Mountain towns across the West see declining occupancy, but Park City is an exception
Looking back on the 2018-19 winter season, it’s hard to argue anything could have gone much better for the Western mountain town lodging industry. Public faith in the economy was strong, so those with money were ready and willing to spend it. Snow was widespread across the country. Most ski resorts, as one would expect, did very well.
And yet for the lodging industry, it was “the perfect example of a head-scratcher.”
Tom Foley, senior vice president of business operations and analytics for Inntopia, which analyzes visitation in resort towns, said both occupancy and nightly rates softened compared to the previous winter despite seemingly optimal conditions.
“And in the prior year, the economy was more in question and snow conditions were at best inconsistent,” he said.
Which raises the question: If conditions are excellent, why is this happening?
November analysis shows continuing decline
Inntopia released its November analysis a few weeks ago — December’s report won’t be released until later this month — and it covers lodging from more than 300 properties in 18 Western resort towns across six states, Park City included. In those 18 towns, the report stated, actual occupancy for November was down 5.3% compared to November 2018, while the average daily rate lodging properties charged guests saw only a 0.7% increase — despite widespread and significant early season snowfall.
Lower occupancy and nearly flat rates led to a 4.7% decline in revenue for the month compared to November 2018. And projections for the remainder of the winter season also show a decrease in year-over-year occupancy in five of the six winter months. The average daily rate for the winter is projected to be up a modest 4%.
According to the report, winter revenues for the entire six-month season are projected to be up 2.4%, though Foley noted that is being bolstered by the higher rates and not increased occupancy.
The pace of booking through the rest of the winter season is also down, according to the report.
“The behavioral trend we’ve seen is that the year-over-year percentage change in average daily rate is softening toward flat, and at the same time occupancy is softening toward flat, as well. In many mountain communities, it is actually declining,” Foley said. “It’s more pronounced in mountain communities because the year-over-year percentage gained in (average daily rate) has increased in mountain communities for most of the past decade and has outstripped the inflation rate by a couple hundred percent in many cases.”
Foley said Inntopia has been consistent in its message for years now: The rate of lodging performance growth in mountain communities has far outpaced the increases in most people’s income. If, year-over-year, the average daily rate is down more than occupancy is going up, that’s a recipe for negative revenue growth. Foley said lodging properties in mountain communities need to be more thoughtful in their rate increases and stop short of the “tipping point” where it begins to harm occupancy. Modest rate increases and modest occupancy growth, he said, “leads to more than modest revenue increases.”
“However, we have been unwilling as an industry to look for that balance and instead have pushed toward what the market will bear,” Foley said. “The downside is ‘what the market will bear’ is dramatically more expensive in mountain communities than in other destinations. So in an era where we see declining participation (in winter activities), it starts to become something of a self-fulfilling prophecy.”
Foley said mountain resort towns would do well to pay attention.
“Clearly there is a change not so much coming as already here,” he said. “The data is clear. Since January of 2018, there is a softening of the average daily rate, and in the last seven to eight months a softening of occupancy. Not only in our summer season, which grew at an alarming rate and was bound to slow down sooner or later, but in our winter season, too, which is our bread and butter.”
Park City, at least for now, is an exception
Before Park City residents and workers start wringing their hands, it’s important to note that, while occupancy is down overall across the 18 towns Inntopia tracks, the overall numbers look good in Park City. Bill Malone, president and CEO of the Park City Chamber/Bureau, said Park City had a difficult November — down 17% year-over-year — but projections for the rest of the winter are promising.
And besides, Malone said, he doesn’t put much stock in the numbers in November, as Park City’s busy season traditionally starts with the arrival of the December holidays.
“First, we went from 25% occupancy in November 2018 to 21% in November 2019,” he said. “So, sure, that’s a 17% decrease, but it isn’t much.
“And there is not a lot of Thanksgiving destination ski business here. Probably our November numbers are more reflective of meeting and convention business than ski business.”
Malone said December through April are the months that matter in Park City, and projections show year-over-year occupancy up 1% in those months. For the 18 towns in the report collectively, it’s projected to be down 1.5%. Specifically, Malone said Park City is expecting occupancy to have increased by 4% in December and to increase by 11% and 3% in January and February, respectively — which is notable, as December through February is typically the town’s busiest three-month stretch. March projections as of Nov. 30 are down 3% and April is projected to remain flat.
“When I look at the numbers for these 18 other towns and they are down 1.5% while we are up 1 percent, I’m pretty satisfied with that,” Malone said. “It’s also important to note it’s still early yet. These projections are months away.”
Malone said the mood among Park City businesses directly or indirectly involved in winter activities is optimistic.
“I think there’s a lot of confidence coming through after the holiday season,” he said. “Obviously that’s big for the community from a sales tax standpoint. We’re getting into the meat of the winter, and we have unsettled weather coming over the next couple of weeks. That’s always good for us.”
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Park City officials are anticipating heavy traffic over a five-week stretch that started on Friday, a sign that City Hall expects solid business over an important period in the ski season.