The global economy is still healthy, yet last year out of the top destinations for international travel only two declined. The United States and Turkey! The other top ten destinations all increased; many increased by double digits while the U.S. declined by 6%. The United States lost 32.2 billion dollars in spending and over one hundred thousands jobs due to the drop in tourism (LA times). How does this impact Colorado ski real estate? Why are international visitors so important?
Note: I took this picture when I was driving on i70 early one morning looking at properties outside of Breckenridge, it was amazing how the sun was hitting just a small section of the mountain.
Importance of International Visitors
International visitors are the most lucrative tourists as they stay longer and spend considerably more than domestic tourists. According to the United States Travel Association international travelers spend on average five thousand a trip. I suspect this is considerably more in Ski towns. For example if a family of four went to Aspen for a week, lodging alone would be around five thousand or more and rentals, food, etc.. would put the total well above ten thousand dollars. Ski towns love international tourists as they spend considerably more and stay longer.
Impact to Colorado
Rob Katz, the head of Vail Resorts, told analysts earlier this month that international visitation to the company’s major ski resorts in California, Utah and Colorado was down through January. He specifically noted a decline among Mexican travelers (source Denver Post). Colorado ski resorts are a large destination for many international tourists as they focus their time in places like Vail, Aspen, and Telluride. For example, Colorado’s largest draw of international tourists are from Mexico (24% of all international arrivals) with the Vail Valley one of the top destinations. Last year arrivals from Mexico into Denver were down twenty five percent. This hit the bottom line of ski resorts throughout the state.
Not only does a drop in visitation impact the resorts bottom line, but also the real estate in the area. International visitors are large purchasers of Colorado Resort Real Estate. For example at the Solaris, a trendy upscale residential complex in Vail Village, Latin Americans have bought 60% of the units that have sold for more than $12 million, with Mexicans making up the majority of those buyers. This same theme is repeated throughout the mountains of Colorado with International buyers purchasing large amounts of real estate. If visitation continues its downward trajectory, real estate will be impacted as the pool of prospective buyers decline
What is behind the drop?
There are several factors behind the recent visitation slump.
- Strong Dollar: As the dollar strengthens buying power of international buyers decline. International trips and real estate become more expensive as the foreign currency buys less dollars.
- Trump Slump: According to Travel Weekly “ Trump’s America-first rhetoric, continued attempts to institute a travel ban on Muslim-majority countries, restrictions on electronic devices on airplanes and the rollback of Cuba travel easement have put the travel industry at odds with the administration all year”
Regardless of the reason behind the international travel decline, hopefully the trend can be reversed. quickly. Colorado ski towns will be impacted negatively both in spending by international visitors on vacations and real estate purchases. If visitation is dropping in good times, what happens when there is a global recession? How deep will the loss of international visitors be felt in Colorado Mountain Communities?
Resources/Additional Reading
- https://www.bloomberg.com/news/articles/2018-01-17/how-to-reverse-america-s-foreign-tourist-problem
- https://www.denverpost.com/2017/03/22/decline-mexican-travelers-vail/
- https://www.nytimes.com/2017/09/19/travel/tourism-united-states-international-decline.html
- http://tinet.ita.doc.gov/view/m-2017-I-001/table1.asp
- http://www.latimes.com/business/la-fi-coalition-visit-us-20180116-story.html
- https://fronteralist.org/2012/11/13/mexicos-rich-and-powerful-find-their-places-in-vail-colorado/
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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