Sac Biz Journal -- Tahoe's economy

Friday, October 19, 2007

Tahoe's tourism economy singed by fire, chilled by skimpy snow

Sacramento Business Journal -
by Kathryn Reed Correspondent

If Lake Tahoe believed the adage "there's no such thing as bad publicity," the Angora Fire changed its mind.

Tourism is at the heart of the Tahoe economy, but print and broadcast reports in late June seared the image of Tahoe going up in flames into people's minds. The fire destroyed more than 250 homes and charred about 3,100 acres, and news coverage was global.

The pictures of devastation told only part of the story, though. No tourist ever has to drive through the South Lake Tahoe neighborhood that was consumed by fire and reduced to rubble, yet tourism on the lake's south shore came to a screeching halt for much of July.

The fire came at a lousy time for the region, mere months after a winter that brought just a fraction of the usual snowfall. That cut into winter tourism dollars and led to an early end to the season and job cuts at some ski resorts. Retailers and others depending on tourists were banking on summer to help, only to see the Angora blaze squelch things just before the Fourth of July.

All those ills came against the national backdrop of tightened credit, delinquent subprime loans and a soft housing market.

One bad snow year and the fire alone won't destabilize the entire Lake Tahoe economy, said Tom Cargill, economics professor at the University of Nevada, Reno. "What makes this particular year different is the mortgage problem. Nevada and California rank very high in foreclosures," Cargill said. "There's evidence the mortgage problem goes way beyond the subprime problem."

Tourists and millionaires
Many houses in Lake Tahoe are second homes. In South Lake Tahoe, only 25 percent are occupied by full-time residents.

"People are stretched in trying to service that debt," Cargill said of those with vacation homes in the basin. "Second homes often have a higher interest rate. Lending institutions see them as more risky. The problem is houses are not selling. That's probably more of a threat to the Tahoe basin than a bad winter or fire."

However, houses costing several million dollars are on the move in Tahoe. A weak dollar has made property cheaper for foreign investors -- whether they are buying in the Sierra or elsewhere. "Lake Tahoe is one of the jewels of world. People want to come. For that reason it will always be valuable," Cargill said.

It's the middle and lower classes who will feel any economic sting. When purse strings tighten, people have less discretionary income. In an area where the primary industry is tourism, dwindling tourist dollars quickly show up on the bottom line at restaurants, casinos, recreation venues and other service businesses.

That's what happened after the fire, with the brunt of the blow hitting the south shore. Those on the north shore dealt with a couple of days of smoke, but the fallout for them was minimal.

"There were some short-term benefits," said Andy Chapman, director of tourism for the North Lake Tahoe Resort Association. "Some people who were planning to go to the south shore rearranged their schedule and came to the north shore."

Telephones were ringing more than usual at the Resort at Squaw Creek while the fire was out of control.

"What we saw were people who really weren't familiar with the geography canceling their vacation," said Les Pederson, director of sales and marketing for Squaw Creek. Still, he said the resort had a record June and strong August.

Northstar-at-Tahoe received an urgent call from folks at Stanford Sierra Camp asking if guests and employees could head to the Truckee-area resort. Stanford Camp had a good view from the shore of Fallen Leaf Lake of the blazing Angora ridge. Northstar filled about 10 units with Stanford guests and housed 70 employees for a couple of days.

Despite the fire and the Fourth of July falling midweek, Northstar had a better summer in 2007 than 2006. A lot had to do with construction of the village being complete.

Snowless in the Sierra
Summer is the busiest time throughout the Tahoe basin, with winter the No. 2 season. No. 2 was pretty bad last year, with little snow to draw visitors from the Sacramento Valley and San Francisco Bay area to the mountains.

High hopes were pinned on summer. May, often questionable weatherwise, was downright balmy. Harvey's Outdoor Concert Series started with Sammy Hagar performing in mid-June over Opening Day on the Lake weekend.

