TELLURIDE – Dirk de Pagter has seen Telluride transform from a post-mining ghost town to a posh getaway for skiers and festivalgoers in his 40 years as a resident. He has been buying, selling and building properties since the creation of the ski resort and the development of Mountain Village, always keeping his finger on the pulse of the market.
Telluride’s real estate market began to rise in 1970s with the creation of the ski resort, he recalled.
“There was some escalation in real estate value then, but very low-level,” de Pagter said, reflecting on recent decades of Telluride’s long history. “The only major project during that time was Telluride Lodge.”
Telluride’s economy hit some turbulence in the early 1980s, when a lawsuit filed against the ski resort caused a stall in the region’s real-estate market. There was another hiccup when the stock market crashed in 1987. The 1990s saw a surge in real estate construction and development, interrupted by two minor adjustments, following the dot.com crash and 9/11.
Looking back from the aftermath of the Great Recession, which hit Telluride hard in late 2007 and early 2008, all of those ups and downs were small, almost inconsequential disruptions.
“The crazy reality is that while there were blips on the radar, people in the construction and real estate sectors here had the feeling that our boom wasn’t going to end until Telluride reached maximum buildup,” de Pagter said. “We were too cocky. But the cows came home, I guess.”
Back Tending Bar
To say that 2007 housing crash and subsequent financial crisis hit the region’s real estate markets hard may be an understatement.
“We lost 30 percent of the realtors in three years, starting in 2007,” said real estate broker George Harvey of the Harvey Team. “We had about 250 realtors in 2007, and we’re down to 165 or pretty close to that now.”
Telluride Properties real estate agent Eric Saunders was one of those brokers deeply and personally affected by the economic downturn. He couldn’t sell real estate, but still needed to provide for his family.
“I got my old job back bartending to bring in some income,” he recalled. “I had one kid then – I have two now – and a mortgage. Working five, six nights a week, and doing what I could to sell property during the days…. Anything I could do to get some cash flow into the house.”
While he did what was needed, working from seven in the morning until nearly midnight left him feeling strained.
“It was a pretty big hit to the ego,” Saunders said. “I had been a fairly successful realtor here up until the crash, and now I was serving my fellow realtors at the bar. But when you have a family and kids, you do what you need to do.”
Putting the crash into perspective, real estate transfer taxes (to the Town of Telluride) and assessments (to the Mountain Village Owners Association) added up to over $25 million in 2005. In 2009 the two entities collected under $10 million.
“The crash virtually erased my sales,” said Saunders, adding that his worst year was 2010, when he sold only one fractional condominium.
Saunders kept his bartending job through 2013, even though his real estate sales picked up again. While he has enjoyed $5 million in sales in the past two years, the best period in his career, he hasn’t popped any champagne corks.
“If the recession taught us anything, it’s that the blind optimism we had back in the day is long gone, and that buyers are way more careful now,” Saunders reflected.
Compounding the recession’s impact, the region’s real estate collapse did not affect only realtors. For every real estate broker, there are numbers of other workers in the region in related fields, from construction to interior design to banks and title insurance companies.
Statistics collected by Todd Brown, who serves on the Telluride Town Council, and has made an avocation out of collecting and interpreting local economic data, demonstrate that the Great Recession changed Telluride and the surrounding region, at least as of now, more than six years after it began. And while the downturn has hit virtually everyone in every economic sector, real estate and construction were hit the hardest of all.
Reliance on RealEstate Sales
Construction in Telluride all but dried up when real estate sales tanked.
“All these major reconstruction projects, or new house building, disappeared,” said Brown, “Contractors quit hiring subcontractors who were coming out from Cortez, Montrose and Durango…. I remember a traffic study done back near the peak, maybe around 2005 or 2006, near Placerville. The number of people commuting to Telluride daily was triple what it is today. They were contractors – trucks with ladders on the side, plumbers, those sort of commuters that had jobs to do here.”
“I had a backlog of work when the recession hit,” said Kathy Green, owner of BONE Construction, in Telluride, “so I had a few years’ work. But then I had to work to find jobs. We had to change our pricing, there wasn’t a lot of latitude to change it much.”
LuxWest, a full-service interior design store located in Telluride, also felt the pinch.
