market turns, not if.Before the market turns around, he sees more contraction for the Aspen real estate industry. The major firms have strong owners, but some of the smaller firms may go out of business. And some real estate agents will be forced to find other lines of work since so few have had closings in the last year or so.”This fall will be the big shake-out,” Ritchie said. “It will contract in the numbers of offices and numbers of brokers.”-By Scott Condon

As the national recession continues to wreak havoc on the local economy, some business owners – like longtime art gallery owner David Floria – are banking on a summer of success.”I think this summer will be OK … the economy is no longer in free-fall and it’s zig-zagging back up,” said Floria, who has owned an art gallery in three different locations in the Aspen area since 1993. “People’s attitudes are going to be more positive and summer is generally a more positive time.”People are tired of being frugal.”Floria was able to withstand a tough winter season – sales were down between 20 and 25 percent – largely because art collectors will buy pieces regardless of what the economy is doing. Many of his clients have planned for months, if not years, to fill their recently built or remodeled homes with new pieces, Floria said.He also operates efficiently.”I have a very small, lean operation,” said Floria, who has between 13 and 25 pieces displayed in his Cooper Avenue gallery. “It’s about quality, not quantity.”But the fact that three highly reputable art galleries in New York, Sun Valley and Dallas have recently gone out of business is still a reality check for him. “It makes me nervous,” he admitted. But an upcoming exhibit of the late Herbert Bayer at Floria’s gallery will coincide with the 60th anniversary of the Aspen Music Festival, where Bayer is a featured artist. So Floria thinks he’s well positioned. And summer typically translates into more sales because summer visitors are more focused on arts and culture.There are a lot of art galleries in Aspen, but Floria doesn’t consider many of them as competition. The key to his success, he said, is that he’s carved out a niche by providing contemporary and modern art by international and emerging artists, including local ones.As he speaks with other gallery owners and retailers around town, Floria said many have their fingers crossed that the summer season will keep them alive.”Most people are hanging on and riding it out,” he said. “I’m not going anywhere.”Floria said the current economic downturn is by far worse than what he experienced after the September 11 terrorist attacks.”This seems like it’s scarier because it’s a systematic problem in the global economy,” he said. “Nobody knows what’s going to happen.”-By Carolyn Sackariason

With disposable income and jobs on the wane, some people are still willing to plop down $50,000 for a piece of history that’s not only close to their hearts – but a boost for their investment portfolio.So says Rick Schultz, proprietor of the Autograph Source, a downtown Aspen business crammed full of jerseys, balls, documents and other signed relics. Unlke many investment opportunities, high-end autographed pieces continue to hold their value.”When the prices of the Babe Ruths, the Hendrixes, The Beatles don’t come down,” he said, “that’s good. People still see these as good investments.”Just recently, Schultz sold some hand-written lyrics by Jimi Hendrix, the iconic guitarist, for $75,000.The big money is still out there, Schultz said. But, for whatever reason, “the $2,000 to $5,000 priced items, the mid-range items, have not fared as well.”Schultz has also seen a sharp drop in online sales, and had to reduce one of his full-time workers to part time. He staffs two other part-time employees as well. Schultz said business is on pace this year to match last year’s performance.The Autograph Source fills a relatively small space in downtown Aspen. Among its offerings are a Mickey Mantle-signed jersey that retails for $6,399, a Pele-autographed soccer jersey for $799 and a Time magazine cover autographed by Barack Obama for $2,899. There are items for as low as $100, including a Duke Snider-signed baseball, and signed Beatles posters that can command as much as $60,000.As a buyer and seller, Schultz keeps a keen eye on the autograph memorabilia market. He has seen some clients vanish recently, but he’s also boosted his inventory when some high-end collectors from Bear Stearns had to liquidate.Aside from the recession, tabloid scandals have also affected interest in his items. Olympian swimmer Michael Phelps was once one of his top sellers. But when pictures of his bong-hitting activities went viral earlier this year, sales of his merchandise plummeted. Meanwhile, Yankees slugger Alex Rodriguez remains popular, despite his admission to taking performance-enhancing drugs.”Phelps won’t sell, but A-Rod is my No. 1 selling guy,” Schultz said.Schultz said he simply must be more creative during these tough times. And he’s happy to be where he is.”Aspen is a good place to ride out the recession,” he said. -By Rick Carroll

