Is Colorado Leisure Travel Recession Proof?
Photo by Joshua Sukoff
People come to Colorado for the winter, but they stay for the summer. For those of us native to the state, this is a well-known narrative. Colorado is an ideal vacation destination and once here, it’s not difficult to find reasons to want to stay. The state is centrally located in the US with a great airport, we’ve got four seasons, it’s constantly sunny, and people are generally friendly.
The summer of 2020 was a particularly wild time in Colorado mountain towns. It seemed like the entire city of Denver, about half of California, and a massive chunk of Texas moved right in while running stop signs, masks sagging around chins, sidewalks packed to the gills, and not a campsite or hotel room to be had.
The high seasons of summer and winter have always been busy in the high country. I grew up in the mountains and I can remember a time when mud season meant we’d be living in a ghost town. Parking spots everywhere, hardly any restaurants to choose from as they closed for the off-season, and a blissful quiet that lasted just a few short weeks.
These days, spring and fall are almost as busy as the high seasons with budget travelers hoping to score a reasonable rate on a hotel room or catch a glimpse of the shock of colors as the aspens change. If you’re looking for a quick commute on I70, you better do it early in the morning on a weekday, and even then, you’re likely in for a slow ride.
The Colorado economy relies heavily on tourism. Thankfully, people continue to visit making for a unique market that fares better than many other parts of the country in troubled times. Does this mean that the mountain markets aren’t slowed by rising interest rates? Of course not. It means that with good timing and strategic thinking, there are real estate opportunities to be had no matter the economic climate. The right move can produce a highly dependable asset that grows in value and produces income year after year.
While the mountain towns tend to get the lion’s share of attention, it’s important to understand the other shifts taking place around the state as urban markets evolve to serve the expanding pool of leisure visitors hitting Denver, Boulder, Fort Collins, and Colorado Springs.
Is Colorado Leisure Travel Recession Proof?
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Photo by Mike Scheid
Visitors are becoming residents
Over the past ten years, Colorado has gained 760,180 new residents. While some states like California and New Jersey have seen residents depart, Colorado continues to see more and more people moving here all the time. For a state of 5.8 million people, this 13.11% increase is significant. People come here on vacation and quickly start to imagine their life here.
A recent study by MoveBuddah Colorado Migration Report shows the number one place people are moving to in Colorado is Dillon with a ratio of 218 people moving in versus 100 people moving out in 2022. For a town with a population of just over 1,000 year-round residents, these are big numbers.
What’s so special about Dillon? The town is essentially the doorway to Colorado ski country. Located right off Interstate 70, it takes just over an hour to arrive from Denver. The town sits at the edge of picturesque Lake Dillon surrounded by breathtaking mountains, clear blue water, hiking trails, and convenient amenities such as Whole Foods Market, Walmart, and the nearby Silverthorne shopping outlets.
With easy access to the big city as well as world-class ski resorts like Breckenridge and Copper a short shuttle ride away, Dillon makes a lot of sense for people seeking the ideal Colorado lifestyle. In fact, future job growth in the area is forecasted to be 48% over the next year, a figure significantly higher than the national average of 33.5%.
Denver is no longer just the “Gateway to the Rockies”
Tech jobs are a major fuel bringing transplants to the Mile High City but the industry isn’t the only thing attracting new residents. In the fifteen years I’ve lived in Denver, the city has changed drastically. Upgrades to hubs like Union Station and Larimer Square and transformations in hip neighborhoods like RiNo, the Highlands, and Sloan’s Lake have made Denver a better place to live than ever before. At the moment, Denver holds the number five spot of most popular places to move in the country.
For visitors, Denver has long been considered the “Gateway to the Rockies”. People would fly into the city, maybe stay a night, and drive to the mountains. Now, that’s changing. Denver itself is becoming a tourist destination. A lodging market that was driven primarily by business travel and conventions has been forced to pivot in the wake of the pandemic as visitors elect to spend more time in the city.
Visitors come to attend sporting events and concerts, enjoy the revived restaurant scene, visit breweries, and enjoy the city as a home base as they make short trips to Red Rocks or Estes Park for a day hike. Not to mention, cannabis tourism is still alive and well.
Leisure visitors represent a shift in lifestyle as they drive trends for hotels. Visitors have new expectations of their accommodations. Often, they intend to get in a few hours on the computer and a workout during their visit. They are looking for a great bar and restaurants in close proximity. Entertainment is important too and Denver hotels are making necessary adjustments.
