Western Wildfires: Economic devastation and opportunity

Western Wildfires: Economic devastation and opportunity

23 August 2013

published by www.forbes.com

USA — If you’ve been watching the national news, there have been a rash of wildfires in the West. Most recently, the fires near the world famous Sun Valley resort have been in the news. Since I have been in Sun Valley during the Beaver Creek fire, I’ve had the opportunity to see the economic impact from the fires. The impact is big and made worse by sensational media coverage, however I’ll outline below how savvy individuals see opportunity where others see devastation.

For a resort community like Sun Valley, a big chunk of their business comes in August — 25% is typical for some businesses. Talking to friends outside the area, the sensational coverage (see examples here and here from CNN) makes it sound like armageddon and focuses on it being the playground for celebrities such as Bruce Willis and Tom Hanks. In reality, it was smoky for awhile and 1 home was lost to the fire.

Overnight, tourists canceled trips and for a period, it was a ghost town. For those of us who stuck around, it was a great time to get a great seat at a restaurant. If the smoke got too much, you could take a short drive over a mountain pass and be at a place like Redfish Lake with air clearer and scenery more beautiful than just about anywhere in the world.

I don’t want to gloss over the fact that local businesses such as retailers and restaurants took a huge hit as most live on a thin margin. However, the focus of this article will be on how creative business leaders and real estate investors see opportunity. Where others pull back, they lean in. Resort market economies rise and fall largely based upon the real estate market so I’ll focus on two key aspects of real estate — home sales and property management.

Existing Home Sales Impact

Rob Cronin is both a top-producing real estate agent and owner of a award-winning local restaurant, Zou:

“The valley definitely took a hit through the course of the fire. As it got closer by the day and the smoke got worse, we saw an exodus of tourists, 2nd home owners, and potential investors in the valley. While the situation here has discouraged many, a lucky few have seen this as an opportunity and we are already scheduling showings again. With a lack of inventory the competition for certain properties was fierce and now those investors who have stuck it out are in a position to take advantage (see sample of Cronin’s Sun Valley listings). On the restaurant and retail front the initial hit was even more devastating as buyers and shoppers dried up, and businesses had trouble staffing as employees were evacuated. We had to close mid shift at Zou 75 on a busy Friday night as two of our chefs were forced to evacuate at around 8pm. The positive news is the smoke has cleared and with the local businesses having to compete for remaining high season dollars, there will be great deals in all sectors from dining to lodging to retail and there has never been a better time to get to Sun Valley and take advantage of the beautiful weather and more than inviting locals eager to get the wheels of our economy turning again.”

Eeva Turzian sold more real estate than anyone in the Sun Valley area in 2011 and had this to say about the impact of the fire:

“The fire was a blip for the 2nd homeowner real estate market that drives much of the real estate in Sun Valley. Sotheby’s and other realtors are seeing a surge in buying activity as prices are nearly identical to what they were in 2000. The fire was a pause so savvy buyers are stepping up recognizing that Sun Valley has lagged other markets in recovering from the real estate downturn and now is the opportunity. At the same time, there are some motivated sellers so it should make for a lively Fall which most of us agree is the best time of year to be in Sun Valley.”

Turzian also shared how a buyer who had been circling for awhile saw the fire as a great buying opportunity. They wrote up an aggressive offer and the seller took it. She indicated that the price was what one would have paid in the late 90′s.

Katherine Rixon is another top-producing realtor in Sun Valley and shared her perspective:

“On the real estate front, we saw a dramatic pause during the fire. However once the evacuation orders were lifted business seems to have resumed as usual. All of our pending contracts continued to move forward and the fire did not scare away any of our out of town buyers. We closed on five properties during the week of evacuations.

Many visitors simply delayed their vacations and we expect town to be busy this fall. I don’t believe the fires scared anyone off for good, but purely slowed things down. The buyers will be back, and in the meantime there is time to get in on the great deals. Because our market is driven by secondary home buyers the upswing seen by the rest of the country has not yet hit us. We know it is coming and values will be heading upward, most likely this coming year.”

