June 2, 2009

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Wasatch and Summit Outlook

June 2, 2009

We’d like to thank The Yarrow Resort Hotel & Conference Center for hosting the event and Myles Rademan, director of public affairs for Park City, for moderating the discussion. Like the rest of the state, Wasatch and Summit counties are feeling a hit; yet, leaders remain cautiously optimistic. In this regional economic outlook roundtable, experts discussed how the area’s travel and tourism industry has handled the economic storm, including the growth of international tourism. Experts also discussed diversifying the economy, education trends and residential and commercial real estate. Participants: Myles Rademan, Park City Municipal Corporation; Bob Wheaton - Deer Valley Resort; Jason Giles - Heber Valley Chamber Bureau; Richard Hines - Heber Valley Vision 20/20; Jonathan Weidenhamer - Park City Municipal; Curtis Taylor - Heber Valley Bank; Bob Waits - 212 Resources; Wes Bitters - UVU, Wasatch Campus; Allen Fawcett - Heber City; Jan McCormick - Zermatt Resort; Bill Malone - Park City Chamber/Bureau; Gary McDonald - Wasatch County Housing Authority; Bob Mathis - Midway City; Paul Kennard - Wasatch Economic; Martin Lewis - Utah Business; Colin Hilton - Utah Athletic Foundation; Britt Mathwich - Homestead Resort; Shad Sorenson - UVU, Wasatch Campus Development; Jessica Taylor - The Yarrow Resort Hotel & Conference Center Corporation Travel and tourism is Wasatch and Summit counties’ economic bread and butter. How has the slowing economy affected the area’s travel and tourism industry? MALONE: We estimate that overnight visitation will be down in the 16 percent range and possibly skier days in the low teens percent, with revenue likely off substantially more. Prices have dropped dramatically related to lodging prices. People’s patterns in terms of spending, whether retail or dining, have changed dramatically. We could have anywhere from 25 to 30 percent in revenue down. So, it’s requiring a lot of adjustments moving forward in terms of staffing and how to operate business. We are looking at keeping what works and trying to get rid of things that are irrelevant to the community. GILES: In Heber Valley, we are experiencing approximately 20 percent reduction in our lodging. Looks like that forecast is going to continue through the next quarter along the same lines. And in a community where 20 to 22 percent of our jobs are tourism based, it calls for a little bit of alarm. We are seeing the day-to-day customers still there, but it’s the businesses that count on other businesses that are seeing dramatic drops. On the plus side, we are seeing brand new businesses coming out of the woodwork that are hurting. Some good news is we had about 12 new businesses just join the chamber. WHEATON: We saw that locals are still coming out and spending money. For instance, our season passes were up last year versus the year before. But, the bottom line is we were off from the previous year, which was our sixth record year in a row, so it’s all relative. We did see people shopping more. In the past number of years we never really got a lot of hagglers on the phone, but this year we’ve heard a lot of people saying, “Gee, I want to come over. How about a free night?” Overall, I’m convinced that this next year is going to be at least as strong as it was this year, and that we are slowly going to do see our numbers go up. McCORMICK: Midway got hit with a double whammy. Typically, when Park City is running strong occupancy, we are going to have an opportunity to attract a lot of that skier business. This year, because there was a fair amount of inventory and everybody was discounting, we had a difficult time trying to compete. On top of that, this year most of the major corporations and companies stopped meeting. We had a couple thousand room nights cancel the first quarter alone in groups, which really shocked us. And as we are looking at the rest of this year, we are finding that most companies are either cutting back, their attendance is off or they’re asking for concessions after contracts have been signed. So it’s clearly a situation that we are concerned about. Things have been tough, but we strongly believe in the human capital. The question is, “How do you keep your core staff working on a regular basis as you continue to build a future foundation in the coming years?” We are concerned about 2010 and 2011, but we believe there is tremendous opportunity if we package our services differently. So that’s what we are looking at doing. We’re not going to sell at a low ball rate which, unfortunately, a lot of folks in the down economy will do to get people in. But that just drives the whole market down. MATHWICH: We’re experiencing about the same thing. In the winters if Park City is doing well we will get a little bit of overflow. We do a lot of local and group business in the winter, but in the last part of October and first part of November it was like the spigot just turned off on group travel. We had probably 500 rooms cancel or blocks dropped lower. And we are hearing the same thing with people coming back and saying, “Look, we want to come but we have to have it for this rate if you want to do it this year.” We had budgeted about 8 percent reduction for this year, but I think it is going to be more like 20 to 25 percent. TAYLOR: Our winter consists primarily of international travelers, the group market and the leisure traveler. The leisure traveler definitely suffered the most significant decline. People started realizing that they do not have to make advance reservations or did not have to pay a deposit. They could wait, see where the snow was good and get a better deal a week in advance. And that makes it very difficult for us to plan our winter and depend on revenues. So, the leisure market slowed, but international stayed strong. The group market was not as strong, but we are very active in government and association business. Many are coming back and asking for