The price of land in downtown Aspen now makes it highly unlikely that a new stand-alone, moderately priced hotel will be built there again, according to research and interviews conducted recently by the city of Aspen.
City planners also found that Aspen’s stock of condos — which accounts for 40 percent of the tourist bed base — is outdated and there are significant challenges to redeveloping the condo complexes in a way that makes them both attractive and available to visitors.
However, planners also heard from many local lodge owners, developers and condo managers that the city should not try to solve either the hotel or the condo problem, outside of streamlining regulations and reviews of new projects.
But after presenting their results to the Aspen City Council on Dec. 11, planners were told to keep studying the issue.
They are now working with consultants to better understand lodging economics and to learn what Aspen’s visitors — both current and prospective — want for lodging options. And they’re exploring ways to spur condo renovation and redevelopment, according to Jessica Garrow, the city’s long range planner.
A changing bed base
Today in the city there are 2,293 short-term accommodation units, according to a 2012 study by Mountain Travel Research Program, or MTRiP.
The 2,293 units in Aspen include 1,158 hotel and lodge rooms, 932 condos, 131 private homes, and 72 rooms in B&Bs.
In all of those units combined, there are 10,085 “pillows,” or places for 10,085 people to sleep in a bed.
There are another 1,822 units and 8,772 pillows in Snowmass Village, according to MTRiP, which means the Aspen/Snowmass resort can theoretically sleep 18,857 people in short-term rental accommodations.
That number — call it 19,000 — does not include people staying at, or living in, single-family homes, town homes, apartments or condos that are not counted in the short-term rental pool.
To say nothing of couch surfers.
Indeed, it is not so much the number of short-term units in Aspen that now concerns the city, it is the nightly price of the units.
From 2006 to 2011, the average rate for a room in Aspen in December was $540. And from 2006 to 2012, the average rate in March was $420, according to MTRiP’s findings.
And as demand warrants, those prices are likely to keep climbing.
During the economic boom from 2003 to 2007, for example, Aspen lodging prices went up 40 percent.
And there has been a sharp increase in the number of private homes on the short-term rental market.
While they account for only 5 percent of the tourist bed base, home rentals have gone up 30 percent since 2009 — and 95 percent of those homes rent at “deluxe” prices.
Today in Aspen, there are 1,423 “deluxe” units, 654 “moderate” units and 216 “economy” units.
That means 62 percent of the units in Aspen are considered deluxe, 29 percent are moderate and 9 percent are economy, according to MTRiP.
The number of units in each category is primarily a function of the amount charged for a room.
And since 2009, there has been a 37 percent drop in the amount of moderately priced units in Aspen that might appeal to middle-class visitors.
According to Aspen lodging operators, the challenges for existing low-end lodges in Aspen include: “inability to market aggressively; too few rooms to achieve critical mass economically; difficulty in matching service levels offered by others; the competition when upper-end lodges aggressively lower off-season rates; and outdated buildings and facilities.”
The old Skier Chalet restaurant and lodge: once an Aspen icon, now a faded memory awaiting redevelopment. Photo: Brent Gardner-Smith/Aspen Journalism
Access to Aspen?
The lack of cheap hotel rooms in Aspen could be considered in conflict a with long-standing city policy, according to city planners.
They point to Aspen’s revolutionary 1977 growth management plan as articulating the idea that “working Americans are entitled to enjoy the public lands surrounding Aspen, and high costs shouldn’t act as a barrier.”
And the recently adopted Aspen Area Community Plan declares that “the concept of providing equal access to Aspen has been present in long range plans dating back to 1976. We seek a broader demographic in order to sustain a diverse, visitor-based economy.”
Backing that sentiment up, planners say, is a 2008 survey of local citizens where 61 percent said they wanted to see more “ski bum” lodges in Aspen
However, lodging and development professionals interviewed this fall by the city weren’t sure that the dearth of low-priced hotel rooms in Aspen is even a problem.
“Many said that the reality is that people must pay for the quality of the amenities that the Aspen area offers,” notes they city’s analysis.
“Times have changed,” Warren Klug, the manager of Aspen Square, a condo-hotel in downtown Aspen with 101 units, told city planners. “Economy lodging is not Aspen’s market.”
Stan Clauson, a land-use planner and consultant in Aspen, agreed with Klug.
“The bottom line is that it’s not cheap to get to a destination resort, and you have to pay for the quality of Aspen,” Clauson told city planners. “It’s a unique place that’s in demand, and that means prices are relatively high to stay here, to eat here, to ski and paraglide and so forth.”
An enviable problem?
Fork Frick, an economic consultant with BBC Research and Consulting in Denver, said the community’s desire for more low-end lodges may be a problem unique to Aspen.
“Aspen is one of the few communities so confident of its high-end market that it might prefer to channel development toward a lower price point,” he wrote in a Nov. 30 memo to city planners. “Most communities react favorably to high-end hotel or interval ownership proposals, which hold the promise of wealthy customers and associated retail and restaurant sales.”
Frick attended a planning charrette held in Aspen on Oct. 20 by city planners that included a number of local lodge operators, condo managers, real estate developers and land-use planners.
“There was skepticism about the extent of a bed base imbalance or problem in Aspen,” Frick reported to the city about the opinions in the group he sat in on.
“There was deep skepticism that a large (relatively) low-priced hotel could be successful on an ongoing basis, even if development was subsidized,” Frick wrote. “Actually, there was skepticism that any new hotel, at any price point, could be successfully developed and operated in the current market and under current regulations.”
Another consultant hired by the city underscored that last point — that it is now too expensive in Aspen to build a straight-ahead hotel that did not include a mechanism for increasing revenue beyond hotel operations, such as selling condos or fractional units.
