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Plan B: Doing Business in Interesting Times

“Blow up your TV, Throw away your paper.” For the second time since the U.S.

“Blow up your TV,

Throw away your paper.”

For the second time since the U.S. presidential elections last month, the headlines in the newspapers I used to read online each morning and now just glance at were about something other than the bleak and growing bleaker world economic news. Nothing like a terrorist bombing — Mumbai — or a historic bunfight in our own House of Commons to take our collective mind off the gut wrenching, rollercoaster rides Wall Street and Bay Street have become. With stock market charts looking more like an EKG of a patient being defibbed, evaporating consumer confidence, governments the world over singing the deficit blues and economists throwing up their hands as though practicing the wave, what’s a poor ski bum waiting for the depths of depression to be replaced by the depths of powder to do?

There’s not enough sand around here to stick your head in — and if there is, let me know where — but I am mindful of my experience on that sunny, late summer day in 2001. September 11 dawned crisp and golden in Cariboo land. Eagles circled, fish jumped and the phone unexpectedly rang early in the morning.

“Turn on your TV,” an excited friend screamed from the other end.

“No TV here,” I replied.

As she explained the drama unfolding in New York it simply seemed unreal in contrast to the peaceful sameness playing out in front of my eyes. I listened periodically, in growing bewilderment, to the radio reports during the day but it was over a week before I saw the images of melting World Trade towers. Living a media-lite life offered me a pass on that episode of global angst.

Surprisingly, when I had a chance to compare my reaction to it with the reactions of friends who’d sat transfixed to the TV screen as it played out again and again, I realized I’d avoided making a substantial withdrawal from my peace of mind account at the karma bank. I was considerably less traumatized than they were.

Blow up your TV.

Willful ignorance isn’t the worst approach you can take to the current global financial crisis. Knowing more about what’s going on isn’t necessarily going to change your strategy for dealing with it, if indeed one can be said to have a strategy for dealing with something one can’t possibly fathom.

I don’t know what the value is in listening to or reading the musings of the parade of economists speculating on how deep, how long, how devastating the recession, depression, fiscal fiasco might be. I’m losing interest in the daily assault by the captains of industry — budding socialists formerly known as rugged individualists — coming cap in hand for corporate welfare bailouts. I’ve lost the ability to grasp the magnitude of the U.S. national debt, let alone the velocity at which it’s growing unimaginably larger. I’ve even stopped blaming Stephen Harper for pissing away the surplus so painstakingly built up by the former Liberal government and agreeing to dance with the deficit devil.

There’s nothing I can do about it so I DON’T CARE!

But I was wondering, in a moment of thinking locally and withdrawing globally, what some of the people who move and shake Tiny Town were planning and doing about the upcoming Great Unknown. After all, the economic viability — dare I say, sustainability — of Whistler is umbilically attached to the rapidly dwindling supply of discretionary funds people have available to feed their snow sliding addictions. While we collectively deal annually with the possible negative impacts of snow gone AWOL, how are the people who run local government, market Whistler and operate big and small businesses sizing up the challenges of reacting to… well, reacting to whatever the near future might bring? What’s everyone’s Plan B?

So I asked ’em. If you’re interested, read on. If not, heed John Prine’s advice: throw away your paper.

New Council — Same Problems

Municipal finance is more or less a zero sum game. Reduced to its basics — and like all good reductions, I’m over-simplifying the complex — Whistler’s sources of funds come from three spigots: property taxes, hotel taxes and fees.

Hotel taxes are derivative; that is, when tourists come and stay in hotels, Whistler gets a cut of the tax collected by the province. More guests, higher room rates equal more revenue. Fewer guests, lower rates… you understand. The money comes with strings attached; it can’t be used for just any old thing, only initiatives that benefit tourism. But that’s not really important to this tale. The impact of municipal actions on hotel tax revenue is more or less zero.

Fees come from things like development permits. While this has been a significant source of revenue in years past, its contribution and importance is dwindling as the resort approaches buildout. Its continuing march towards insignificance will likely be accompanied by increased debate on whether Whistler can, in fact, cap growth or give in to what many believe is the raison d’etre of capitalism — ever-expanding growth.

