Bozeman News

READING TEA LEAVES IN THE TETONS

Are Trends In Jackson Hole Applicable To Other Western Towns?

By Jonathan Schechter, 1-09-07

What might 2007 hold for the local Jackson Hole economy?

From a macroeconomic perspective, no dramatic changes seem to be in the offing for 2007: The Middle East will remain a mess, neither energy prices nor demand will vary much, manufacturing will continue to boom in Asian countries, and little of substance will change in Washington.

As a result, most of the macroeconomic forces affecting Jackson Hole will continue apace.

How will this affect particular segments of the local economy? With one big exception, it means more of the same.

Due to supply and demand, the Jackson Hole real estate market should continue to be hallmarked by 2006’s three basic qualities: higher prices, fewer sales and similar total dollar volume. Once again, by not having a real estate transfer tax, the community will leave a ton of money on the table; once again, huge sales prices will induce large numbers of Realtor-wannabes to enter into the trade; once again, as more Realtors pursue fewer sales, local agents and firms will be forced to market even more feverishly to distinguish themselves from one another.

The story in neighboring Star Valley and Teton Valley, Idaho—the bedroom communities supplying us with workers—will be a bit different. For a variety of macroeconomic and other reasons, demand to live in the greater Jackson Hole area will continue to be high. However, because of housing prices in Jackson Hole, surrounding counties will continue to see booms in both real estate and development.

What about the national slowdown in housing prices?

It isn’t clear whether that phenomenon has stabilized. If it hasn’t, we won’t be immune, just as we aren’t immune from any other macroeconomic trend. However, if a bust does come, it is far more likely to clobber sales (and therefore prices) in Star Valley and Teton Valley than it is Jackson Hole.

Why?

Three reasons: the relative desirability of living in Jackson Hole; the tremendous oversupply of lots (particularly in Teton Valley), and the number of properties in both counties that have been bought as investments.

Assuming no real estate collapse, construction should also stay frenzied. And as with real estate, while the majority of the area’s construction dollars will be spent in Jackson Hole, the majority of construction jobs will occur in the surrounding counties.

Here are a few thoughts on various sectors of our economy:

TOURISM

In 1993, Grand Teton and Yellowstone national parks changed the way they count visitation. Since then, both saw visitation peak around 1998; since 1998, both have seen total visitation drop around 10 percent (1.5 percent annually, compounded). There’s no reason to think this trend will reverse itself in 2007.

The point? While those who love the parks and those who make their living off of summer tourism may not want to acknowledge it, national park visitation is hurting nation-wide. As it declines, it’s slowly taking our summer tourism economy with it.

Similarly, there’s no reason to anticipate higher skier days at the Jackson Hole Mountain Resort. Last year, the resort did a magnificent job turning lemons into lemonade by aggressively marketing the tram’s demise. For the next two years, however, they will not be able to play that card. And the home team’s efforts to lure last-minute skiers this year certainly won’t be helped by the national media attention drawn to the recent back-to-back Denver International Airport closures: Travelers may say “yuck,” but skiers will swarm to Colorado.

RETAIL AND TAXABLE SALES

Taxable sales are driven by three sectors: retail, lodging and construction. During the past year, strong retail and construction sales more than offset lousy tourism numbers, driving taxable sales past the $1 billion mark for the first time in the county’s history. This pattern, too, should repeat itself, with particular success being enjoyed by those businesses, which cater to locals. In the foreseeable future, that’s where retail growth will come.

OTHER SECTORS

In the Sherlock Holmes story “The Silver Blaze,” the key to solving the entire crime was something that received no attention: the dog that didn’t bark. A similar situation exists with the local economy.

The key to our current economic prosperity is the fact that an increasing number and variety of high-income “big city” businesses – ranging from investments to consulting – are being conducted from Jackson Hole. The salaries paid by these businesses are being used to buy local real estate and local merchandise, and support local activities ranging from recreation to nonprofits. These businesses aren’t measured, don’t generate taxes, aren’t hyped (or even publicized), and certainly aren’t written about or analyzed. However, in an era of stagnating tourism, they are driving our remarkable growth. Unless and until we screw up our quality of life – something we are entirely capable of, but something that won’t happen in 2007 – this won’t change.

THE ONE BIG EXCEPTION

One big change will occur in the local economy in 2007: Mainstream Jackson Hole will finally decide it’s OK to be “green.”

Schechter’s maxim holds that the economy changes faster than perceptions, and perceptions change faster than politics. Well, with the Town of Jackson signing the U.S. Mayor’s Climate Protection Agreement, our politics have now gone green: Both the town and county governments are on record recognizing that human-influenced global warming poses a significant threat to the local economy and quality of life.

Building on this platform, in 2007 Jackson Hole will see so much climate change and resource use-related activity that, by the end of the year, there will be a clear critical mass of “green” local businesses. Sure, some of them will be doing little more than greenwashing. However, that matters far less than the fact that a year from now businesses that aren’t actively touting their environmental awareness will be viewed as outside the mainstream, and suffer financially for it.

This embrace of the environment will, of course, put Teton County even further at odds with the rest of the state: “Not only are they blue, but now they’re green!” But even that “freak” label won’t last long: By acknowledging the economic importance of environmentalism, Jackson Hole will be aligning itself with such powerhouses as Wal-Mart, Toyota, and the state of California. Because these are the entities with a proven track record of successfully anticipating the future, it’s far better for us to be aligned with them than, say, dinosaurs such as Big Oil or U.S. auto manufacturers or, alas, the state of Wyoming.

Bottom line? Whether we actively lead or simply follow in the paths of the “green giants,” 2007 will be the year in which our economy develops a decidedly greenish hue.


EDITOR'S NOTE: Mr. Schechter owns Summit Management Consulting and writes a biweekly column for the Jackson Hole News & Guide.

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