“Our business is totally dependent on real estate sales,” said LuxWest co-owner and principal designer Barbara MacIntire. “I’ve been an entrepreneur my whole life, so I’m just used to it. It’s normal to have ups and downs in business. You try to do your best to plan for what you think is coming.”
But from the early 2000s until the crash in 2008, LuxWest’s business had grown from a family business to nearly ten employees.
“I had a full-time staff person that did our window covering and motorized shade installations,” she recalled, “and if he wasn’t working on that, he was receiving shipments. I don’t have anyone on staff like that anymore.”
By 2004, LuxWest’s business and shipments had grown so much that it began renting warehouse space in Montrose to store deliveries. Then, in 2009, work orders and clientele dropped dramatically.
“Things came to a screeching halt for five years, until the real estate market turned around. We didn’t go out of business or go bankrupt, but we just hung in there… We went from ten or so employees to just our family. It was really hard. The Great Recession also changed our personal finances quite a bit. We hung in, but we struggled through it.”
The year 2011 was the worst year for the LuxWest, said MacIntire. Other service firms in Telluride had a tough year, too, according to the Town of Telluride’s sales tax data, earning the town just $112,108 in sales tax. But the sector has roared back, generating $265,156 in taxes in 2013 – more than double what those businesses earned just two years earlier.
Even though work orders picked up in 2012, LuxWest hasn’t hired any additional staff.
“But I have a really good feeling for the future… “ Mac-Intire said. “We seem to have steady growth; we finish and wonder what’s next, and something always comes. We feel comfortable in that regard.”
LuxWest’s increase in work may reflect a modest rebound in real estate in Telluride, said Brown, while, at the same time, depressed activity in Mountain Village has prevented a full recovery.
Telluride real estate transfer taxes took a beating in 2009, declining from $8.3 million in 2007 to $5.1 million the following year. From 2009 until 2012, transfer revenues averaged roughly $2.7 million per year.
At the same time, real estate transfer assessments in Mountain Village dropped from a high of $16.5 million to a low in 2011 of just $4.9 million.
According to de Pagter, “In 2007, 45 percent of real estate transactions occurred in Mountain Village, and about 25 to 30 percent were in the Telluride. The rest were Ski Ranches and Aldasoro Ranch. Now the Town of Telluride accounts for between 40 and 45 percent of all sales.”
On a Friday night in early March, parties of visitors and Telluride locals lined up outside the Cosmopolitan restaurant at 4:30 p.m. hoping to snag a table in the bar or lobby area, where sushi and cosmopolitans are served half-priced from 5-6 p.m.
The sight of a packed bar and lobby at Cosmopolitan comes as a relief to restaurant chef-owner Chad Scothorn, who wondered in 2008 when the Great Recession hit Telluride whether his business would survive.
“I was very, very scared in 2008,” said Scothorn, “because at the time I had a restaurant in Durango and in Telluride, and I was hemorrhaging money. I lost a lot of sleep during that time…. During those times, your survival mode kicks in….”
For Scothorn, survival meant rethinking how his business operated. He renegotiated his lease with the adjacent New Columbia Hotel, remodeling and expanding in 2012 and 2013 into the hotel’s lobby, and adding more outdoor seating. Scothorn experimented with specials during football games, and although Cosmo is known for fine dining, he tried offering burgers and more pizza.
“The staff was frustrated when I started serving a cheeseburger,” he recalled. “I was trying to save the restaurant and their jobs, but they didn’t understand that…. When you own your own business, you go home pretty lonely. You’re trying to change what you do to stop the hemorrhaging of cash.”
Perhaps the breakthrough, Scothorn says on reflection, was investing in more education for his sous chef, whom he sent to sushi school.
“I remember sitting in the Durango Cosmopolitan, and I hired a lot of cooks that knew how to roll sushi. I went into the kitchen and saw they were trimming sushi, and I asked, ‘What’s going on here?’
“I tried it and said, ‘It’s good! Put it on the menu,’” and a week later, he said, the sushi option was a hit.
Fast forward to 2014, and Cosmopolitan’s happy hour has become a mainstay of the restaurant’s reimagined business, not only adding hours of business every week, but building the restaurant’s clientele during the subsequent dinner hours, as well.