“There is no simple solution to expanding the city’s tourist bed base,” wrote Brian Duffany of Economic and Planning Systems in a report to the city. “High land costs are a major barrier to hotel and mid-range condominium development. Real estate economics indicate that any hotel development will need to contain a luxury residential component to subsidize the hotel component.”
Duffany pointed to a 2006 analysis by Hospitality Valuation Consultants which found that it would take land prices as low as $40 a square foot to make a mid-range hotel in Aspen economically viable, especially given the resort’s annual occupancy levels of 50 to 60 percent.
Trouble is, at least for prospective hotel operators, land in downtown Aspen or near Aspen Mountain is now going for about $500 a square foot, according to the EPS report.
“No community faces the same cost, land supply, and regulatory constraints as Aspen,” Duffany noted. “Even with a major loosening of exactions and density increases, hotel development will still be inhibited by high land costs.”
One veteran local hotel operator agrees.
“When you get into the costs of building in Aspen it becomes very hard to make it work — from the land, to the stringent codes, to the design/architectural work in conjunction with City Council, to construction costs,” Craig Melville of the Mountain Chalet told the city. “The cards are stacked against building affordably and thus succeeding as a moderate hotel.”
The city’s lodging analysis also highlighted the problem with Aspen’s aging condos.
“Aspen’s condominium inventory is relatively old and obsolete compared to new condominium lodging in competitive resorts such as Vail and Beaver Creek, and Park City (including Deer Valley and The Canyons),” wrote Duffany of EPS. “Many of Aspen’s condominiums were built in the 1960s, 1970s, and 1980s and have low ceiling heights and few amenities, such as elevators, wireless internet, health/fitness facilities, or even adequate parking.”
And redeveloping Aspen’s condos won’t be an easy task.
Alan Richman, a veteran local land-use planner, was hired by the city to examine the obstacles to redeveloping existing condo projects in Aspen.
He found in his report that the city’s land-use regulations favor the redevelopment of lodge and hotel properties over condo complexes.
For example, only 14 condo units at a maximum size of 2,000 square feet, and a max height of 28 feet, can be built on an acre of land in the city, which is a much smaller development than it would be for a new hotel or lodge.
Also complicating the situation is that many condos in Aspen are considered “nonconforming” with the underlying zoning, which means they are subject to strict replacement formulas, including a restriction on additional square-footage.
And if old condos in town have ever been used by locals as year-round housing, then a new condo development has to replace those units with deed-restricted housing, further driving up the costs of redevelopment.
Further, Richman points out that costs have been driven higher recently by new or increased city fees tied to parks, transportation, housing, water, sewage, stormwater drainage and land-use review.
Then there is the reality that many longtime condo owners are happy with their units the way they are, and are not interested in spending lots of money to upgrade them.
“It was suggested that unless a developer is willing to come in and take the risk for them, many owners are unwilling to even put up the funds to evaluate what issues they would have to overcome to make improvements,” Richman wrote in his report to the city.
Ironically, even if many condos in Aspen were upgraded, they might then be pulled off the rental market, as owners may not want their new digs compromised.
Many of those interviewed by the city didn’t think government could do much to change trends in the local lodging sector.
“I don’t think it’s the city’s place to have an impact on the industry,” John Corcoran, the general manager of the Aspen Alps, told city planners.
If the city does want to see more affordable local hotel rooms, several of the local professionals said, it could reduce red tape.
As Duffany, the consultant with EPS, put it in one recommendation to the city, “consider offering more flexibility in development review to allow residential units with hotel projects, recognizing the financial feasibility limitations of hotel development.”
And he noted, developers would like to see “fee waivers, expedited permitting and review, exemption from or reduced housing mitigation requirements, and perhaps limited use of tax increment financing.”
But beyond that, let the market rule, he counseled.
“There was general agreement that it was not advisable for the City to ‘get into the hotel business’ or to ‘pick winners and losers,'” Duffany wrote. “In addition, the level of financial subsidy required would be unrealistically large.”
In terms of the aging condo issue, consultant Alan Richman said the city could start by sending a positive message to condo owners.
“We believe that the most important thing the city can do is make it clear to the homeowner’s association that the city is interested in seeing these units get remodeled and upgraded and is not erecting barriers to doing so,” Richman wrote.
“One way to change this impression would be for the city to make it easier for owners to accomplish remodels or upgrades that will result in energy efficiency or green building,” Richman wrote. “Many older complexes have highly inefficient buildings and it would seem logical that the city would welcome these kinds of upgrades, not make them hard to accomplish.”
By the numbers:
Aspen’s short-term lodging inventory in local hotels and condo-hotels, by number of units. Note, some similar properties, such as the North of Nell, are not included on this list, which the city compiled as part of its study:
Rooms — Property
204 — St. Regis
143 — The Gant
126 — The Limelight
122 — Hyatt Grand Aspen
122 — Inn at Aspen
101 — Aspen Square
100 — Sky Hotel
98 — Aspen Meadows
93 — Hotel Jerome
92 — Little Nell
83 — Aspen Alps
73 — Ritz Carlton Club
58 — Mountain Chalet
53 — Molly Gibson
45 — Hotel Aspen
38 — Aspen Mountain Lodge
37 — St. Moritz
35 — Annabelle Inn
27 — Mountain House Lodge
26 — Residences at Little Nell
24 — Independence Square
20 — Hotel Durant
19 — Hotel Lenado
17 — Innsbruck Inn
16 — Hearthstone House
16 — Tyrolean Lodge
9 — Dancing Bear Lodge
8 — Snow Queen Lodge
8 — The Residence Hotel
1 — Christiana Lodge
Source: City of Aspen
Editor’s note: The reports cited in this story are also posted on the city’s long-range planning page.