Property taxes are the real source of municipal revenue. The muni can raise them, lower them or leave them the same. This year, they raised them by 5.5 per cent, much to the hue and cry of some. Property taxes were raised, principally, to cover a shortfall in revenue of around $2 million that resulted from the reclassification of strata hotels from commercial to residential. The hue and cry was raised, principally, because this led to a tax increase greater than the rate of inflation.

“For a number of years, property taxes only went up by the rate of inflation,” explained Lisa Landry, general manager of economic viability, Whistler’s name for its director of finance. “Maybe that wasn’t such a good thing but it did serve as a restraint on growth.”

Heading into the 2008 budget, the implications of the tax classification shortfall and increasing operating costs meant Whistler homeowners would have faced a 14.5 per cent increase, absent bold intervention. But a number of steps were taken to bring that down to 5.5 per cent, among them freezing departmental operating budgets, cutting some budgets and reducing contributions to capital reserves — a one-time cut that prudence dictates should be made up over the coming years.

With Victoria’s reductions to the provincial school tax, the overall tax increase to Whistler homeowners was whittled down to 1.5 per cent. Notwithstanding the cries of anguish, that number is likely to seem nostalgic in the coming years.

There is every likelihood property taxes will increase in excess of the rate of inflation again for 2009. “We’re currently looking at a budget shortfall, in our five-year financial plan, of $1.3 million,” Lisa said. “But I suspect the shortfall will be larger because we haven’t provided for as big an increase in transit as it looks like we’re going to wind up with.”

Revenue will also be down if projections about fewer hotel nights come to pass. “Currently Tourism Whistler’s estimating 12 per cent fewer hotel nights. I’m using a 15 per cent reduction in hotel revenue to account for the likely decline in per night rates and running a sensitivity analysis to see what a 20 per cent reduction looks like.”

At the end of the day, the municipal budget dance comes down to a simple equation: raise property taxes, cut spending or both. Higher taxes are fairly easy to grasp. Lower spending, well, not quite so easily grasped and even less easily accomplished.

Enter a new council.

During the municipal election last month, many of the successful candidates ran on a platform of fiscal restraint. When it comes time to set priorities for the next fiscal year, they’ll have their platform put to the test.

“I suspect this budget process will be very involved and very challenging,” Landry said. “Everything’s back on the table. We’re looking at everything * .”

To lend a hand, the RMOW has formed a steering committee of financial experts from both outside and inside muni hall. In part a response to the Chamber of Commerce’s request to have the business community more involved in setting budget priorities, the committee will review current and future financial and economic scenarios and establish guiding principles and policies for staff and council to consider. An array of Plans B, if you will.

While no one’s willing to speculate exactly what the revenues and budget for Whistler will look like in the next few years, it’s interesting to note an Ipsos Reid poll conducted in October found a majority of British Columbians would prefer municipalities maintain or expand services, even if that means raising taxes. More than half, 56 per cent, said they’d opt for increased taxes, while only 30 per cent favoured cutting services in exchange for current or lower tax rates.

No doubt, Whistler residents, always trend buckers, will let * their preferences be heard.

We’ve Built It; Will They Come?

“It is not business as usual. It is business as unusual.” So says Barrett Fisher, Tourism Whistler’s boss. Tourism Whistler’s mandate is to market Whistler to the world. But it’s a big world and people with a jones for any winter sports are spread thinly around the globe.

The good news is that TW’s been doing this long enough to have some pretty good historical data. They also capture considerable real-time data from tour operators, local hoteliers, reservations operators and a number of other sources. Some of it gets shaked and baked to tell us what we know, the Rumsfeldian known knowns, if you will.

“We know Canada is our number one market,” Fisher says. “The U.S. is number two and the United Kingdom is number three. We also know we have some grave concerns when we look at the U.S., U.K., and Ontario markets. So it looks like we’ve got some challenges ahead.”

As things stand right now, TW’s forecast is for business — resort room nights — to be off by 12 per cent. While this number has more basis in factual data than Bob Dylan’s artful reply to a clueless reporter who once asked him how many singers of protest songs there were — 276, he shot back — it does represent a best guess estimate within a range that runs from a 5 per cent reduction to a 20 per cent slide year over year.