Property Management: National Leader Moves Into Sun Valley
If you attend vacation property management conferences, there is one company that gets spoken about more than any other — All Star Vacation Homes and their CEO, Steve Trover, are recognized for how they are reinventing vacation property management. All Star has become the top vacation property manager in the world’s most competitive vacation markets. All Star is like many savvy business leaders before them. When others pull back, that’s the time to lean in. It’s no surprise that All Star and Purpose Built have a wide array of individual and institutional investors who see how they are taking a Blue Ocean strategy and creating a new market niche by providing a fundamentally different experience. Their concept is the most unique new offering in the travel sector in the last decade and is on fire. It’s a key reason they continued to thrive during the real estate meltdown in Florida while others suffered.

It’s interesting to get All Star’s perspective on the fires as the impact was small by comparison to the Florida real estate “conflagration” that they thrived under. I spoke with Trover yesterday and he shared how he has told some people he’s expanding into Sun Valley and he indicated that the fire coverage was only a positive. People didn’t really remember much about the fire but they said something along the lines of “oh yeah, that’s where Bruce Willis, Tom Hanks and Arnold have vacation homes” and made no mention of the fires. While it’s irritating for many locals to see the national media only focus on the celeb component of the fire story, there is a positive side to that notoriety. Here is how Trover described the economic impact of the fires…

“There are short-term negative effects on the local businesses, as Sun Valley was winding down its summer when the fires began. This could also have a negative impact on visitation numbers heading into the fall, due to visitor perception of the recent fire damage to the area. However there are many more positives. Mid-term and long-term, the effects are only positive. There has been a tremendous increase of destination awareness for a resort with relatively low awareness that will more than make up for any short-term negative effects. Not only has the destination been highlighted very positively throughout the coverage of the fire, the local community rallying together has showcased the charm of this resort area.”

Trover indicated that the resort area of Sun Valley had great appeal due to its charm, travel seasons and potential growth. For a resort community of Sun Valley’s caliber, All Star’s analysis found there is a dearth of hotel rooms. Having stayed in All Star properties, a key part of their formula for success is providing high end hotel level experience with the benefits of a vacation property experience such as privacy, a big kitchen, media rooms and common areas.

All Star will both take on existing properties under management that meet their high bar and construct purpose-built vacation properties. In fact, All Star’s sister business is called Purpose Built Communities. These homes are very unique in that they are built for multi-generation/family vacations and corporate retreats. For example, a home might have 8-10 rooms/suites that are like a hotel (e.g., private bath) yet have great gathering spaces. Even before their full entry into the Sun Valley market, they have taken some properties under management. As much as their guest experience is unique, they have the most owner-friendly property management experience I know of. It is a stark contrast to the nickel & diming experience I had when renting out our home. It would be a topic for another article to explain their creative and owner-friendly experience.

All Star is already generating economic activity in Sun Valley with local realtors, builders, decorators, property managers and others as they enter the market. Where others might have paused on their business plans, All Star is doubling down. Nearly every great investor has been a contrarian. By moving ahead of others, All Star is seizing on an opportunities such as multi-generation and multi-family vacations and corporate retreats. People have tired of the generic hotel experience — a fact recognized and addressed by All Star. How many hotels have fully equipped kitchens, multiple master bedroom suites, home theaters, game rooms, themed bedrooms, private patios and balconies, dining areas, living areas, TVs in every bedroom, washer and dryers, access to resort pools and amenities and more. All for a cost that is less than a typical high end hotel.

All Star is symbiotic with local realtors as they make 2nd homeownership a more solid investment. In many cases, buyers of real estate stay in one of the All Star managed homes before they purchase. They provide realtors a great marketing tool by showing how homeowners can have full access to their property while getting all their operating costs and then some covered.

While others dither, savvy real estate investors and property managers like All Star are seizing upon a great opportunity that most are missing.


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