Revenue is up, but occupancy is not for western mountain resorts
July 26, 2017
Traffic jams and long lines at Safeway can often characterize summer in Lake Tahoe, but a recent report shows that overnight visits to mountain resorts have remained relatively flat this year.
The monthly DestiMetrics Market Briefing reports that although western mountain resorts have not experienced significant gains in occupancy so far this summer, their overall revenue has climbed 8.4 percent because of rate increases.
"While this pattern works well for the bottom line, when we see a trend like this persist, there is concern that the lower income segment of our customer base may be getting forced out of the market by the steady rate increases," said Inntopia Business Intelligence Director Tom Foley in a statement.
Inntopia, a Vermont-based business intelligence company, acquired DestiMetrics earlier this year.
The monthly report, which was released July 20, shows that key economic indicators such as the Dow Jones Industrial Average and the unemployment rate remain mostly positive. However, it also notes that even as employee earnings are up 2.5 percent compared with last year, the pace of earnings remains well below economic growth.
"Financial markets are still waiting for the impact of legislative action, or inaction, in Washington to determine the economic direction for the remainder of 2017," Foley said.
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According to the data, May through October occupancy rates only rose 0.2 percent at western mountain resorts, which includes properties in Colorado, Utah, California, Nevada, Oregon, Wyoming, Montana, and Idaho.
The flattening of occupancy rates can also be seen in mountain resort destinations across the Rocky Mountains, which rose 0.6 percent according to the company. Similar to trends in the West, lodging revenue across Rocky Mountain-area resorts was up 9 percent for the summer season.
"A booming economy has allowed lodging properties to nudge rates up for the past year, but occupancy is lagging which is unusual and in contrast to previous summer seasons," said DestiMetrics director Ralf Garrison in a statement. "One or more culprits could be contributing to this trend including rate resistance, lower demand, or fewer available rooms during peak weekends and periods."
Rate resistance is a term that describes when consumers are no longer willing to pay a certain price for, in this case, a room.
"Rate resistance, that's really consumers saying 'You know this is really expensive compared to a loaf of bread,'" said Foley in a follow-up interview.
He said that rates in the tourism industry have grown faster than the rest of the economy, which can cause some consumers to think twice about how they spend their money. Still, it's only one possible explanation why revenue has been able to climb as occupancy remains flat.
"I think we can infer but without a direct study we can't know for sure," Foley said. "Market forces are telling us that in a supply and demand economy if you can get the rate, you do."
In other words, room rates can rise as long as enough people are still willing to pay.
"That's just capitalism at work," he said.
Another possibility is that after years of growth, resorts are maxing out because they're running out of open rooms.
"As we increase our visitation during summers, during peak days such as Saturday, we are bumping up against occupancy limits," Foley said. "As rooms become more scarce, rates are dirven up."
The other burning question many in the tourism industry have is what impact short-term rentals like Airbnb, HomeAway and VRBO have on the economy. That, Foley said, is still largely unknown.
"It's a complex question that requires a lot of detail because its new ground," he said.
He stressed while there is a possibility that the popularity of short-term rentals has shifted room demand away from resorts, it's only a possibility at this time. He also said that he was working with his team to develop better tools for understanding the rent-by-owner market that they hope to unveil later this year.