June 1, 2011

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Utah Business Staff

June 1, 2011

Wasatch and Summit counties are at the forefront of economic growth with resurgence in visitors to resorts and state parks. But the communities face tough decisions in planning for the future while preserving the area’s appeal to residents and tourists. We’d like to thank the Park City Marriott for hosting the event and Myles Rademan, director of public affairs for Park City, for moderating the discussion. Participants: (1) Miles Rademan, Park City Municipal Corporation; (2) Donnie Novelle, Park City Transportation; (3) Richard Bizzaro, All Resort Group; (4) Debbie Batt, Park City Marriott; (5) Dave Stobart, Jordanelle State Park; (6) Dan Flick, Stein Eriksen Lodge; (7) Hal Leonard, Canyons; (8) Alex Butwinski, Park City Council; (9) Hans Fuegi, Grub Steak Restaurant; (10) Mitchel Burns, Red Ledges; (11) Curtis Taylor, Heber Valley Bank; (12) Tim Anker, Commerce Real Estate Solutions; (13) Bob Jasper, Summit County; (14) Chris Robinson, Summit County Council; (15) Dirk Beal, Deer Valley Resort; (16) Bill Malone, Park City Chamber/Convention & Visitors Bureau; (17) George Hansen, Conductive Composites Company; (18) Shad Sorenson, UVU; (19) Tony Golden, Canyons Club; Jonathan Weidenhamer, Park City Municipal Corp We’ve been hearing that the recession is over. Is the recession over for your business? How has your business fared through these last couple of years of tough economic times? TAYLOR: Things started getting bad three years ago, and we’ve been waiting to the find the bottom and see things get a little better. I don’t know if it’s just a springtime bounce or if we really are seeing a change, but there have been good things happening. It seems like folks that have been on the sidelines of the real estate industry waiting for prices to go lower have decided maybe we’re near the bottom and it’s time to step in and start soaking up some of this real estate that’s been lingering out there on the market, and that’s helping. Overall, we see better numbers. It seems like we’ve absorbed the damage to a greater extent. And so I have a bright outlook for the future, although we spent the better part of the last years with some residential housing policies that got us in the mess we’re in. BURNS: At Red Ledges, we started selling property about three years ago, which was about the time the whole market crashed. So I don’t even know what the good times are. It’s really made us sharpen the pencil as we pushed through these last three years. This springtime, we are well ahead of where we were last year and the year before, both in people that are interested in talking about real estate, and people actually purchasing. ANKER: On the commercial side of things, some projects are made to take 10 or 20 years. The new Boyer Tech Center in Kimball Junction has a fully entitled, 1.2-million-square-foot office project that will double the size of our current office inventory—but it’s just entitlement. It’s going to take years and years to build it out. BEAL: At Deer Valley Resort, our year-over-year revenue is vastly improved. We’ve been in operation 30 years, and it was one of our top few years, although not at the high watermark of a few years back. It doesn’t hurt when you have great snow and some pent-up demand. There’s some sectors that are still lagging. Our group business is definitely not back to where it was. But the individual skier, especially in our market, seems to be pretty resilient, and we’ve built over the last three years from that dip. FUEGI: Most restaurants in town were probably off, at the low level, about 30 percent of their sales. It’s definitely picked up this year. People seem to be parting with their money a bit easier than they used to a year or so ago. And for the first time, we can actually consider buying new equipment and making improvements to the restaurant rather than just keeping the staff. So that’s the positive. ROBINSON: One metric that we monitor is evaluation of building permits and number of permits issued. The first quarter of this year, we did $6.8 million in valuations. Compare that to the heyday of 2007, when we did $23.4 million—it’s a decrease of 71 percent. But the good news is, in 2010, the same first quarter valuation was about $4 million; and so we increased 73 percent compared to the first quarter of 2010. FLICK: At Stein Eriksen Lodge, there were definitely signs of palpable improvement over 2009-2010. Our occupancy and revenue was up year to year. But the big challenge for us with the addition of the St. Regis and Montage is rate. Rate has gotten incredibly competitive. All the affluent travelers are still looking for deals. During the winter months, 90 percent of our group business—and our group business during the winter months is about 30 percent of our business—was strictly high-end investment banking. We actually signed a contract recently with one of those big investment banks that is coming back next winter. It’s nowhere near the magnitude or scale that it had been in previous years; but it’s another positive sign that the investment banking segment is starting to come back to our area. BIZZARO: In our transportation business, we have a good barometer on the amount of people that are arriving in Park City from the airport. This season was the best we’ve had since 2008. The big change for us was the attraction of the new five-star hotels. We mentioned the St. Regis and the Montage, but also the Waldorf Astoria and now the Hyatt. Park City has a different cachet now; it has changed its personality and is attracting a different kind of traveler. It’s