To put that into perspective, a 12 per cent decline would take the resort back to the kinds of visitor numbers we saw during the 2004-05 season. While that season will always be remembered more for its abundance of liquid snow (e.g. rain) than lack of tourists, it’s unlikely to ever be thought of as the good old days.

In a normal year, with the world’s economy operating within normal parameters, TW’s Plan A would be to aggressively market the resort in all global markets where skiers have come from in the past. But with global economic conditions staggering like a punchdrunk boxer, it’s time to dust off Plan B.

“Plan B says you need to focus on your core markets,” Fisher explained. “Target high awareness markets, repeat visitors, people who know and love you. In our case, that’s our more local markets: B.C.’s lower mainland, Washington state, California.”

As Peter Yesawich, the U.S. travel guru, said when he was advising Whistler earlier this year, U.S. consumers were likely to travel down but not out: take shorter holidays, stay in less upscale hotels, economize on restaurants and discretionary spending, but not stop traveling altogether. According to Fisher, what that means for Whistler businesses is, “showing empathy and support for markets who are in troubled economic times. It isn’t about undercutting our existing product but it is about showing an attractive price point.”

To that end, the Canadian dollar’s nosedive back into peso territory may be a blessing, as is the smaller mortgage you have to take out to fill up your car’s gas tank compared to last summer’s highway robbery prices. So too is the Olympic buzz, the Peak 2 Peak Gondola and the Squamish Lil’wat Cultural Centre.

But then, there’s still that snow we’re waiting on.

If Money Was No Object….

When Skiing magazine asked their readers, “If money was no object, where would you want to go ski?” the answer was Whistler Blackcomb. In fact, Whistler Blackcomb polled more votes than the next eight places combined. While that’s something to feel very proud about, the cold hard reality of the current economy is that money is disappearing faster than a platter of brownies at an Overeater’s Anonymous meeting.

Naturally, Whistler Blackcomb’s focus isn’t as broad as the municipal government’s or even Tourism Whistler’s. But as a stand-in for General Motors — apologies to WB and I’d just like to state for the record that I am in no way comparing you guys to GM — it’s not a stretch to say what’s good for Whistler Blackcomb * is good for Whistler. The town and the mountains are joined at the hip, and while this isn’t a one-horse town, even if it was I’d rather be riding the WB pony than, say, Cominco or some other commodity producer.

So what’s the future look like from atop the twin tempters?

“Like every other discretionary spending business, we think we’re going to be impacted on the destination side,” says Dave Brownlie, WB’s president and chief sliding officer. “The regional side is exceptionally strong and I think we’re going to do well there. The destination side is going to be a challenge. We’re trending off between 13 to 17 per cent. But we’re doing better than a bunch of our competitors… which is good,” he added, characteristically the optimist.

But the news is by no means all bad. “What we’re seeing today, if there’s any bright spot out there, is the loonie and the airline deals,” Brownlie says. “Maybe that’ll help.” The beating the Canadian buck’s taken compared to the Yankee greenback means our American visitors who make it up here will feel a flush of economic well-being when they see how far their dollars go in Whistler.

Even though Brownlie is forecasting business to be off in the 13-17 per cent range, “We’re still going to do over two million skier visits this season,” he says. “Last year we did 2.2 million visits. Knock 15 per cent off the destination numbers and increase our focus on our regional market and we’ll come in at around two million. That’s what we’re gearing up to do.”

By contrast, in that most challenging of years, 2004-05, the mountain drew 1.7 million visits… and learned a lot about reaching and tempting the regional market. “We’ve got a great database in our reservations centre. We’re looking in that 4 to 6 hour radius and spending our money there. Our largest U.S. market is still Washington by a long shot; we’re really locked in on those people.”

So from a Plan B perspective, will we likely see some of those promotions that proved so useful in luring the rubber tire market in that year? “You never know,” says Brownlie. “We’ll do what we have to do. We’re already ahead of the competition in terms of value to the destination market. For instance, instead of buy eight (days) and get 10, it’s buy seven get 10 just to try and lock in that business. I’m sure we’ll respond to the trends we see with our regional visitors.”