“It’s been a home run,” Scothorn said.
Peaks and Valleys
Scothorn’s experiences before, during and after the Great Recession are not unlike the experiences of other restaurants in town, Brown’s data suggests.
“I’ve watched the data for restaurants for several years, highlighting the peak business they see on the weekends, and the impacts of holidays and festivals,” he said.
Brown observes that the peaks of Telluride’s summer and winter seasons – when the town is filled with ski vacationers or festivalgoers – are rising, while the valleys – when business comes to a crawl – remain where they were, before the recession.
“Our challenge here isn’t to add more to the peaks, it’s to fill in the valleys,” he said.
The last Christmas and New Year’s rush vastly outperformed the 2008-2013 average during that time.
A 2008-2013 average of the restaurants in Telluride indicates that they brought in roughly $8,000 a night during the holiday rush. But restaurants performed roughly 13 percent higher during the holiday rush in 2014, bringing in an average of $9,000 a night.
And peak business at Telluride restaurants during 2014 is higher than the 2008-2014 average. “Every weekend, business at the restaurants spikes like clockwork,” said Brown.
Correspondingly, the Telluride Wastewater Treatment Plant, which processes wastewater from Telluride, Mountain Village and Lawson Hill, calculates that nearly 23,000 people were here during New Year’s, 2014 – an all-time high, said Brown.
“Last season’s Bluegrass festival was the previous high – nearly 21,000 people. This winter saw nearly ten percent more people than that.”
Scothorn has felt the uptick during the summer and winter months since business picked back up. “The business lulls were much worse during 2008, 2009 and 2010,” said Scothorn, “It was so bad, we had to close during the middle of October through Thanksgiving. We recently started staying open during the fall because business has picked up a little. We still lose money in the fall, just not as much.”
Lower Priced Hotel Rooms
In the same economic segment as restaurants – providing services to visitors – Telluride’s hotels have also come back from the depths of the Great Recession.
Among them is a hotel that has seen its share of Telluride booms and busts, the historic New Sheridan Hotel, occupying a prominent spot on Main Street, and which is, perhaps, the most visible symbol of Telluride’s powers of endurance.
Indeed, since the New Sheridan’s reopening in 1893, after the original Sheridan Hotel, built in 1891 was destroyed in a fire, it’s remained true to its roots as a traditional hotel. Even in the modern era, none of its 26 hotel rooms have been sold as condominiums (as have many other hotels in Telluride).
The hotel, said general manager Ray Farnsworth, attracts a variety of guests, ranging from snow-chasing skiers looking for a few nights’ stay during the powdery late January and February months to heritage tourists drawn by the hotel’s mining-era feel and turn-of-the-century, hand-labeled photographs that line its walls.
In the boom years leading up to the Great Recession, the hotel was scheduled for a renovation that began in early 2008 and was completed in time for the holiday season that year. The refurbished hotel was busy for the holiday season, but as the national economy continued to slump, the New Sheridan’s occupancy and average daily rates declined sharply, said Farnsworth.
“Even when we re-opened in December 2008, the economic slide hadn’t really hit Telluride yet. It was more like 2009, 2010 and 2011, when things were really tougher than they are now.”
And as the smell of fresh paint faded, the reality of falling demand hit hard.
“We had to reduce staffing, and it was really stressful,” said Farnsworth. “We try to take the approach that we’re a family, and that we all work hard together, and we spend a lot of hours of the day together.”
To keep the hotel afloat, Farnsworth used whatever tools he could to keep the business viable during the economic storm.
“It was very much rate-driven. In order to sell rooms, you had to consider pricing the rooms lower than what you were used to,” he recalled.
The New Sheridan was not alone. Hotels in Telluride took a hit in 2009, when lodging sales tax revenue plummeted a whopping 22 percent from 2008.
But as the economy improved, Telluride’s hotels bounced back from the down years, with 2013 bringing more guests and restaurant patrons to the New Sheridan, said Farnsworth, and with 2014 now on pace to outperform the hotel’s 2007 numbers.
“For 2014, January is historically the slower month of the first quarter, but that’s where we saw the most gain,” said Farnsworth.