concessions to contracts that are already signed. Events will be shorter in duration and they will be scaled back. We’ve heard resistance to the word “resort.” Even if the destination is a good match for someone and a good price and value, the perception that it’s a resort destination vacation-type of function versus back-to-business has hurt our market. HILTON: We [Utah Athletic Foundation] are a classic example of a nonprofit that looks to the earnings of an endowment to allow us to be in existence. Over the past fiscal year, our endowment is down 29 percent. The tough thing to advise our staff is we have to change how we operate going forward. If we stay under the current spending pattern, I calculated we would be out of business in less than 15 years. Despite our revenue losses, however, we are still under budget. So going forward, we have had to cut back on facility operating hours, how many people we have per shift operating the Olympic Park, the oval down in Salt Lake and still have preserved our core staff and our core programs. Despite all the financial challenges of the past year, we are up 27 percent in participant numbers in our youth programs. That is really good for us, and I think a little bit of an indicator that we have programs that are attractive to folks to get their kids involved in winter sports. That’s obviously something we feel is very unique and marketable for Utah—we have an ability to be promoting participants in winter sport programs with this post-Olympic legacy foundation. Another positive indicator is the World Cup events that we hold both at the Olympic Park and down at the Olympic Oval. We saw the best attendance at our bobsled, skeleton and speed skating events than we have seen in a long time. We have a lot of great opportunities for folks to come out and see these events. And that has been a focus of mine—to look at utilizing these Olympic facilities more as community resources. Many of today’s economic woes are centered in real estate. How is the area’s real estate industry doing? TAYLOR: The most severe problems of the recession seem to be concentrated in the real estate industry and, of course, that affects a broad swath in our communities, both Wasatch and Summit. Unimproved land prices or improved building lot prices, without vertical improvements on them, are down in Wasatch County anywhere from 30 percent to in some cases 50 percent; while improved homes, the homes for sale, might only be down about 20 to 30 percent. But we also haven’t found a firm bottom yet. WAITS: We are an environmental service company located in Midway. Housing has been a big issue for us—we simply couldn’t attract young engineers and accounting folks and young professionals into the area. We actually had to put another office up in north Ogden to be able to afford staff. We just have sort of our headquarters group here. So, affordable housing programs are important to attract young professionals. The other side is the issue of scale, which is important for economic development here. We can’t find real estate that we can really afford for office space as a relatively new company. Whenever we tell someone we are in this area, they say, “Oh, you are in such a beautiful area.” We are, but we have to house our people 100 miles away. So I think it would be good to look at the scale issue—attract lots of small businesses and become incubators for entrepreneurs. FAWCETT: Several months ago we saw the cost of a single family home go right off the charts. It caused us to totally rethink our whole affordable housing. In fact, we basically threw out our whole plan for affordable housing and we have rewritten it. We are now focusing even more on affordable housing, and getting to have a real impact on folks that are in that area. McDONALD: In Wasatch County, we have a lot of people who have to live in Provo or some place generally in Utah County. We have a lot of people coming in now applying for some of our down payment systems loans. We also have a program to help first-time home buyers to get into homes. And even though there’s obviously a real hard time now with real estate, that has actually created some opportunities for individuals and families to get into homes they otherwise would not have been able to do. We are working with Utah Housing Corporation to build homes that we call the Crown Project, which stands for Credit to Own. We have some lots that we received from developers as part of their affordable housing obligation that we will be building on down the road, possibly with Utah Housing Corporation again through another program that’s called Share. Has the economic downturn posed any unique opportunities for the area? MALONE: There are people who are great risk takers and see opportunity in these times and are out there opening new businesses, and some of them are being very successful at just coming into the marketplace at the right time. HINES: I’m the chairman of Heber Valley Vision 2020. It didn’t seem last year or two years ago that 12 years out was very far, but all of the sudden I think we have a big lag for the growth that wasn’t anticipated. One opportunity that the recession has given us is time. Vision has spent time with political agencies, city governments, the county and the offices within those areas, to present and discuss thoughts of what we would like to have the Heber Valley look like in 12 years, now 11 years from this point. The positive issue for Vision 2020 is that we do have some time to communicate and gather a base within the Heber Valley, and to help promote business leaders, civic leaders, financial leaders and the like. I don’t want to call the slowdown “good,” but it has given us some time to develop the things that need to be done to make growth happen. It’s very important to our valley that each one of these elements happens. WHEATON: Just because the economy isn’t what it was two years ago, we have not moved further away from the airport. We do not have a less great place to live, with just a myriad of recreational