not necessarily just skiers My personal goal for our community would be to market it in a way so that people realize that this is an excellent destination—not just for skiing, but for the summer—and to mimic Aspen, Vail and Jackson Hole. MALONE: We just received our numbers for skier days collectively for the three resorts in Summit County. We were up 7.6 percent from the previous year. I keep reminding myself that a lot of our numbers look similar to 2006 at this point, and we thought we were pretty good in 2006. So we seem to be on our way back. LEONARD: At the Canyons, lodging revenue is up over 10 percent and skier visits are up 7-8 percent. A big challenge is rate. We’ve had a big increase in occupancy, but rates are down in both group and lodging. BATT: Our first quarter of this year was definitely up compared to last year; however, still not back to the 2008 levels. Room nights and revenue, definitely up; rates, down a little bit. I think Park City as a whole was slower for the recession to hit, and so it’s taking us a little bit longer to climb back up as compared to some of the other cities that we compete with. BEAL: It seemed like this year, everyone wanted to try the new luxury properties. Because we help them coordinate some of their programs on the mountain, it seemed like they had a huge success in corporate groups for those opening years. It will be interesting to see how much of that is trial, “Let’s go check out the new hotel in Deer Valley, Park City,” and how much of that is repeat business. That’s a huge opportunity but also a challenge to see how many of those folks actually come back or move on to the next new location. How is higher education faring these days? SORENSON: A recession is always good for higher education. If people aren’t employed, they come and get additional training or degrees. So we have done extremely well as a university. In fact, we were one student less than the University of Utah this year, so that’s pretty remarkable. As far as the Wasatch campus, we reached that 500 student mark. We have a hospitality management program that offers four-year and two-year degrees, as well as certificates. We’re going to be working with resort owners in the upcoming year to hold those courses on property or with multi-resorts participating in that. What other industries are growing in the area? HANSEN: Defense. Conductive Composites Company does a lot of stuff for the military, space-based things. That being said, a healthy economy is not based upon discretionary dollars, and our economy here is based upon discretionary dollars. A good economy is based upon a base-value technology that brings primary jobs into a market, and that’s where I would like to see more growth come. Utah, in the broader sector, is the largest single actor in the hardware and software market dealing with space. One of the best things we could do to attract more defense-related companies is to get the decision-makers to come here for recreation. I’m talking about military hotels. The level of leadership from the military that that attracts—there’s a lot of money and decisions running through there. It would be incumbent upon us to draw those kind of executives to this market. Let’s turn our attention to the state parks. What is the big news in your realm? STOBART: With state parks, I feel like we’re just now going into recession, being partially funded by tax dollars. We were cut about $3 million—38 percent of the budget. We were receiving about $9.8 million from the general fund, and now we’re down to $6.8. The directors made the necessary cuts to get us down to operating at that level, but we’re scheduled to go down to $4 million. And if that happens, it’s just going to be inconceivable not to expect parks, people, major services, to have to be terminated. Basically, the state will go back and report to some committees in October about where we’re at with the intent language. We just have to wait and see there. We’re trying to be innovative; the park management at Jordanelle is very creative. We put a lot of energy in that park. One thing we have done and want to continue to do is really reach out to local businesses, let them know that this is an asset within the community. We want to try to make it more accessible to local businesses that don’t have concessions. We’re looking at things like creating a “Deal with Demo Days.” We have a boat ramp there that creates a lot of foot traffic for a certain type of customer. We could set up some commercial space along that ramp so people on any given weekend can come in, whether they’re retailers or dealers, demo their stuff, and provide access to the water, if they want to show off a new fishing boat, a new wakeboard boat, any kind of recreational toys. BURNS: When we try to sell real estate, we’re not really selling real estate as much as we’re selling lifestyle. The lifestyle in Northern Utah is really that rugged outdoors lifestyle, and it’s year-round, not just skiing. For us especially, we’re trying to drive summer traffic. We really look at places like state parks. That’s important when people are flying from New York and LA, Atlanta and Chicago—they want to be able to go fly fishing, boating or golf in the same day. Make Park City more of a year-round destination is key to your success also. Let’s talk about partnerships, particularly with government. How are we leveraging some of those? WEIDENHAMER: I continue to question the city’s role in economic development. When I tell people, especially at the state or a higher level, that I’m not about job creation, they look at me like I’m crazy because of that traditional model for economic