Like most large metro areas, Denver suffered a significant loss of business travel in wake of the COVID-19 pandemic. Historically, the Colorado Convention Center booked major shows eight to ten years in advance. During the pandemic, the center was converted into a makeshift hospital to supplement the local medical services. To say the least, full recovery is going to take time for this segment. On the bright side, by the end of September 2022, we saw room rates for conventions and group travel in Colorado return to the closest figures since 2019.
Photo by Acton Crawford
Luxury leads the way, but there are still options for budget travelers in Colorado
The ultra-high-end accommodations, lift tickets, dining, and retail spending in the top resorts skew numbers statewide. Luxury travel in Colorado has not only recovered but has significantly exceeded pre-pandemic numbers as far as volume and average daily rates for hotels.
While high-end luxury travel is the driving force boosting numbers statewide, there are still options for mid-tier and budget travelers. Many visitors are traveling by car, staying in less extravagant hotels just outside of the major resorts, and enjoying the camping options available in state parks.
While the uber-wealthy visitors may see Colorado as an ideal location for a second home or investment property, the folks who come to hike a 14er or see a show at Red Rocks might envision a year-round residency and a wonderful place to raise a young family.
Photo by Stephen Monroe
Americans believe travel is important, even essential, and will continue to spend despite a recession
According to an October 2022 report by Destination Analysts, 74.8% of Americans say they believe travel to be a worthwhile expense in spite of an economic downturn. Additionally, an American Travel Sentiment Study by Longwoods International found that 91% of Americans plan to travel in the next six months.
Affluent travelers appear to be driving the trends. While midrange and lower-income people also anticipate some kind of travel in the next six months, their decisions are more impacted by high fuel prices with 41% stating that record high gas prices will influence their travel plans, an increase of 32% since May 2022. With fuel prices a serious consideration, we’re seeing travelers look to scale back spending in other areas such as hotel fares, dining, and recreation.
Finally, fewer decisions about upcoming travel are being influenced by COVID (only 16% — the lowest since the beginning of the pandemic) and more by financial concerns as consumers anticipate a recession.
Real estate opportunities exist in Colorado – but you need to act
No market is immune to rising interest rates, supply chain difficulties, increasingly high construction costs, or labor shortages. The good news is, it’s clear that people will continue to come to Colorado to spend money either as visitors or as new residents. If my opening sentiment holds true and people come for the winter and stay for the summer, the months ahead hold exciting opportunities for property transactions despite an inevitable market adjustment.
If you’re a native or long-time local and you don’t own property in Colorado, it’s time to get serious about it. If you don’t, somebody else will. What’s important to know is that there are countless ways to make a deal work. Consider joining forces with others to achieve bigger goals than what you might be able to do on your own. Work with real estate professionals (like myself) who operate from a place of collaboration rather than competition with other brokers to achieve seamless transactions.
What does it all mean?
Let’s talk about this nasty word, “recession”. As my mentor Craig Rathbun points out, “the buildings don’t go away, they just change hands.” Craig isn’t a fan of the word recession. Instead, he refers to times of economic downturn as a “market adjustment”. His points aren’t lost on me. If you’ve got any skin in the game of the American economy at all, these are important ideas to consider. If you own or are interested in owning property, these are simple truths that can guide your decisions over the next twelve months and long after.
I’m learning that success in real estate is about the long game. The system ebbs and flows but it’s important to remember that it’s a process and there is never a period of time where there are zero opportunities. Craig ought to know. He’s been at this game for nearly 50 years now. He’s seen every type of transaction and more than one “market adjustment”.
If right now doesn’t seem like the moment to do a deal, then what about creating a plan for the year ahead that will help you reach your real estate goals in the future? What can you do now to set yourself up for success? For me, it’s market research. It’s studying the economy, both past and present. It’s working to identify areas of opportunity for myself and my clients. I’m looking for segments of the Colorado market where I believe there to be a level of reliability that is superior to alternatives. While one can argue that nothing is “recession-proof”, I think it’s a worthwhile practice to research and share topics like this one so that you can understand why Colorado is a wonderful place to own property.
I welcome any discussion or commentary on these topics or anything else related to real estate, the economy, and what’s ahead for Colorado. Please leave a comment below! If you found this article informative, please consider sharing it with your network.
Sources:
Colorado Real Estate Journal 2022 Hotel Summit + Expo, October 2022
Miles Partnership & Longwoods, Intl Travel Sentiment Study Wave 66
Destination Analyst, October 2022
MMGY Sentiment Survey
Oxford Economics
Colorado Department of Local Affairs
Colorado Business Magazine
US Census Bureau
MoveBuddah Colorado Migration Report
US Global Investors