opportunities whether it’s skiing or golf or fishing or just being outside. We live in a great place. And that’s a wonderful thing. I would say that diversity and the things that we have to offer as a regional economy are absolutely crucial for our success. TAYLOR: All efforts that go toward diversification of the economy, both in the seasons as well as in different businesses, allow us to gain strength. When one portion of our market is suffering another is there to shore it up. So the peaks and valleys can definitely melt with the diversification. It allows us to provide quality service year-round and stabilize our work force. We are not ramping up and breaking down. And all that leads to happier employees, better work place and better service to our guests. How has Utah Valley University, Wasatch Campus handled the economic strife? SORENSON: A recession is typically good for higher education, and that has played out this year. For the university as a whole, in both fall and spring semesters, enrollments were up double digits. While being up double digits is good, we are funded about 48 percent by tuition and 52 percent by tax revenue. So while the tax revenue went down, the student enrollment increased, and we were educating more and more students with less dollars. At the Wasatch campus, we are up about 44 students over last spring, which is pretty significant. So we went up from 260 to 304. The program offerings that we have at the Wasatch campus are pretty skill based, and we are also working hard to get a hospitality management program. We are really focused on the service needs of the economics of the region that we serve. BITTERS: At the present time, the university is building a base for teaching hospitality or resort management. I have always felt the base is in the high schools, so we have contacted the four local high schools and told them about the program we want to develop this summer. It will be a continuous program from now on where students will have an opportunity to come to a summer camp where they will earn six college credits toward their degree and also have the opportunity to visit various resorts and hotels, establishments, country clubs and golf courses, where they can learn of the opportunities that might be available to them in the resort and hospitality areas. At the present time, we have 39 applicants from the four high schools who are interested in the summer program. The vision is if we can get them interested in hospitality during high school, they can continue to go ahead and take college courses during the high school year. And it is feasible that if a student entered as a junior into our program, they could graduate high school with a two-year associate degree. Our vision for the future at the Wasatch Campus is to have our students, during their junior and senior year, spend at least six months to a year in an internship which is included in our four-year degree. It’s a long process, but we are building a foundation that we can go ahead and provide better education to the students working with the industry, and also provide better employees for the industry in the Park City and Wasatch area. What is the area doing to diversify its economy and prepare for future growth? WEIDENHAMER: Park City always had the tone of, “Hey, we are a resort town and we need to do the things that support that. We are a ski town. We need to have a workforce that supports a ski town. We need to be partners with the resorts. Our snow is our best friend and the winter economy is where everything is.” We are, however, working to diversify our economy by spreading out the times of the year where we can make money. We have had a very high focus on the summertime economy, and our event calendar has been very successful. We have been able to grow our summertime and shrink our shoulder seasons. And with the resort lodging base we have here, we are able to accommodate a series of guests. Our occupancy has steadily grown throughout the summertime. Cultural tourism is another area we have focused on recently. The city signed a 99 year lease with the Park City Historical Society, which resulted in a $7.5 million renovated and expanded museum on Main Street and the old city hall. That is scheduled to open September 15th, and it’s a perfect example of things that we are doing. It’s historic preservation and it’s cultural tourism, which we feel is a sector we have targeted and can grow. Another area we are actively targeting is recreation. Obviously you’ve got what Ogden is doing in trying to target the outdoor recreation. We are not actively recruiting businesses like Solomon or Rosignol, but we are trying to continue to focus on the brand of world class destination and tourism that we have. We have the Utah Olympic Park, we have the two other venues in city limits for the Olympics: Deer Valley and Park City. And we want to continue to focus on world class destination resorts. With the ice rink that we built at the end of town, the National Abilities Center and through the annexation of Intermountain Hospital and United States Skiing and Snowboarding, we have set a precedent for how we can brand ourselves and be different than what we think is every other highway interchange in town. We have set a tone of recreation, wellness, destination and sports. We continue to evolve our thinking on what to do with that land. RADEMAN: So it’s not post-tourism. It’s enhanced tourism. WEIDENHAMER: The city continues to evaluate what our role is in the economy. We have a housing program. We have an environmental program. We’ve created a sustainability department which balances economic development, environmental and then community quality of life. But, if we bring so many visitors in and the traffic gets so bad that no one wants to be here, I’m not sure we have succeeded. If we have clogged up the road so the workers can’t get to the resorts and the people buying lift tickets can’t get there, they won’t want to come. Another opportunity we have is all the commercial