A new report assessed the business climate at Western U.S. resorts, and the news is not good. The trifecta that dampened lodging occupancy in November persisted into December when the stakes and expectations were higher for resort businesses. 

The report’s authors said that consumer optimism could not offset the challenges presented by meager snowfall, school holidays that started nearly a week later than usual and ongoing resistance to near historically high daily rates at Western mountain destinations.

In the most recent monthly Market Briefing released by DestiMetrics, the Business Intelligence division of Inntopia, December marked the second consecutive month in more than two years that aggregated revenues declined for the 17 participating destinations across seven Western states.

December Disappoints
In a year-over-year comparison to last December, occupancy rates declined 2.7 percent, and the Average Daily Rate (ADR) slipped 1.1 percent for revenues that were 3.8 percent lower than the prior year. 

The report said occupancy rates during the pre-pandemic December 2019 were comparable to 2023, up 0.2 percent. The more striking contrast was that daily rates were up 29.8 percent compared to four years ago and provided properties with a 30.1 percent increase in aggregated revenues compared to December 2019 (pre-COVID) and its aftermath skewed performance and results in 2021 and 2022.

Winter Season In Slow Skid
As of December 31, in-the-bank and on-the-books occupancy at Western resorts for the winter season from November 2023 through April 2024 are down 3.5 percent compared to the same period last winter, with declines every month but April, which is up 3.4 percent. 

ADR is up a modest 2.4 percent, with modest gains in four of the months. December and April are the only months posting declines. In contrast, February rates are up 4.7 percent over last year, and March is coming in with its single highest aggregated average daily rate— at over $726/night. Even with the uptick in daily rates, winter revenues are down 1.2 percent over 2023.

Despite snow challenges, the 2024 winter season compares favorably to the winter seasons of 2019 and 20220, with overall seasonal occupancy up 1.1 percent, daily rates up 40.7 percent, strong gains in all months, and revenues up 42.4 percent.

“The holiday period, especially between Christmas and New Year’s, typically captures the highest rates of the year, and strong occupancy can have a big impact on the bottom line at the end of the season,” explained Tom Foley, SVP of Business Intelligence at Inntopia. “But holidays alone can only drive so much business, and when you have mediocre snow and substantial shifts in the holiday school schedule, it becomes pretty tough to meet expectations.”

 Foley clarified by saying, “That said when you compare this season so far to the last pre-pandemic winter four years ago and a good comparison, this season is looking pretty good considering the challenges. You have to keep some perspective when looking at the current year-over-year data.”

Thumbs Up On Economic Headlines
Once again, during December, the Dow Jones Industrial Average (DJIA) rose sharply, adding 6.4 percent during the month on top of the 7.6 percent gain in November. The DJIA closed at an all-time high of 37,710.1 points on December 28 and boosted the Index more than 4,760 points higher than it was at the end of October 2023 and 13.7 percent higher than it was one year ago at this time. Investors were buoyed by further easing inflation, indications that interest rates should start going down in 2024, and holiday spending that exceeded expectations and helped bolster the end-of-year momentum.

“Strong financial markets can have a significant impact on consumer purchasing behavior as savings and investments grow, but so far that ”feeling flush sentiment has not shown up at mountain resorts where daily rates continue to appear as a pain-point for bookings,” observed Foley.

Reflecting some of this financial optimism, both the Conference Board’s Consumer Confidence Index (CCI) and the Consumer Sentiment Index (CSI) from the University of Michigan were up in December as consumers reported more confidence in short- and long-term prospects for themselves and the economy. 

The CCI was up for the second consecutive month by adding 9.6 percent over November and settling just 3.3 points lower than its 24-month high in July 2023. Improvements were made across all age groups and income levels, but the largest increase was in households aged 35 to 54 with income levels above $125,000. 

The CSI enjoyed an even sharper increase, up 13.7 percent to reach slightly below its 24-month high in July. 

