Reports show Utah lodging industry on upswing

Reports show Utah lodging industry on upswing
Hospitality » Occupancy levels rising, but nightly rates remain down, prompting caution.

By Mike Gorrell
The Salt Lake Tribune

Two separate lodging industry reports suggest that key segment of Utah's economy is improving, but full recovery will be slow in coming.

Hotel occupancy rates statewide and in Salt Lake County last month exceeded levels achieved in March 2009, the first time since April 2008 that year-over-year increases were realized.

Similar results also emerged in a monthly report tracking the performance of lodging establishments in Western destination resort communities. That report, by the Denver-based Mountain Travel Research Program, found that occupancy rates last month in those posh places were 9.6 percent higher than March 2009.

March's improved showing was not as pronounced in conventional communities, with Salt Lake County hotels recording a 5.2 percent increase last month. Hotels statewide filled 2.9 percent more rooms on a nightly basis, according to the Rocky Mountain Lodging Report, which also is based in Denver.

Although both sets of results are "great positives," according to Utah Hotel & Lodging Association executive director Michael Johnson, he was reticent to get too excited at this point.

"There's some hesitancy to say it's because we've recovered," he said. "Occupancy has gone up, but hotels have held their rates low, knowing people are still looking for deals.

"People who used to take a couple of small trips a year or one big one put it off last year. They don't want to put it off again. Unlike last year, they feel their jobs are secure and they're more comfortable, so they're traveling again -- but looking for deals."

Good snow in March and an earlier Easter also helped boost occupancy levels at resorts and southern Salt Lake Valley hotels, Johnson said.

"But there are still a lot of unemployed people who won't be traveling and still a lot of companies that have cut back on meetings. It's hard to know when those meetings will come back," he said.

"A lot of [hotel] properties are celebrating now, but it's because they don't have to cut their budgets even further. We have to put it into the context that there's a long way to go."

Ralf Garrison, author of the Mountain Travel Research Program's report, shared Johnson's perspective that it's too soon to rejoice too much about the latest figures.

March of 2009 was a bad month for the industry, so besting its results does not necessarily equate to March of 2010 being "good," he said. Still, it was the third consecutive month with year-over-year increases in actual occupancy for property management companies in 15 resort communities in Utah, Colorado, California and British Columbia.

"These figures indicate that a positive trend has now been established. It is now virtually certain that the winter season occupancies will exceed those of 2008-09," Garrison said. "But our enthusiasm remains cautious since occupancy rates remain fragile and overall revenues continue to lag behind those of last year."

His report projected occupancy this season will be 1.3 percent better than the previous winter. But in line with Johnson's concern, average nightly rates were down about 5 percent, indicative of consumers being rate conscious.

"Now that we are seeing the momentum shifting slowly to the more positive side of the spectrum -- in the ski industry, travel industry and the broader economy -- as a [mountain travel] industry we can be optimistic about carrying this strength into the summer season," said Garrison, who is now looking to the 2010-11 ski season with "cautious optimism."

mikeg@sltrib.com
Filling more rooms

Utah hotels posted higher occupancy rates last month than in March 2009, the first year-over-year increase in almost two years. Rooms filled nightly:

Salt Lake County » 73 percent
Ogden » 66 percent
St. George » 63 percent
Davis County » 61 percent
Utah County » 59 percent
Cedar City » 48 percent
Logan » 46 percent
Mountain resorts » 56 percent
Other parts of Utah » 57 percent
Statewide » 65 percent

Source: Rocky Mountain Lodging Report

Utah banks enter 2010 in better shape

Utah banks enter 2010 in better shape
Recession » State supervisor says it's too soon to tell if the industry has touched bottom.

By Paul Beebe, Salt Lake Tribune
Updated:04/10/2010 06:45:27 PM MDT


Several community banks in Utah struggling with bad loans tied to real estate appeared to turn a corner for the better at the end of 2009.

But with two failures already this year and other banks still carrying overdue or defaulted real estate loans on their books, it's hard to know with certainty that lenders are firmly in recovery mode.

Lenders say their banks have raised new capital, written off toxic real estate loans and boosted reserves for future loan losses. And despite ongoing weakness at many banks, depositors' money -- insured up to $250,000 per account by the Federal Deposit Insurance Corp. -- isn't at risk, they say.

Still, many admit the danger isn't over. While a slow recovery is taking hold, they think home prices will continue to sink this year, leaving banks with little margin for error.

Meanwhile, bank lending remains weak, threatening the ability of businesses to finance expansion and new hiring that could drive Utah's 7.1 percent unemployment rate down from its highest level since 1984.

"We believe that we won't make a lot of progress in the economy until the last quarter, and then in the last quarter things hopefully will start to rebuild," said Paul Mathews, president of Holladay Bank and Trust.

"If I were guessing, we are probably at least a year away from the bottom," said Ron Spratling, the bank's chairman.

Holladay was one of an assortment of community banks with precarious levels of real estate loans to enter 2010 in better shape than just three months earlier.