development. I’m in the business of our resort economy and destination tourism. Post-Olympics, my big push was to build the summer season. We have immense room for growth in the summer, so we began to do a lot of events. And we were really good at it. We felt like we succeeded, and all of a sudden I was being directed to try to diversify. We don’t have to be about the resort. The resort’s doing great. What can we do to bring in more business? And we started talking to the county a little bit about business opportunities in Kimball Junction. And then the recession came into play. And now I’ve been directed to really get back and focus on the bread and butter of the resort economy. BUTWINSKI: Everything that John said is what the city is trying to do, even to the extent of figuring out ways to incentivize local businesses to do programs or events they might not have the money to do themselves. Tourism has to remain our core business, but it’s good to hear some of the other things that people are talking about. ROBINSON: The county has created an economic development task force. We’re really trying to figure out ways that we can augment the great tourism-based economy and economic development that the chamber and the city have done. So is the city or county interested in actually recruiting businesses or trying to streamline the process if someone has an idea? ROBINSON: The EDCU and GOED are all about jobs. But we want the right kind of jobs. We have an affordable housing issue as it is. We need the kind of jobs like Boyer Research Park will create—the kind of jobs that will pay a wage or a salary that will allow people to live here. JASPER: There are two sides of the county, and their economies are a little different. The west side of the county has not embraced the concept of growth. If you look at attractive businesses, they want to be on this side, but this side doesn’t want any growth. So there’s a dilemma. Our take was the west side of the county, like Park City, which is basically a tourism and very well-to-do kind of base. So we worked our tail off and have started construction on a golf course at the Canyons. And in getting enough people together to get a golf course, we got enough lawsuits settled. It cost us a lot of money in legal fees and a tremendous amount of effort, but the Canyons is ready to go. They put several hundred millions of dollars into that resort and have bought out some of the hotels in the area. We’re still working with them on a transportation plan, but we predict that you’ll see a lot of development. The council has approved a variety of changes to the spa, from chair lifts that go higher up to a big parking garage underneath the mall area. We also finished all the infrastructure required to implement the tech park that Chris mentioned, and we may even jump in with the chamber to put a permanent visitors center there and get one of the first buildings going. We will hopefully soon unveil a transit service so that there will be busses going back and forth. We have a lot of people in Jeremy Ranch and other parts of the county that basically commute down there or workers that come up here. So that should help in terms of economic development in a green sort of way. On the east side, we have lots of skilled people; but when you need a plumber, you end up getting somebody from Salt Lake coming up. We have plumbers on the east side that the recession has hurt, so we’re working with the chamber to develop a different kind of business listing, so if you need a plumber, you can get online and find one on the east side. Trying to build anything is very controversial. It’s not like they want any kind of growth on the east side, but they’re more open for it. So how do you mesh the two parts of the county together for solid economic development for both sides? ANKER: Certainly the county has earned a reputation for having a high barrier for entry, but we certainly also have the inventory to accommodate any kind of group that’s coming our way in the future. We could easily double our capacity in both office and investor space, although maybe not in retail. The ability to do that is certainly there, and that perception is changing. We still talk to people—contractors, developers—who refuse to do business in Summit County. There are people that will, so that’s not where they’re beginning to hurt us. JASPER: Newpark, which had approval for office space, came in and wanted to change that to housing. There’s no doubt in my mind that there’s a demand up here, but I’m not convinced that there’s a supply. When you said “industrial,” where would you put that? Every neighborhood in the west side of this county is going to go nuts if you talk about putting an investor over here. It doesn’t make us bad. It’s a very, very desirable place to live and have a business. But one of the things that makes this a wonderful place is one of the same reasons that people don’t want commercial development. I’m not arguing for or against. We’re trying to push a little bit to the east side. ANKER: I’m speaking in terms of entitled projects. Our current industrial inventory is 800,000 feet, but at Quinn’s Junction—the Park City business park—their entitlement is for 1.2 million square feet. So there’s certainly room to grow. RADEMAN: Some of this is déjà vu all over again. I sat on the economic development committee for the county when we put in the original business park and got Lucas Western to come here with the Gear Factory, which is now Triumph. And that was the idea: We build it, they come. From what I can see, there’s still a lot of land out there that’s available. So I don’t think it’s lack of