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Consultant Ralf Garrison explains resort economics at a Sun Valley Economic Development forum at the Limelight Hotel in Ketchum on Wednesday night.

Though it will always hold the distinction of being the first destination ski resort in the U.S., Sun Valley is lagging behind its competition when it comes to winter tourism.

Consultant Ralf Garrison discussed that uncomfortable truth at a Sun Valley Economic Development forum at the Limelight Hotel in Ketchum on Wednesday night.

In an interview prior to Wednesday’s forum, Garrison said Sun Valley’s standing as a winter resort destination risks further degradation due to a possible cut in Visit Sun Valley’s funding from the city of Ketchum next year.

He said the city should be increasing marketing spending to keep pace with competing resort communities, and to boost occupancy rates above the typical 30-40 percent that Wood River Valley lodging properties experience in December, January and February. Sun Valley’s competition is averaging occupancy rates of 50-65 percent in those months, he said.

“Our economic equilibrium has this hole in the bottom of the bucket in the winter,” Garrison said. “Compared to other destinations, Sun Valley is further and further and further behind. If it’s not OK, there’s going to have to be a concerted effort to move that marketplace.”

While Mayor Neil Bradshaw’s fiscal 2020 budget proposal won’t be unveiled until late June or early July, the Ketchum City Council is preparing to hear budget requests from its nonprofit partners in the coming weeks, including Visit Sun Valley.

Recent conversations among Bradshaw, the city administration, the Visit Sun Valley board and its executive director, Scott Fortner, have included the possibility that Ketchum might reduce its funding for Visit Sun Valley in fiscal 2020.

Ketchum provides Visit Sun Valley $440,000 from the original local-option tax. Ketchum, Sun Valley and Hailey provide Visit Sun Valley $1.3 million from the 1 Percent for Air tax. The city of Sun Valley contributes another $300,000, while the Idaho Travel Council contributes about $350,000.

Last year, Bradshaw asked Visit Sun Valley about the potential effect if Ketchum reduced its original LOT funding.

He said the conversation has been framed on the fact that Ketchum’s funding for Visit Sun Valley has doubled in the past five years thanks to the 1 Percent for Air tax, but spending on services like Mountain Rides, events and other city services has remained flat or hasn’t met needed levels. He said the city faces a substantial price tag for improving public safety services in the upcoming budget.

“Nothing has even been penciled into the budget,” Bradshaw said. “It wasn’t a formal proposal. Are we achieving the right balance of marketing, products and services? What have we spent over the last five years on marketing? Are we balancing our spending appropriately and strategically? We don’t have an unlimited budget. We’ve got some major expenditures required on our public safety.”

Garrison said the discussions have included the possibility of the city’ halving its original $440,000 local-option tax commitment in one budget, and reducing it to zero in the next. He is pushing for a five-year plan that would include unprecedented collaboration by the private sector in the Wood River Valley to boost tourism, as well as a fundraising effort for marketing dollars.

“The marketplace is getting fierce,” he said. “Competition from these other destinations is huge. We shouldn’t be playing defense. We should be playing offense.”

Speaking on overall resort-community economic patterns at the forum, Garrison said tourism-dependent businesses in a ski town need 30 percent lodging occupancy to cover their fixed costs. They need 40 percent occupancy to cover variable costs, from 40-70 percent to turn a profit and above 70 percent to grow, he said.

Garrison said that in winter 2017-18, average occupancy in Ketchum, Sun Valley and Hailey hovered between 30 and 40 percent in December, January, February and March, before dipping to 20 percent in April. Occupancy spiked at about 85 percent during Christmas and the week before New Year’s, on President’s Day weekend and during the week of spring break.

In winter 2017-18, Garrison said, occupancy rates provided profitability for tourism-reliant businesses in the Wood River Valley on just 62 of 180 days.

“Your locals may be more spoiled than any others on the planet,” Garrison said of the ample access to great skiing during winter.

He said Sun Valley’s competing ski resort communities have access to substantially more tax revenue from lodging, which can be a key source of marketing dollars. Aspen generates $30 million annually from lodging tax revenue, Jackson nets $27 million, Mammoth brings in $20 million and Steamboat Springs generates $10 million.

“You’re going to be competing against Gunnison and Crested Butte for the bottom rung of the ladder,” Garrison said. “We’re thinking about how to stimulate winter marketing. A better idea is to get more people coming here.”

At Wednesday’s forum, former state lawmaker Wendy Jaquet said the original local-option tax has greater flexibility for Visit Sun Valley than the 1 Percent for Air dollars. By ordinance, the 1 Percent for Air revenue has to be spent on marketing tied to air service. The original LOT dollars can be spent on the visitor center or on marketing in an increasingly significant regional market like Boise, Jaquet said.

“That amount of money is really important,” she said.

Bradshaw stressed that no decisions have been made yet, and the proposals are just to test ideas and their effects.

“Sometimes I get people’s attention by saying, ‘What would happen if we do this?’” he said. “If it’s $220,000, what would we lose? If it’s more than $440,000, what would we gain? I have, obviously, competing interests for those dollars. Zero decisions have been made.”

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