Prime Alliance Bank of Woods Cross, SunFirst Bank and Village Bank in St. George, Capital Community Bank of Provo and First Utah Bank in Salt Lake City also stabilized or reduced the proportion of their troubled loans to their capital and loss reserves.

The six lenders also fattened their capital cushions to levels exceeding the FDIC's standards for well-capitalized banks. Shareholders of First Utah Bank, for example, added $1.5 million in December, President David Brown said.

And while First Utah's "troubled asset ratio" of capital to bad loans still exceeded 100 percent at the end of the fourth quarter, much of the real estate it took back when borrowers didn't repay the bank is under contract to be sold, Brown said.

"Things are perhaps better than you see," he said.

Community banks are probably holding their own, said Tom Bay, supervisor of banks for the Utah Department of Financial Institutions. But, he went on to say, it's too soon to tell if the banking industry has touched bottom and is recovering.

"They are tied to the economy like everyone else. They are just hoping, like everyone else is, that things will start to fall into place, as far as the economy is concerned," Bay said.

Some lenders weren't able to weather the Great Recession. In January, Bay's department seized Barnes Bank after its troubled asset ratio to capital climbed to 320 percent, bringing the Kaysville bank to its knees. Rumors the bank was in trouble caused a huge run on its deposits, depleting its capital.

Last month, the department closed Ogden's Centennial Bank. Its ratio had ballooned to 829 percent. Both banks had lent heavily to land developers who defaulted when real estate values plunged.

Two banks heavy into real estate lending -- Gunnison Valley Bank in Gunnison and Orem's Western Community Bank -- saw their troubled loan ratios climb during the final three months of 2009. Neither has failed, but both face different futures.

Western has reached a deal to sell 51 percent of the bank to a Utah County group calling itself Rock Canyon in Organization. The investors intend to expand into retail, manufacturing and agricultural lending.

Gunnison, in Sanpete County, is profitable, and President Paul Andersen believes the bank "is looking a lot better."

Gunnison has lined up $4 million in new capital. It has stopped making real estate construction loans and is focusing instead on agriculture and consumer lending. And the bank has cut the value of most of its real estate loans because they are no longer worth the amount shown on its books.

"Things have stabilized. We've still got some [real estate loans] out there, but they've been written down. So our losses are going to be nowhere near what they were," Andersen said.

In February, the FDIC ordered Village Bank in St. George to develop a plan within 60 days for boosting its already hefty capital reserves. The agency also told Village Bank to purge its worst loans within 10 days.

President Douglas Bringhurst said Village Bank has raised additional capital and is foreclosing and writing off loans in order to bring the size of its portfolio into line with its capital.

But while Bringhurst says the bank is doing better, he won't say it's healthy.

"I don't have an answer to that," he said. "We have signed an agreement with the FDIC to work through the problems they have identified, and we are in the process of fulfilling their wishes and doing what they want us to do."

Some bankers think regulators are too pushy. Howard Headlee, who directs the Utah Bankers Association, said Bringhurst may have been unwilling to make a stronger case for Village Bank because of his contact with FDIC examiners.

"I know he's tired," Headlee said. "Dealing with the regulators is an exhausting process. But when you take a step back and take a look at their numbers, [Village Bank] has a lot to be proud of.

"They are a long way from what most people would consider an unhealthy bank," Headlee said.

Spratling, chairman of Holladay Bank, said Barnes and Centennial banks could have survived if the FDIC had given them more time to work out their problems.

That view is gaining some traction in Congress. Two weeks ago, Rep. Walt Minnick, D-Idaho, and Rep. Barney Frank, D-Mass., asked the Government Accounting Office to assess whether federal and state banking regulators are being unreasonable in their examinations of community banks.

Overzealous field examiners are also provoking banks to curtail their lending, which exacerbates the economic downturn, Minnick and Frank said last month in a letter to the acting comptroller general, whose agency supervises national banks.

Utah retains top ranking in economic outlook report

Utah retains top ranking in economic outlook report
Deseret News
Published: Wednesday, April 7, 2010 8:34 p.m. MDT

SALT LAKE CITY — Utah retained the top economic outlook ranking in a new report by the American Legislative Exchange Council.

The third edition of "Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index" had Utah top-ranked a year ago, based on 15 state public policy variables. Utah was ranked 18th in economic performance, based on three variables "highly influenced by state policy."

The report's authors analyzed how economic competitiveness drives income, population and job growth.

In the economic outlook rankings, Utah was followed by Colorado, Arizona, South Dakota and Florida. New York was ranked last.

The report is available at www.alec.org. ALEC is nonpartisan individual membership association of state legislators.

© 2010 Deseret News Publishing Company | All rights reserved

EDCU: Commercial Real Estate Recovery: Are We There Yet?

Has Utah's commercial real estate market hit bottom? Are the capital markets unthawing? Will the retail sector be the first to rebound? Will investors swoop in and gobble up record bargains on distressed properties?

