It’s anyone’s guess how Russia’s invasion of Ukraine will end. But a shock to the world and its economy has the potential to affect tourism to Eagle County.
Tom Foley is the senior vice president of business intelligence for Inntopia, a lodging and tourism booking and research firm. Foley has spent much of his career looking at lodging and tourism in mountain resort areas.
“We are yet to find an economic event since the Great Recession that has actually had a notable and readily measurable impact” in the world of destination mountain resorts, Foley said.
Since the world’s financial markets have been overvalued for several years, Foley said there was already a correction underway before Russia’s Wednesday invasion.
While an inflationary trend began last year, including oil price jumps, Foley said those price hikes haven’t yet had an impact on mountain resort tourism, adding that increases in room rates have far outstripped inflation in the broader economy.
When does it hurt us?
The question is at what point inflation, particularly in fuel prices, starts to have an affect on the travel economy.
Fuel prices are rising, and are expected to keep rising for some time.
In a Thursday virtual press conference, Patrick DeHaan, an industry analyst for GasBuddy, said the added impact from Russia’s military action is already being felt at retailers nationwide.
DeHaan said the national average price of a gallon of gasoline could surpass $4 per gallon in April or May, with prices in California passing $5 in the next few weeks. But, he added, U.S. motorists in most places are unlikely to see gas above $6 this year.
This year’s price increases are on top of normal seasonal increases seen when refineries shut down for maintenance and a switch to summer-blend gasoline.
‘Slight’ summer relief
Those prices tend to fall back into summer. But, DeHaan said, he expects only “slight” relief later in the summer. And, he added, the U.S. oil industry is starting to recover from the deep drops seen during the COVID-19 pandemic. That recovery has been slow, though, and output is still below pre-pandemic levels.
Beyond the price at the pump, though, diesel fuel is the fuel of industry, and the vast majority of consumer goods come to market via diesel-powered locomotives and trucks. That’s going to increase the cost of those goods. Airfares will rise as the price of jet fuel increases.
Foley noted that travel can assume a lower priority as consumers have to stretch their dollars to pay for groceries, gasoline and other essentials.
There’s also the matter of consumer confidence, a big factor in travel confidence.
Vail Valley Partnership President and CEO Chris Romer wrote in an email that he doesn’t expect the Russian invasion of Ukraine to have much in the way of short-term impact on the valley’s tourism business.
But summer is another matter.
If the war drags on and fuel prices keep rising, “it is very possible” those factors could affect consumer confidence and travel, Romer wrote.
Longtime tourism industry analyst Ralf Garrison said consumer confidence is often shaken by uncertainty, and wars are by nature uncertain.
“It’s unnerving,” Garrison said. On the other hand, though, “When times get bad, people want to go on vacation.”