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myvalleysun.com
Deuling & Co
Lawyers
Joseph Deuling, LL.B
“Proudly serving Lumby & District”
Miller St. Lumby – 250-547-8827
Wildcraft Forest
October 17, 2013
Bullish on the real news in the Monashee
My Valley Sun
blog
index
Online Community News for Lumby, Cherryville, Rural Coldstream and Highway 6
We update this website on a regular basis. We are eager to receive your news, events, advertising and letters by email at: mediaservices@uniserve.com
it’s the
Many tourism operators would agree
that there are a greater number of people
across the country making money
from the “idea” of tourism, than there
are people actually “delivering” tourism experiences.
The issues are many, if you went to ten different tourism operators and asked them what are the top issues that impact their ability to stay in business and thrive – you would get ten different lists. However, sprinkled through them all would be a few common threads that represent lingering and substantial issues that have now grown and festered. Today in the Monashee, and within the larger Okanagan region, the number of small eco and adventure tourism operators have been reduced by 70 percent compared to the numbers found here from a decade ago.
The “tourism industry” would suggest that this reduction in numbers is largely due to a shrinking market due to hard times, and while this is partly true, there are other issues that are much more significant and they strike at the core as to how communities and governments have been managing, or not managing, tourism planning.
On the eve of a civic election, those elected to local governments need to get a handle on tourism and begin to really understand what’s happening – if they don’t the industry will be lost to them as a local economic engine.
Here’s 10 points that represent a primer to better understand the issues facing small-scale tourism businesses in rural areas like the Monashee.
1. Affordable and Accessible Capitalization and Cash Flow Solutions
Issues: Many small rural based operators don’t have access to the true value of their net-worth because of bank lending practices which only consider a small percentage of land equity to borrowing power. Also, banks will often provide only a single option for overdraft support – this being a credit card rather than a conventional line-of-credit or overdraft protection. Often, this credit card must be brought to a positive outstanding balance annually making it a difficult solution for start-ups – this method of cash flow support becomes very expensive for small operators and reflects a rural/urban divide within financial sector policies.
2. A Dependable Customer Base
Issues: Advance bookings and contract bookings via Travel Trade partnerships provide assurances that a secure volume of revenues will arrive in the pre-season – this increases confidence and allows the small operator to secure staff and support. However, trends are proving that visitors are not booking in advance – their trip planning provides very little lead time. Also, the Travel Trade (wholesalers from Europe, North America etc) will often consider the interior of BC as not being market-ready and it is very expensive to attract this sector, often beyond the capacity of small operators. Also, many small operators and communities do not know how to sell into the travel trade, and lack strategies even though there is great potential to grow these profitable relationships.
3. Market Readiness and Effective Business Strategy
Issues: Small operators are challenged with capacity issues that impact their access to micro-trends which become important when developing an effective business strategy. Market readiness is often challenged by timeframes where snow melt occurs three weeks before the first visitors arrive making site and logistics preparation a challenge. These businesses are also challenged by the lack of data when trying to understand customer needs: Do they remain rustic and authentic - or do they create an upscale environment with urban-like comforts?
4. Quality Staffing and Support
Issues: Rural and Backcountry operators are challenged when trying to attract dependable staff because of the remoteness of such operations. Sometimes students fill staffing roles, however they may not return year after year. This causes training costs to remain high. Worker accommodation is also a challenge. Emerging trends are showing that operators are trying to attract active seniors as workers, inviting them to bring their RV with them. Adventure tour providers require trained staff (certification, first aid, class 4 license etc) which can be unaffordable for the smaller operations or simply not available to them because of a worker shortage.
Outdoor tourism has within it a “value chain” which consists of a range of support businesses such as transportation providers, guides, a range of accommodators, food outlets and caterers and marketing agencies etc., if there are gaps in the value chain then the development of a destination is challenged and fewer visitors will arrive which will impact revenues. Operators are challenged with developing value chains in remote areas and then retaining good working long-term partnerships.
