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People have been asking about the future of travel leisure and Vail in particular, so I thought it appropriate to comment having grown up in Los Angeles and living in the Vail Valley for the past 25 years. Despite our reputation as a playground and capital preservation harbor for the ultrawealthy, this miniscule demographic (.6%) is not representative of the Top 10% families who control 70% of all wealth in the US and for the most part drive demand for seven digit luxury good spending.  The question that I think people are really asking is “what will money do after the pandemic is under control?”.  Historically our customer base has been well paid professionals but not uber multi-million dollar families.  The enthusiast profile can be characterized as lawyers, doctors, corporate VP’s and small business owners all of which are paid well but are not necessarily $10m investible asset rich.  Over the past 25 years “the wealthy have been getting wealthier” driving luxury good spending to levels that few Americans can afford which is the Vail Valley’s blessing and bane.  As to vacation home ownership today you can’t just be a lawyer; you probably have to be a partner.  Doctors will have to own a piece of their practice or the clinic.  Being a corporate VP may not be enough unless they are the EVP which means the boss of bosses.  While in the past small business owners could have had 5 employees, today they will have to run a much larger company to buy world class ski proximate real estate.

My back of the napkin calc points to a 90% loss of our traditional customer base which if true should be reflected in a flattening of buyer demand if not outright reductions in pricing which have been going in the opposite direction.  Concentrated wealth is growing so maybe that trend is countering what should have been a softening market?  Is it our exponentially expanding international customer base?  Maybe it’s the very low cost of financing or growth of investible assets?  Did the longest running bull market run in history artificially inflate consumer confidence in their wealth and employment income?  Has the intergenerational transfer of family assets begun?  These are difficult questions to answer and are societal issues to contemplate as the rebuilding of America unfolds.

Any predictions based upon historical trends are now COVID-19 irrelevant.  It’s impossible to measure how much capital structure and/or employer destruction has or will occur.  Is fear so pervasive that people will want to live in less congested highly affluent areas such as Vail, Aspen, The Hamptons or Napa Valley knowing they can effectively work on-line?  Will a 30 trillion dollar budget deficit drive inflation to double digit numbers?  What will the credit markets look like as we continue to print money to counter the worldwide pandemic?

While I don’t see a systemic breakdown coming no one knows how badly consumer confidence will be affected.  Over the next couple of years demand for travel, leisure and resort home ownership will suffer as people wait for portfolio and employment income levels to recover which only makes sense in a time of fear and panic where anything can happen.  What I do know is that DURATION is the critical issue.  If the world comes out of COVID-19 by year end, normalcy could return relatively quickly.  If businesses remain shuttered into next year the damage could takes years to restore.  Bloomberg News talking heads are pontificating a V-shaped cyclical downturn pattern, which is a violent decline followed by a swift recovery, but in my opinion seems to be wishful thinking.  It takes months to build a house but only a couple of hours for it to burn down.  Could this a metaphor for the global economy?

Long range forecasting requires accurate and detailed information, so be wary of trusting what will be a barrage of predictions that should be taken with measured skepticism.  The pundits are only guessing so it makes sense to prepare for the worst while hoping for the best.  No matter how all of this ends it is going to be a turbulent and volatile ride, so fasten your seatbelt because I expect it is going to get worse before it gets better with timing and magnitude impossible to predict.