area that we are doing right now is ripe for redevelopment. We’ve got buildings that are 20 to 30 years old and it is probably about time they’re looked at. Those buildings have five property owners and they are all talking to each other to figure out a redevelopment plan. And, if we can integrate transportation, general planning and commitment on these property owners for corridors and redevelopment, we have a really neat opportunity to explore. What’s on the horizon for Wasatch and Summit counties? Are there any major developments and programs you’re excited about? WEIDENHAMER: The legislature passed a bill that essentially enables the Air Force to come in and build a hotel in the community. The county and state are working with a military installation group to find a right site to locate that hotel. The original concept plan was associated with mixed-use development that included a movie studio and some other support to assist in subsidizing the hotel development. So currently we are in the infancy stages of understanding what it really is. But, I think where the county and city government are right now is that this is a really good spot to have a military hotel. And, we really want a military hotel in town. MALONE: This year we went from an $11 million tourism budget to a $7 million budget. And it’s going to change how we do things, what we do and where we market. Like any other business, we have to adapt and make those changes. But we can also remember when the entire budget was $900,000, so we have come a long way for marketing the state and helping communities drive business. I think the new liquor laws are bigger than what we think. The amount of customers who have shied away from Utah based on the perception that Utah is no fun, especially in the meeting and convention business, has been huge. What we are doing now to normalize the liquor laws is going to pay dividends for us. It’s hard to measure now because we are in this recession, where business travel is down. But when we come out of the recession and people recognize our laws have changed, we’ll attract more visitors and conventions to the state. One other thing I’d like to mention is international travel. This winter was our fourth straight increase in international visitation. We went up another 10 percent this past winter. Brazil and Germany were big winners this year for us. Utah—not just Park City—is becoming well-known on an international visitation basis. The Delta nonstop flight from Tokyo to Salt Lake City is also going to be a big help. So when we rebound out of this recession, hopefully Utah will a top destination choice. GILES: I think international traffic will have a big impact on the area in the coming years. The international traveler has already found Summit County, but not Heber Valley—but they will and that’s a good thing. In this down economy, a lot of the travel industry folks—the magazines, the TV shows—are looking for locations off the beaten path. Well, this is a great location for off the beaten path. They don’t want to go to L.A. or Orlando or Portland—they are looking for unique family travel. Heber Valley fits into that and we will be the beneficiaries of that kind of activity over the next couple of years. McCORMICK: We are working in conjunction with the Chamber to create the premier outdoor experience, because clearly Heber Valley has a tremendous amount of outdoor recreation to offer. Again, it’s just getting the word out in a way that is more of a word-of-mouth exposure versus strict advertising. We have social media campaigns going out there now just talking about the great golf experience you can have at the Heber Valley at phenomenal prices. My whole staff—including me—now have a Facebook page. It’s literally that kind of a grassroots marketing campaign that we are talking about. WEIDENHAMER: To go along with that thought, I think the regional economy is something that we need to start thinking about. I think there is a new plateau. And we have had records in each industry for six years now. To compare this year to the last six years is maybe unfair. I think looking at a new plateau is reasonable. But what’s good for Park City can be good for Midway. The idea that we are holding huge events in Park City, but those guys are renting out the whole Zermatt facility is good—it’s good for us individually and together as a community. MALONE: Certainly the Olympics were a great impetus for tourism. But in addition, the boost in summertime events utilizing sports facilities for softball tournaments and hockey events and other things has been great. I think we are certainly actively looking to grow what I would call destination athletes to utilize our facilities and utilize not just training environments in our region but also health services and sport orthopedics. HILTON: The total improvement of performance is a key thing. You will see more national soccer teams and other international groups utilizing the region up here because of the access to the airport. All those things won’t be huge numbers initially in a year or so, but I think over time we are going to see that as a great thing that gets our numbers increasing. KENNARD: I think it’s important to note that we have a regional focus and regional vision, and our two areas are very complimentary to one another. Heber and Park City are not the same. Sometimes people in Heber say, “We don’t want to be Park City,” and I hope Park City never takes offense at that. But, Heber shouldn’t be Park City. Heber, Midway and Park City need to be true to their identity in order to be successful. But, there’s a lot of things that we can do on a regional basis. Our tourism is probably 20 percent. It’s a major part of our economy and we want to keep it that way. Realistically, we are joined at the hip at Deer Valley—Deer Valley spans our two counties. I think there’s a lot of opportunity for us to work together and really maximize what people have when they come to this region.
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