5. Dependable Logistics and Access to Natural Features, Attractions and Partnerships
Issues: Outdoor tourism depends on a healthy mix of natural attractions, tour and hospitality services. This mix is provided by the government sector which controls crown land and the private sector which provides services and logistics. The outdoor tourism sector has been challenged by the costs, rules and regulations that provide them with access to crown land along with maintenance issues on public trails and in parks etc. This along with the cost of insurance has reduced the number of outdoor tour providers by 70 percent in the region.
Often the sudden decommissioning of logging roads and trails by government and forest companies will prevent a tour operator from delivering a longstanding tour itinerary which will negatively impact business - as will damage to the landscape and ecosystems by commercial development and industrial operations.
6. Fair and Affordable Liability Insurance and Risk Management Solutions
Issues: Liability insurance continues to be unaffordable and unfair for the outdoor tourism sector. Sometimes insurance is not even available and this becomes problematic when the Provincial Government requires insurance from operators in order for them to gain access to crown land.
Presently, there is no advocacy organization adequately addressing the insurance problem which results in negative impacts for the outdoor tourism sector which continues to erode because of this high cost.
7. Accurate Environmental Forecasting
Issues: Climate change is impacting not only eco-systems but is adding significant costs to outdoor tourism. The risk of wildfire and the chance of backcountry areas being closed to tourism operations is now an annual risk. Also there are now changing seasons of operation. October now has the potential to become an active month for visitors yet many trails, campgrounds and attractions close for the season in September.
8. Customer Satisfaction
Issues: Word of mouth is still the primary means to grow a customer-base and build return visits. Small business is often challenged when trying to deliver and collect customer feedback information and then building effective follow-up tools.
9. Level Playing Field and Confidence
Issues: Small outdoor tourism businesses require an extra-ordinary level playing field to operate within. Because they are hands-on entrepreneurs who are often located in remote locations and remain somewhat isolated from the larger tourism industry, external issues of regulation, access to marketing and development support can often appear to be daunting to overcome. Such external pressure can negatively impact confidence.
Having the capacity to gather information and then effectively address issues is a challenge that requires a new industry management model that considers small vs. large businesses and rural vs urban areas.
10. Competition
Issues: There are many layers of competition that impact small outdoor tourism businesses, some of these elements are linked to the consumer marketplace; others are linked to the tourism industry itself. The following represents a few points of competition faced by this sector in rural and remote areas:
a) Local and Regional – There is always a degree of local competition which operators address through a local strategy, however inter-regional competition takes place between competing communities through their Destination Marketing Organizations (DMO’s). If a DMO is not robust then visitors will not have knowledge of an area and its operators. Rural areas often lack the marketing resources to promote themselves inter-regionally, as a result, local operators will suffer.
b) Small vs. Corporate – Small family owned outdoor tourism operations compete with large corporate owned operations which are usually Ski Resorts. These resorts attempt to become all-inclusive destinations with large marketing budgets. Their negative impacts on small businesses in rural areas continue to grow as they evolve into all-season resorts with accommodation and activities.
c) Discretionary Spending – Probably the single greatest element of competition is the direction by which consumers spend their discretionary income. Do they buy a barbeque on sale at Walmart or rent a lakeside cabin for a week? This spending is very unpredictable and is often driven by large scale media campaigns from big box retailers.
d) FIT vs. Guided Package – Tour operators largely survive as a result of providing guided group tours however much of BC’s destination marketing strategy is directed to the Fully Independent Traveler (FIT) who is encouraged to drive to a destination and then navigate an experience on their own. FIT is a lower cost form of travel but leaves behind significantly less revenue in a local economy. Also, impacts from FIT’s which can include ATVing and snowmobiling require that communities spend significantly more maintaining wildland areas, forest service roads and trails.
