v\:* {behavior:url(#default#VML);} o\:* {behavior:url(#default#VML);} w\:* {behavior:url(#default#VML);} .shape {behavior:url(#default#VML);} Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 /* Style Definitions */ table.MsoNormalTable {mso-style-name:”Table Normal”; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:””; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:11.0pt; font-family:”Calibri”,”sans-serif”; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:”Times New Roman”; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:”Times New Roman”; mso-bidi-theme-font:minor-bidi;} A city-commissioned report on the state of the Aspen economy shows a marketplace based on tourism and lifestyle that has become sharply more expensive and dependent on second-home real estate and construction over the years.The study, which can be found at www.aspencommunityvision.com, was done by Economic Research Associates to inform the update process for the Aspen Area Community Plan. The city is currently holding focus groups to gather community input on the plan.

By Curtis Wackerle, Oct 30, 2008, Aspen Daily News

The 44-page study, which cost the city $66,000, shows that Aspen’s economic ups and downs can be pegged to trends in the national economy. When times are good, Aspen experiences robust growth, although the growth has shifted over the years from retail and lodging to real estate and construction. When times are bad, Aspen slumps as well, with sharply declining real estate transaction volumes but little decline in average sales price.

Aspen began its growth boom in the early to mid-1970s, as the first wave of the baby boom generation turned 30. One of the busiest ski seasons in Aspen history was the winter of 1974-75, when local mountains logged 1.4 million skier visits. Last year’s number was around 1.5 million.

In 1985, total real estate transaction value was about half of the $159 million generated by retail, restaurant and lodging sales. Real estate surpassed retail, restaurant and lodging in the late 90s as the primary source of commerce, and as of last year, Aspen real estate sales of $1.8 billion far exceeded the $508 million in taxable retail sales, according to the report.

Today, the average Aspen home price of $6 million is about 25 times the national average. Home prices here are 15 times higher than they were in the early ’80s, which puts Aspen at or near the top as far as the rate of real estate appreciation; in California, home prices have risen 5.6 times in the same period.

The number of jobs in the real estate industry has increased 32 percent since 2001 and real estate transactions contribute 20 times more to the Aspen economy than 27 years ago and roughly three times more than a decade ago.

The report also found that the typical new home in Aspen requires three times the construction labor that was involved in the home it replaced. Services dedicated to the care and maintenance of these homes has become a large sector of the economy.

The report ties Aspen’s economic growth to the overall growth in national and worldwide wealth in the last 30 years. Data from the IRS show that more than 300,000 American households earned over $1 million in 2005, a fivefold increase since 1993.

Aspen’s retail environment has changed to reflect this, says the report, which has a detailed way of stating the obvious.

“In terms of both food service and merchandise, there has been a discernible trend of market repositioning, oriented to a more affluent and older customer, which corresponds to some reduction in the nightlife scene and in the number of unusual stores that are unique to Aspen,” the report said.

Astonishingly, locals contribute only about 10 percent of the dollars spent in local stores and restaurants, according to the report.

Meanwhile, growth in the retail and restaurant sector has not kept up with growth in real estate. Restaurant and bar sales have actually declined in the last 10 years, when adjusted for inflation, while retail has grown about 2 percent per year and food and drug stores have followed the pace of inflation.

“Considering that the average incomes of property owners and visitors have reportedly continued to increase at a strong rate and that the national economy over this period averaged 2.3 percent annual growth, the data suggest a decline in Aspen’s capture of the potential retail market,” the report states. There is also a caution that as much as 20 percent of Aspen’s retail sales, particularly from jewelry stores and art galleries, could be mailed out of the area to escape local sales taxes.

Economic difficulties experienced in the past year have so far caused similar symptoms as recessions experienced in the early part of the decade, the early ’90s and the early ’80s: Real estate transactions down between 40 and 50 percent, and slightly depreciating values. 

“Typically affluent Aspen property owners are not compelled to sell during slumps, and are able to wait for expected market recovery and price appreciation,” the report states.

The lifestyle element also insulates Aspen to a certain degree from the ups and downs of the real world.

“Brokers indicate that the vast majority of purchasers are primarily motivated by a desire to spend time in Aspen and participate in the lifestyle, which makes the Aspen real estate market more stable in down markets than mid- and upper-middle priced areas,” the report states.

But the report also cautions that the full consequences of the economic downturn are still unknown, and could have tremendous negative effects on real estate and tourism.

The report also finds what could be described as a fundamental flaw in the long-term stability of the Aspen economy: The inability of Aspen to attract young people of moderate incomes, who would be able to sustain the tourism, real estate and skiing industries after the baby boomers are gone.

A snapshot of the lodging industry paints the picture. While available pillows in nightly rental  properties have declined 35 percent since the ’70s, total pillows in economy or low-end lodges have dropped 80 percent. In the last five years alone, the average room rate has increased 40 percent.

“While some aging of the average Aspen population is inevitable, maintaining Aspen’s long-term vitality and market appeal will require policies and investments to maintain visitation levels from the younger and therefore less affluent populations,” the report states near its conclusion.

Ben Gagnon, a long-range planner with the city’s community development department, was pleased with the thoroughness of the report. He described the economic realities contained within as “off the charts.”

“The effort made this year to gather data over the last several decades was unprecedented, and it will be relatively easy to build on this new database in the future,” Gagnon said in a press release. “A wide variety of reliable information helps communities make good decisions.”