Forces at Play 2022: Will the lack of housing reshape tourism destination economies?
One of the biggest challenges tourism destinations face is a lack of affordable housing. Across the country, in all directions, the lack of housing is the one constant confounding local governments. And this lack of housing is not just supporting the tourism industry itself, but ancillary services and businesses as well. Necessary service providers and workers such as first responders, teachers, medical and construction workers, etc., are all impacted. The problem cuts across most industry segments, and we are just now coming to grips with the repercussions.
While many have a focus on the need for affordable housing, it begs a more profound and far-reaching question: What happens if there is no more affordable housing or not enough? Will the lack of affordable housing reshape tourism destinations economies?
The causes of this new challenge were outlined in the Northwest Colorado Council of Governments Mountain Migration Report in June 2021. Some of the key findings for the shortage of housing included more extended and frequent stays by visitors, part-time residents occupying their own homes, and more people buying housing previously used for the workforce, a combination of conditions often driving up the price beyond the reach of residents whose pay is tied closely to the service sector.
The net effect is less housing available for residents who work at the local level, and the housing that is available has experienced significant increases in cost, to the point where long-term residents are leaving. The situation in destinations across the county is exemplified in the 2019 study “Tahoe Prosperity Center Housing Report”, which focuses on understanding the scope of the problem. That study found that only 28% of Lake Tahoe residents can afford the median price of a house and about 3,290 housing units are needed through 2026 to offset the current housing shortfall and keep pace with job growth and retiring employees.
Fifty-seven percent of those needed units (1,880 total) need to be priced below current market prices to meet the full range of resident housing needs. This situation can be a challenge as Brian London, an Insights Collective consultant, observes, “Developer profits impact housing type. Developers build what the market demands, not what creates an equitable community, and workforce housing is not always profitable for developers.”
What happens over the long term? As a strategist, one has to ask, what happens if there is no additional new housing and, as a result, tourism destinations continue to lose the labor supply that is badly needed? Remember, building houses takes time; a developer showing up today with a proposal to build workforce housing could wait years before seeing people move in. What happens in the meantime? A recent article in the June 22 edition of the Economist, “Staffing shortages in America are a glimpse into its future,” provides some clues. Job seekers are sure to pressure wages upward, which will increase prices, but a more ominous threat needs to be considered. In many destinations, economic growth is already straining at its upper limits without adequate labor supply, and future economic growth is sure to be impacted. Think about it: tourism economies have been based on growth for the past forty years. Growth in visitors, revenues, and taxes provide quality of life services, each year more than the last. Without adequate labor, is that growth model sustainable?
Fewer available hospitality employees for primary visitor activities means reduced operations, fewer hours, and declining overall service levels. Look to see more automation, including more self-check at the grocery store. Restaurants will change their business model, including more automation for ordering and pick-up, and reducing in-room dining. The lodging industry has already reacted with reduced room service, maid service, and front desk service. Look for more reservation systems to manage demand and pricing. We are already seeing this, for example, in the wine industry, and we had a sample of it in the ski industry last year.
In the end, the lack of housing may be a catalyst for reducing the reliance on tourism as distance workers and their needs continue to take shape. Ultimately, we may be seeing a shift from tourism destinations whose primary focus was tourism to something different: community destinations, a place where tourism exists as a part of the community but does not define it.
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