e) Local vs. Global – Canada and BC’s global position as an outdoor tourism destination is constantly being challenged from other parts of the world. As our destination marketing becomes more urbanized our outdoor/adventure “brand” lessens in the global marketplace which in turn reduces the number of international visitors seeking outdoor adventure in rural and remote Canada.
f) Brand Wars and Trends – The overwhelming presence of corporate media in all forms driving new trends can impact the tourism marketplace suddenly and without warning. Small business is challenged with shifting market strategies in order to compete in such a marketplace.
g) Industry Influence – Pay to Play – Every year governments and communities provide millions of dollars to the tourism industry so that it may leverage a greater market presence nationally and internationally. However, much of this leverage is being applied to growing the tourism corporate sector that includes Golf, Ski and Hotel experiences. Investment is made largely to support the development and marketing of resort properties (timehares) because this tourism sub-sector can prove a direct economic benefit (properties sold, rooms booked etc). By comparison, tourism in rural and remote BC is seen as economically marginal. Small tourism operators have a difficult time competing against such influence and as a result are not able to capture the marketing resources to grow their business and brand their area as a successful destination.
Tourism in the Monashee negatively
impacted by prison proposal
BC Corrections has coated the jail proposal with financial figures that sheds a positive light on the attributes of the incarceration industry, however the equations are very one sided and represent an unfiltered sketch of reality.
For tourism and lifestyle related businesses there is a different side of the fiscal story. From informal interviews conducted up to April 2011, it has been discovered that these business sectors have been negatively impacted to the tune of nearly $4.5 million and that these losses are directly linked to the jail proposal process and the stigma that it has created. These losses could remain constant every year until the prison stigma is removed which may take 5-10 years.
By 2016, Lumby area businesses and the local economy may have paid over $20 million to cover the losses caused by the prison proposal.
Many rural home-based businesses rely on their property values in order to leverage working and expansion capital from lending institutions on an annual basis. In rural areas like Lumby access to business capital has always been strained since many lenders only appraise a house on five acres even though the number of acres and outbuildings might be much greater. Often lenders then cap the lending value at a percentage of the appraisal – but they take the entire property as security.
Some businesses have found that the jail proposal has made lenders nervous believing property values and business revenues will fall thus impacting financial security. There have already been reports of higher interest rates and reduced access to working capital. Estimated impact to date: $600,000
The jail proposal has interrupted individual business strategies. Some businesses have been in the process of selling off real estate assets that were secured by mortgages that supported their business operations. The sales of such assets were to contribute to expansion plans or provide further operating capital. These businesses have been unable to sell these assets because of the jail proposal and the unwillingness of buyers to invest in a prison town. Estimated impact to date: $1 million.
Tourism businesses and other operations that depend on the “image” of an area have been seriously impacted by the jail proposal. Tourism is a highly competitive industry and some operators believe that they will lose visitors to other areas of the Okanagan or Kootenay as a result of the bad press that the jail proposal has brought to the area. A 10 percent direct loss of revenue this year alone would translate into an estimated $500,000. If this trend remains constant the losses would add up to an estimated $5 million over ten years.
Real estate may experience similar losses as the tourism sector. Higher-end real estate sales particularly to overseas markets depend on the image that the “Monashee” (The Mountains of Peace) has projected successfully as a place where you can “Refresh Your Life”. This image has been deeply impacted by the jail proposal and the negative and false messaging that Lumby Village Council has been projecting about failing infrastructure. High-end buyers are looking elsewhere which lowers the total number of potential buyers which then causes lower property values. These lower property values then impact the appraised value of properties across the local real estate landscape. Further to this event is the loss of new residents and the wealth that this particular high-end segment brings to the area. For one year alone, because of the jail proposal, the estimated loss in property value on high-end properties for sale may be as high as: $1.5 million.