entitlements that’s holding things up. Is there a demand there? We’d love to see the property built out at Kimball Junction now that it’s been entitled. Because you’re saying that’s some of the hope for the high-end jobs, but will that be built out any time soon? ROBINSON: My perception is things like Triumph or Lucas have struggled because it’s an expensive place to do business. It’s not a place where there’s an abundance of affordable housing, where working class people can bring their families and make a living here. You’re right, Tim, that the entitled projects are there. It’s the right kind of demand we need to find—companies that can do business here, that can pay the kind of wage needed. Land costs and rental rates are expensive here on the west side; but on the east side, they may not be. Do you think we can get back to the boom days of 2006, 2007 or is this the new normal? MALONE: The market has changed dramatically. What you didn’t see years ago were three generations on the hill together. We also have the newer product in terms of luxury properties, greater amenities and the culinary side of the experience today. I would be afraid if I was in the ski business with just a hill and a lift and trying to sell lift tickets as opposed to selling a vacation experience in terms of people around the country looking at places like Summit County and saying, “That is a terrific place to go on vacation, whether I ski or not, because of all the amenities.” BIZZARO: The reason I’m excited to be in this business and in this community is because the travel business is a growth area. Now, I don’t disagree with Bill. We have a big problem, and I think that the ski business will continue to be the lifeblood of this industry. Are we retooling our product to cater boomers? In terms of rooms, of comforts, are we retooling our community? JASPER: I face a core decision, and it goes back to the discussion we had earlier. No one would ever think about putting industrial uses in Aspen, and they only want elk in Jackson Hole. Maybe I was shaped by that. So I sit down with our business roundtable folk, and they want to do a high-tech incubator. Looking at the politics, I don’t think we can do it. Now, the east side of the county we can do. If our core business is tourism and rich people—and I think that is our core business—then better skiing, more condos, more luxury homes, better internet, those kinds of things cater to tourism. But all the economic development types, they want to do the traditional economic things. They want industrial, they want commercial, they want incubators, et cetera. And maybe that’s the way to go. But you try to build anything, and there’s a battle. Park City is going through it with the Sweeney property. We’ve gone through it on any number of fronts on the west side of the county. What I’m trying to say is you’ve got this whole east side on the other side of US-40 for commercial growth, and then you’ve got all those little towns and wide open areas where you could have more traditional economic development. The governor’s people and all the economic development people, they’re all geared towards traditional economic development. I personally don’t think it fits on the west side of this county. BUTWINSKI: I don’t totally agree with that. I don’t think we cater to rich people. If you look at some of the events the city does—we bring bicycle races here, we bring a lot of events to Main Street. Yes, from an “Are you going to live here” standpoint, it is expensive to live here. JASPER: For every home that people live in here, there’s three that are second or third homes, or condos or rentals. BUTWINSKI: I don’t dispute that. But we do bring events so that we’re not, in a global sense, catering to rich people. We do bring a lot of people here of all economic demographics, and we continue to work hard with that. It’s just not practical to build industrial in the city; however, my perception is that there is opportunity on the west side to do industrial-type development and certainly commercial. So I don’t agree with the premise that there is that much smashing going on, and smashing occurs for a whole bunch of different reasons. But in Park City—and this sounds almost pretentious—but we want the right kind of development, and that means development that fits in the city, that’s related to our tourism base. FUEGI: This is a debate that’s been going on forever. But let’s face it, tourism is why we came here. That’s what the city is built on. I think the time of the 20,000-square-foot second home is going to be gone. People will, as they get older, get a little more reasonable and maybe 3 or 4,000 square feet will actually do. All of that is shifting. We’re maturing. One of the nice things we have, unlike Aspen, is the room to have a little bit more of a commercial or industrial component in the county. The county is surrounded by government land. But we have a lot of private land here. Just the fact that we can be more picky about how it’s being done is a good thing. Look at Kimball’s Junction—since I’ve been here in 30 years, there was literally nothing between Park City and Salt Lake City. You can’t tell me there hasn’t been commercial development when you look at Kimball’s Junction or at Quinn’s Junction. It’s just been done right, and that takes time. MALONE: A great example outside of the tourism mode is recreation companies like Rossignol. It’s a product that connects into the lifestyle. You look at Skullcandy, another homegrown development that connects to what we’re all about here. So there are compatible developments that can occur.
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