All ages and income levels responded favorably on all major CSI Index components—a result that has only occurred 10 percent of the time since its inception in 1978. The optimistic responses were deemed a direct response to lowering inflation and the prospect of declining interest rates.

The National Unemployment Rate was unchanged at 3.7 percent during December as employers again exceeded expectations by adding 216,000 new jobs; however, it is unclear whether those positions were for holiday hiring or would convert to full-time jobs. 

For the eighth consecutive month, wages were up 0.4 percent and outpaced the national inflation rate, contributing to the surge in consumer sentiment.

The only downshift in economic news was the National Inflation Rate, which rose from 3.1 percent in November to 3.4 percent in December, with consumer prices also going up a seasonally adjusted 0.3 percent. Increases in electricity and car insurance were cited for the rise, while airfares edged up one percent after large declines in mid-2023.

Key Indicators to Watch

  • Snowfall: Dry conditions dominated the weather across much of the Western U.S. during December, leaving only modest snowfall reports throughout the month. Snowmaking significantly enhanced conditions at most resorts, but the month lacked the buzz and enthusiasm that follows big snowstorms, making the short-lead bookings needed to fill vacant rooms considerably more difficult.
  • Winter occupancy: The trend of weakening occupancy continued into December compared to last year, dropping from a 3 percent seasonal deficit last month to a 3.5 percent deficit as of December 31. December took the biggest hit, slipping from a 2 percent deficit to a 2.7 percent deficit, with the losses primarily in the second half and most expensive weeks of the month. “Declines in the holiday period when rates are 5 percent to 20 percent higher than any other time of the year can substantially impact revenues for the month—and the season, ” said Foley.
  • School Breaks: Although properties were aware of the widespread late start to holiday breaks and the likely impact on early holiday-period bookings, the extended school break through the first week of January was expected to pick up some pre-Christmas declines. But as of December 31, the projection had changed, and January occupancy fell sharply during the past few weeks, with occupancy barely even, and, in some cases down for the period. Overall, total occupancy for the week of December 16 to 21 finished down an aggregated 8.1 percent, while the first week of January, which was hoped to offset that deficit, was up only a slight 1 percent.
  • Average Daily Rate (ADR): Year-over-year ADR for the full winter eked out a slight gain during December, up from 2.3 percent as of November 30 to 2.4 percent as of December 31. “The impact of high daily rates on bookings and occupancy has been apparent since last February,” noted Foley. “We have seen a clear correlation between gains in rate leading to lower occupancy and vice-versa. It is particularly notable in March through January, showing marked increases in ADR but declines in occupancy. In contrast, April rates are down sharply, and bookings have significantly increased as consumers respond to that lower price incentive.”

Different Lodging Categories, Different Results
Price sensitivity continued across the three categories—economy with ADR up to $400, mid-range from $401 to $850, and luxury at $851 and above. Last month, mid-range properties were managing positive revenues compared to 2023, but as of December 31, all three categories are posting revenues that are either flat or down slightly. 

Economy properties slipped the most as asking rates in November softened but did not attract enough response, and occupancy dropped 6.9 percent. Mid-range properties also lowered rates slightly and experienced a dip in occupancy, now down 0.7 percent after being up one month ago. Luxury properties posted positive ADR in November but also dropped rates during December, improving occupancy—taking it from down 3.5 percent one month ago to down only one percent as of December 31.

“Although there is still plenty of seasons left to go, December didn’t perform as well as hoped as it was hampered by the ”imperfect” storm of unfortunate school break timing, meager snowfall, persistently high daily rates, and consumer caution,” acknowledged Foley. “But the economic indicators are more upbeat than they have been for months, inflation is receding, and best of all, the magic wand of Mother Nature has delivered abundant snowfall at many western mountain resorts in the past week. That combination can easily change this season’s narrative in a very short time,” he concluded.

Image courtesy Vail Resorts/Heavenly