Marginal business operations that depend on tourism traffic may not be able to absorb a 10-20 percent loss in revenue and may have to sell or even close and liquidate assets. Given the nature of such businesses, potential buyers would be few because of the “prison town” stigma that they would have to overcome. This market environment would deeply impact the price that sellers could expect. If the business is attempting to sell as an operating business with real estate assets they may experience a loss in asset selling strength of an estimated 30 percent on the business portion. If five businesses are forced to sell over the next year this could mean losses of $800,000 depending on the size of each business.
The reduction of tourism value chains will negatively impact the entire tourism sector in the North Okanagan. Because it is still a new industry, the Lumby area has been challenged with trying to attract visitors. Tourism businesses have been engaged in a twenty year effort to support each other and to engage with individuals seeking to start new tourism businesses. In tourism – more is better; the more experiences an area has to offer the better chance it has of attracting visitors. The jail proposal has impacted many of the smaller businesses and if they shut down operations the total number of tourism services will decline which may lessen the total number of visitors that come to the area. If so, the negative financial impacts will be long-term or until new tourism businesses start-up – if they do.
In the past, as a one-industry town, Lumby could not diversify its economy. Once mills shut down it required an investment of about $4 million to adjust the local economy, this occurred in two waves 1992-1997 and 2000-2002 in each case positive results were not felt until a decade later. Investment was primarily driven by small family owned businesses which borrowed money to rebuild the local economy. The present jail proposal process will require a 5-10 year long healing effort within the community and that is only if the jail is rejected and not constructed. If the jail is constructed it will turn Lumby back into a one industry town and economic diversification may decline indefinitely.
Every spring, rural and backcountry tourism operators in Lumby are faced with a 1-3 month preparation period from when the snow disappears to when the first visitors arrive. In this period, there is rigorous site activity and its when a great deal of money is spent in order to open the doors for the coming season. The jail proposal has impacted that preparation period. Operators are accustomed to organizing their finances and adjusting their business strategies during the winter months, the jail proposal has caused uncertainties which has negatively impacted business confidence and in some instances prevented businesses from having financing in place so that the preparation period can begin. It is uncertain what these ramifications will be, but revenues will most likely fall because some businesses will not be ready for the upcoming season.
The laws of unintended consequences may place further financial pressures on the community and business. Extra costs for policing, fire protection, paramedic services and even increases in insurance premiums may impact the local business environment. These added costs may happen incrementally as taxes and premiums increase to deal with these unplanned events. Such increases to the expense column of businesses could add up to an additional average of $500 annually per business. Based on 150 businesses such added costs could total $75,000 annually.
Fixing the problem
The lion’s share of investment to heal the process will come from business operators and they can collectively expect to spend approximately $1.2 million annually within a 5 year readjustment period which would seek to reestablish their lost revenues. Depending on the level of success within that 5 year period, they may have to spend an additional $600,000 annually for an additional 5 years.
A common result from a politically inflicted “local depression” is an outcry from businesses for support from government. Local governments including the regional district as well as the provincial and federal governments would be expected to support planning and provide assistance which could possibly amount to an additional $500,000 annually for a 5-10 year period.
There should be a common recognition that a small community will not have the capacity to battle the prison stigma and that a prison will turn a community like Lumby into a prison town because it will overshadow all other forms of local industry. There’s also a lesson to be learned about the damage that can occur by subjecting a small community to a proposal that has never been properly vetted through an Official Community Plan process.
Governments wanting to build prisons should be required by law to present the real impacts that the incarceration industry can have on a small rural economy. For this reason big governments should engage in independent research that can uncover the truth about whether prisons are economically, socially and culturally beneficial.
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Tourism businesses in Lumby, Cherryville and the rest of the Monashee are largely made up of small micro-businesses that represent family enterprises. The sector has always been recognized as having great potential as an economic engine for priming the local economy, however many tourism operators have yet to realize truly profitable operations, in fact they have contributed more to elevating the region as a destination for newcomers to relocate and live.
issues
that
creates
tourism
or not
0
In the Monashee, small and micro-tourism businesses continue to be under threat where eco and adventure tourism should thrive.
By Don Elzer
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