Once upon a time, lodges and hotels in Aspen could look at their bookings in September and forecast how strong their winter would be. Forecasting summer business wasn’t quite as precise, but still helpful.Those days are long gone.Travelers book their trips much closer to their vacation times now, and they often stay for shorter periods. And this complicates things for Dale Paas, whose family owns the Limelight Lodge in Aspen.The Limelight was closed for reconstruction for two years until last winter, so Paas is just starting to regain his feel for booking trends and business expectations.”The advance bookings have not come in as strongly as we expected,” he said. Nevertheless, walk-in, short-term bookings for June have drastically enhanced the outlook for the month. Beyond that, however, it’s just too early to tell.For Aspen’s tourist accommodations overall, the reservations on the books as of May 31 would have produced an average occupancy of 41 percent during June and 39 percent in July. Last year, advance bookings at the same time produced an occupancy of 48 percent in June and 52 percent in July.So, the bad news is, advance bookings lag behind. The good news is, reservations often improve drastically during summer months because of the tendency for people to make late travel plans. Last year, actual occupancy for July was 81 percent, even though reservations as of May 31 were nearly 30 percent lower.The wild card this summer is the recession. Many of the Limelight’s past guests have returned since the lodge was updated and expanded to 125 rooms, but the condition of the economy weighs on them.”They, just like everybody else, are worried about their jobs,” Paas said.”I think it’s a difficult time to be in any business,” added Paas, whose family has owned the Limelight since the 1950s. He is thankful that his family decided to invest in the reconstruction and expansion when it did. The old lodge was outdated, despite regular maintenance. Now it can offer modern amenities that travelers want, which is essential to compete during an economic downturn.Paas remains bullish about Aspen’s long-term prospects, in large part because it has such high-quality institutions like the Aspen Institute and the Aspen Music Festival staging numerous top-notch events.”We really think the better resorts are going to come back to the level they were at, or better,” Paas said.-By Scott Condon

For the Ute Mountaineer, the summer tourism season is a glass half-full, half-empty kind of thing.The upside for the longtime Aspen retailer is that business this summer is projected to be better than last winter. The downside is business last winter was off substantially, because of a recession that still appears to be choking consumer spending.”What we are looking at is probably a little better than the percentage we were down for the winter,” said general manager Paul Perley, who has lived in the area for more than 20 years.That might not be the most glowing assessment, but it does point toward a chance that Ute Mountaineer could be coming out of a funk that most other businesses in the state – and across the nation – have experienced.”Let’s say we start our season Memorial Day weekend. That was OK. The first week of June was better than expected,” he said. But the (next) week was worse than expected.”Perley said some of that dropoff could be attributed to the 2009 Food & Wine Classic being moved back a week, so it was not a straight-up comparison between the two weekly periods.While Ute Mountaineer, which specializes in outdoor gear and clothing, seems poised to do better this summer, it has made adjustments to account for leaner times.”We’ve definitely lowered our staffing expectations,” Perley said, “kind of in line with the percentage we are seeing down.”He added, “That means using more of the office staff to go work on the floor and trying to run a little bit tighter ship … we haven’t let anybody go.”The retailer is also likely to be more aggressive, sales wise, this summer – specifically with goods that do not sell as well. The idea is to keep people interested and coming back for other things.”The retail mentality after this past winter is that people don’t want to pay full price now and so they are looking for sales,” Perley said. “Obviously, if we just put everything on sale we are not going to stay in business very long.”Looking ahead, Perley projects a 5-7 percent increase in business for September, in part because the same sales period a year earlier was lousy.”It was just poor,” he said. “That is when everything started to go bad.”-By Wyatt Haupt Jr.


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