Then June 24 came, and with it flames. The fire wasn't contained until July 2. Even Gov. Arnold Schwarzenegger's plugs to return to Tahoe weren't enough to get tourists into the mountains that month.

"Right when people were solidifying their summer vacation we got quite a few cancellations. July was really off," said John Packer, spokesman for Harrah's Lake Tahoe and Harveys. "July is usually our strongest month of the year in terms of gaming. Summer represents 40 percent and up of the total annual gaming revenue for casinos," he said.

"We really lost the destination traveler after the fire," said Patrick Kaler, executive director of the Lake Tahoe Visitors Authority. "There really was no way to get them back at that point in the summer because they thought Tahoe burned down."

Making it in Lake Tahoe has been a gamble for businesses since Nevada casino pioneers Harvey Gross and Bill Harrah were alive. A stream of tourists is crucial, and weather affects that stream.

Companies such as Aramark Corp., which runs Zephyr Cove Resort and Tahoe cruise boats, took a double hit this year because the lackluster snowfall devastated the snowmobile season and the fire didn't entice people to want to board a paddle-wheeler.

"The fire affected us pretty drastically. The lack of visibility when the fire first happened isn't a time when most people want to go out on the boat," said spokeswoman Carol Chaplin. "More than that was the perception ... that it was unsafe and that fire was engulfing the lake instead of it being specifically located in one area. I think it was hard for people to grasp the geographic part of the equation. I was surprised that in July I still heard the comments, 'Is it safe to go up there? Is the air clear?' "

The Tahoe Queen, one of two paddle-wheelers the company operates on the south shore, sat idle one day during the throes of the fire. Chaplin estimated business being off by about 25 percent for the summer.

Last winter's snowmobile season was abysmal.

"Our snowmobile operation runs on totally natural snowfall, so the light snowfall and warmer temperatures both contributed to not being able to run a full season," Chaplin said.

Jerry Bindel runs Lakeland Village and is president of the South Lake Tahoe Lodging Association. He estimates July was off about 9 percent throughout the south shore, but said things rebounded in August.

"Is this going to be a banner year? Absolutely not," he said. "For the year we are down. We had six years of consistent growth in occupancy and (revenue). This year will end more similar to 2005 levels. Still a good year, just not as good. We had a significant 2006."

Let it snow
Tahoe businesses are looking to the ski season with hope for a better winter. Season-pass sales for Lake Tahoe resorts were sputtering this summer. However, fall price increase deadlines and the snow that's already sticking in the higher elevations are providing incentives for riders to buy passes.

Booth Creek Ski Holdings Inc., which owns Sierra-at-Tahoe on the south shore and Northstar, said the autumn snow was a boon to pass sales.

Advanced reservations for winter lodging around the lake are a mixed bag.

Throughout the south shore, pre-bookings for December, January and February are comparable to this time last year, Bindel said.

Chapman, on the north shore, said advance reservations are up 10 percent for November over last year, December is up 3 percent and January is up 2 percent.

"That's good news in terms of pre-winter demand. Snow is what will make it happen," Chapman said. "There is pent-up demand from last year. The ski public is like gamblers. Last year Lake Tahoe didn't have great snow. They're thinking it's not going to happen two years in a row."

Northstar, Harrah's, Harveys and Resort at Squaw Creek all are encouraged by the number of rooms secured for the upcoming winter season.

"This winter we are looking pretty good. We have bookings for December and January, but we're not full by any means," said Jerry Birdwell, who owns the Black Bear Inn in South Lake. "Pre-bookings are slower than they were last year. I think they are waiting to see what the weather is going to be like," he said.

"I think the aftermath of the fire is wearing off. All in all 2007 has been a rough year for the economy up here. We're hoping for a good winter," said Packer, the casino spokesman.

Some in the region already are thinking of next summer, particularly if the hoped-for snow doesn't arrive. That could bring a more horrendous fire.

But there is a silver lining; the fire focused government attention on thinning the forest.