With the failure of proposition HH, the Colorado legislature is on the hunt for tax…
Colorado has become the “festival capital” using events to draw an increasingly larger number of visitors from the wine festival to arts festivals to music festivals to car festivals, etc… every weekend was a festival in Denver and mountain resort communities. With the coronavirus the “festival” has stopped on a dime. What does this mean for tourism? What about real estate?
The festival background
Festivals over the last 15 years have become increasingly popular especially in the various Colorado resort communities. Festivals were originally focused on the “shoulder” seasons with Octoberfest and others and they have migrated to year round activities with well over 50 a year in Summit county home to Breckenridge, Keystone, Frisco, etc… Almost every weekend turned into a “festival” with many big weekends like fourth of July having multiple events from music festivals to art festivals and everything in between.
Before Coronavirus, business was great with an increasingly larger number of tourists visiting. When the pandemic struck there was an immediate halt to any large gatherings and the festivals have pretty much been canceled for most of the summer.
Why are festivals preferred by cities?
Many cities, especially the mountain communities, rely heavily on sales tax to fill their city coffers. Festivals are an easy way to get a large number of tourists to the various cities and increase tax revenues. As a result, festivals have greatly expanded leading to “event fatigue”. Here is an excerpt out of the Summit county paper:
Events are a fun way to bring together a community, but in towns where the local economy revolves around tourism, residents can become fatigued by the constant barrage of marketing, activities and crowds.
This is an especially fine line in Summit County, which attracts visitors from across the world as well as the nearby Front Range. In addition to spending money at the events, visitors also support other local businesses such as restaurants, breweries and lodging establishments.
Successful events equal an increasingly successful local economy, but when too many events overwhelm Summit County, resident become disgruntled by road closures, overcrowding, traffic, noise and an overall disturbance of the mountain lifestyle.
In a nutshell festivals have become overused by cities leading to conflicts with full time residents.
What happens after the virus?
I don’t think that the more is better mindset is going to continue in the future. Residents were pushing back against the constant barrage of festivals before the virus and the backlash will only grow. A good example is Steamboat Springs. Steamboat has been hosting a kids baseball tournament (the triple crown) for the past ten years. When it was announced that the city had approved the even for this summer, the town was in an uproar. Almost 25% of all residents signed a petition against the event and hundreds more called their councilor to oppose the move. Ultimately the decision to allow the even was reversed. This is the beginning of a new trend where residents want to minimize the quantity of events going forward.
After the pandemic wanes, events will no doubt come back but they will be considerably smaller and less numerous than they are today. There is going to be a much great focus on the impact to the respective communities.
Furthermore, the preparation for the festivals will be very intensive with handwashing stations, limits on number of attendees, etc… this will make many of the festivals financially unviable and no doubt lead to a steep decline going forward.
How will loss of festivals impact real estate?
There is no doubt that festivals brought an increased number of tourists to various cities and towns. These same tourists, in many cases, also became prospective buyers. With the festivals being drastically reduced or going away and less tourists, will the buyers also vanish?
There are so many festivals now that many visitors attend one because they happen to be in town as opposed to planning a trip just for a particular festival. There is still a huge desire for folks to visit the great places where the festivals were held due to the small town feel, shopping, dining, outdoor recreation opportunities, etc…
I don’t think there will be much of a real estate impact one way or another due to the decrease in number of festivals. Regardless of the festivals there is still not nearly enough supply of real estate and demand should stay constant. Furthermore there is no easy way to increase supply in most of the markets with large numbers of festivals. Think of Breckenridge. The town is basically 100% built out and the only way to add supply would be to redevelop an infill lot or raze an existing structure for a new build, both of which are costly endeavors.
The world is changing very quickly. Nobody knows when or even if an effective vaccine will be available. This has caused travel to come to a virtual standstill and most large gatherings, including festivals, canceled until 2021. In the short term, this will have an impact on real estate in destination resorts with considerably lower transaction volumes. In the long term, these same markets will do fine with or without the large festivals due to lack of supply and continued demand to live and visit these areas.
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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 Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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