Like other areas of the country, Utah's commercial real estate market was hit hard by the recession. In fact, 2009 was a difficult year for the market in most respects; however, 2010 looks much more promising and 2011 even better. While no one has a crystal ball, EDCUtah's partners from the commercial real estate sector say they are cautiously hopeful that improvements in Utah's job market will lead to the recovery of the commercial real estate sector.

You can read the enlightening story about Utah's commercial real estate market and where it is headed in EDCUtah's spring Site Selector Quarterly (SSQ) newsletter, which is being distributed this week to site consultants, real estate brokers, business leaders, and many other interested parties across the state and nation. Written from the perspective of EDCUtah's partners in the commercial real estate market, the feature story provides an engaging look at the market, its challenges, and how it is connected to the state's job market.

Read the full story online in our Site Selector Quarterly newsletter.

Utah job picture shows improvement

Utah job picture shows improvement

By Jasen Lee, Deseret News
Published: Tuesday, April 6, 2010 9:34 p.m. MDT

SALT LAKE CITY — A rise in national employment is pointing to some positive results for Utah small businesses.

The Zions Bank Small Business Index for Utah jumped to 95.9 in March, up from a revised 91.6 in February.

The strongest U.S. job gain in three years was seen as one more sign of renewed national economic growth, ultimately a positive development for Utah's small businesses, according to Kendall Oliphant, senior vice president at Thredgold Economic Associates who compiled the data for the report.



"We do have evidence that Utah job growth is improving," Oliphant told the Deseret News. "The gain in March marks six consecutive months of improvement in the small-business index."

The index measures business conditions from the viewpoint of the Utah small-business owner or manager. A higher index number is associated with more-favorable business conditions. The index uses 100.0 for calendar year 1997 as its base year.

Factors that are moving the index higher include stronger economic performance in the Rocky Mountain region, as well as across the U.S. and around the globe, Oliphant stated.

"In addition, the pace of Utah job losses is slowing, and we anticipate monthly employment gains to be reported by summer," Oliphant said.

Utah's unemployment rate was estimated at 7.1 percent in the latest month, up from the revised 6.9 percent rate in the prior month. Total Utah employment fell an estimated 27,700 jobs during the past 12 months.

In contrast, the U.S. economy gained an estimated 162,000 net new jobs in March. However, the national unemployment rate remained at 9.7 percent in March.

"Utah follows fairly close to what happens across the U.S.," Oliphant said.

He stated that job growth would likely be the trend in the Beehive State in the very near future.

"We anticipate (year-over-year employment) to turn positive in the next few months," he said.

e-mail: jlee@desnews.com

Utah business-conditions index rises in March

Utah business-conditions index rises in March

By Brice Wallace, Deseret News
Published: Thursday, April 1, 2010 11:33 a.m. MDT

Utah's business conditions improved just a hair in March, according to a monthly gauge released Thursday.

The Goss Institute for Economic Research said Utah's Business Conditions Index was 55.9 in March, up from 55.8 in February.

The index ranges from zero to 100, with a figure higher than 50 indicating an expansionary economy over the next three to six months. It is derived from a survey of the state's supply managers.

Components of Utah's overall index for March were new orders at 59.5, production or sales at 60.6, delivery lead time at 51.1, inventories at 57.1 and employment at 51.1.

"When the government releases March employment data, I expect it to show that Utah's level of employment was virtually unchanged for the first quarter of 2010," Ernie Goss, the institute's director and also director of Creighton University's Economic Forecasting Group, said in a prepared statement.

"Based on our surveys over the past several months, Utah will add jobs, albeit at a slow pace, for the second quarter of 2010. Even as the state adds jobs, I expect the state's unemployment rate to remain above 6.5 percent for the remainder of 2010."

The three-state Mountain region — consisting of Utah, Wyoming and Colorado — posted an index of 56.6 in March, a figure Goss described as "healthy" despite being down from February's 58.6. Still, it was the sixth consecutive month for the index to be above growth-neutral 50.0.

Utah was the only state of the three to see month-to-month improvement.

"While the region has yet to record overall and significant positive job growth according to government data, surveys over the past several months indicate that the region experienced slight positive job growth for the first quarter of 2010," Goss said.

The region's manufacturing and value-added services sectors are experiencing strong business activity, Goss said, adding that he expects the increase in activity to extend to the rest of the regional economy in the months ahead.

Colorado's index, above 50.0 for the sixth straight month, was 57.0 in March, down from February's 58.8. Wyoming's index in March was described as "still healthy" at 57.5 despite falling from 65.0 in February.

The Goss institute uses the same methodology as a national index undertaken by the Institute for Supply Management. ISM said Thursday that the national figure in March was 59.6, up from 56.5 in February. It represented the eighth straight month of expansion and the fastest growth since July 2004, when the index was 59.9.

Contributing: Associated Press

e-mail: bwallace@desnews.com
© 2010 Deseret News Publishing Company | All rights reserved