Is Park City Ready for the Next Recession?
Historically, recessions have struck the national economy every 6-7 years. Some are weak like in 1969, while others are powerful like the Great Recession of 2008. What is a given, is that they happen.
With that as a backdrop, economic indicators, like orders for manufactured goods, are starting to flash the warning signs of recession. It shouldn’t come as a surprise, since we are 6 years out from the end of the last recession. This doesn’t mean we are in for another Great Recession but it does mean that economic activity will slow down. As a tourist town, recessions likely impact Park City more than the average area.
Why is that? When a recession hits, unemployment increases, people have less money to spend, and vacation trips are reduced. This impacts local business that serve the tourist crowd (everyone from Vail to Redrock and the people that work there). Likewise, as unemployment rises, the almost-rich buy less second homes. The rich typially still buy second and third homes, and in some ways that could help a place like Park City weather the storm. However, the 800 or so real-estate agents in Park City (we heard that number once and have no idea if its true… but if it is, wow), are going to be impacted significantly. It then begins a vicious cycle where the impact flows down stream to where those people spend money.
So, what impacts could arise from the next recession? This is all a guess, but here are some potential impacts:
- Vail curtails expansion plans. We’ve been told Vail is going to invest $50 million in PCMR and Canyons. While Vail is probably the best run
real-estateski resort company in the world, a bad winter and then a recession could cause them to reduce the amount of money spent to upgrade the resort. Utah’s winter has not been snow filled and looking at Colorado base snow levels, they don’t look much better.
- Local hotels will struggle. Occupancy rates at Park City hotels already often seem low (that’s not news). However, a new hotel (on 224) will likely open this summer. That will increase the available rooms, right into the brunt of the recession. Hotels are resilient, though, so we wouldn’t look for any to fail, but it could impact workers (and owners).
- Village at Kimball will lose a few stores. While the name brands likely won’t be impacted (i.e., Five Guys, Zuppas, Smiths, etc.) we could see a few of the stores close down. You probably already know the ones we are talking about.
- Some Park City Heights Construction Could Be Delayed. Park City Heights construction appears paused for the winter as you might expect. It will likely resume this spring. If a recession has begun, you could look to fewer homes being constructed in the near term. They could wait to ensure that they didn’t build a glut of homes there too soon. We are pretty sure it will eventually be maxed out, but it could take longer than expected.
- The Movie Studio could struggle to continue construction. We saw a TV report on KSL that said the Film studio was near completion in mid January. However, it still looked like a construction zone with dirt floors inside. If they have enough financing to complete the project before a recession was in full steam, they will likely be fine. If not, we may have to wait a while for its grand opening.
- The 1000+ units at Silver Creek could be delayed. This project seems to be coming up more and more in conversations. However, we haven’t heard anything formal about it beginning. Construction could be delayed throughout any recession.
- Mountain Accord would likely be scaled back. If we are in the middle of a recession, we think you’ll see support for Mountain Accord dwindle. It’s really unlikely any politician would suggest spending hundreds of millions of dollars if we are in the middle of a recession, unemployment is rising, and tax dollars are decreasing.
- The bond for Treasure Mountain School could be in trouble. Regardless of what is being said, we are confident that there will be a bond election by the School Board for a new school. This will be for a new Treasure Mountain Junior High and adding on to the high school. We could easily see this bond reach $40 million. It also sounds like teacher contracts are being negotiated. Our gut tells us that the teacher contracts will require increasing property taxes again (note: this is speculation on top of speculation). If taxes are raised, a recession hits, and there is a bond election twice the size of last year’s recent Basin Rec bond, we could see some people say “we just can’t afford this.” That may be enough to put the bond on hold or defeat it at election.
- The Governor’s Office would likely cut growth forecasts. If you’ve been following local issues, you know that transportation and growth are at the forefront of discussions. The one thing to know is that when you hear our area is going to grow by X%… that X% figure likely came from a 2010 Governor’s office report on growth. Recessions tend to both keep people from moving and reduce the number of children born. Those are the two drivers of growth in Utah (mostly the latter). The down stream effects of lowered growth estimates will be interesting to watch across Summit and Wasatch counties.
So, where does that leave us? We actually believe it leaves us in good shape. We need to be reminded every once in a while that things don’t grow to the moon. While there is always growth like the Village at Kimball and the Movie Studio, the Park City area could have gone absolutely hog wild in the last few years. The Discovery Core homes in Summit Park could have been built, Silver Creek’s 1000+ homes could be almost complete, the Boyer Tech Park could have been filled up. As they say, the more you boom, the more you bust. In the scheme of things, we boomed but we didn’t BOOM.
We should know whether that’s an accurate assessment in the next couple of years.
Update: A friend also reminded us that the US dollar is rising versus other currencies. This makes is more expensive for people from other countries to visit Park City… further impacting tourism. Or as a friend put it, “All those people living in China that were going to come ski in Park City due to Mayor Williams’ Park City funded China trips are less likely to come now.”
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