In terms of managing the cost side of things, Whistler Blackcomb has already taken some steps Brownlie calls “pretty standard stuff” to contain costs, things like cutting out the cost of living increases for management staff who qualify for the mountain’s bonus program and keeping a close eye on staffing levels and budgets. It has also taken some extraordinary steps like eliminating a few jobs, combining others and has announced that the senior directors will be losing their company cars by next June.

“All that aside, we don’t have any current plans to reduce the on-the-ground jobs. It’s all about delivering the best guest experience we can and we don’t want to take any steps that’ll impact that.”

“While this year is shaping up to be a tough one, Whistler is very well positioned for the future,” Brownlie added. “As Stuart (Remple, WB’s marketing director) likes to say, ‘People would like to be us.’ We had a great year last year, we’re seen as the number one resort in North America and around the world. People everywhere are excited about Peak 2 Peak. The press is all over the Olympics, not only local and regional and national but the international press. They came here (in mid-November) and saw what we have and were blown away. They’re going away and writing stories about it but more importantly, they’re sending people back this winter to capture shots and write stories. Those things lined up are absolutely positive.”

Getting From Here to There While Enjoying Life

John Kenneth Galbraith once quipped, “In the long run, we’re all dead.” No matter how rosy the future looks, we have to get there from here. And here looks like it’s going to be challenging.

“Businesses are hurting,” says Fiona Famulak, president of Whistler’s Chamber of Commerce and one of the members of the steering committee formed to advise the RMOW, mentioned above. “It’s fair to say, from a business perspective, successful winter seasons have paid for quieter summer seasons. What I’m hearing from retailers is that winter isn’t necessarily carrying summer any more and they’re looking at their costs wondering how they’re going to make it through the next 12 months. I’ll be bringing that message along with the experience and concerns of the business community to the steering committee.”

It isn’t hard to find businesses in town that are cautiously optimistic. From the looks of things at the Escape Route in Marketplace, co-owner Jayson Faulkner is even wildly optimistic. When the opportunity came up earlier this year to take over the adjoining storefront, Jayson committed.

“We’ve been wanting to do this for about five years now. We wanted more space and a chance to open the Arc’teryx store but we didn’t want to open a whole second store because of all the duplication and extra costs,” he said.

“The timing could have been better but we just have to suck it up and do the best we can. Our Plan B is really nothing more than just doing a better job. We’re keeping inventories tight and being really good to our suppliers and customers so they treat us well. Let’s face it, you’ve got to hope just because people are feeling a little poorer they won’t completely stop enjoying their lives.”

That sentiment was echoed by Dave Campbell at Keir Fine Jewellery. “We’ve seen this before and we’ve been through it before,” he said. “Our business is well capitalized and we have a good local following. We’ll ride this one out. We’ve delayed a few capital expenditures but overall, we’ll just have to deal with what comes.”

And over at McCoo’s and McCoo’s Too, owners Jeff Coombs and George McConkey are preparing to go full steam ahead. “What’s our strategy for this season? Great expectations,” exclaims Jeff. “We’re only going to presume we’re going to have a great season. If we just followed what was out there and bought into the idea of a bad season, we’d have one. We’re going to be positive. We’ve adopted the term: Celebrate Everything. We’re celebrating our new staff, our training we’ve put them through that’s given them the tools and knowledge to sell people the right stuff. We’re loaded with staff. We’re givin’r.”

Adds George, “Snow’s gonna come and people are ready to ski. What’s not to celebrate?”

Dave Kirk, who’s been in business here for 27 years and served multiple terms on council, captured the essence of business in a resort town when he observed, “You have to be an optimist to be a retailer. I spend a lot of time in the village, talking to business people. I haven’t seen a sense of foreboding pessimism among them yet.”

That’s not to say there isn’t a tangible undercurrent of worry. Talking to retailers, hoteliers, grocers and restaurateurs from Marketplace to Function Junction for this story, I’ve run across varying degrees of concern and deep pools of resilience. I’ve heard from people rattled because they’ve had to lay off employees for the first time ever, people who are overworked because they either can’t find or are worried about the cost of taking on more employees, people with understanding and flexible landlords and people paying rents they’re not sure how long they can meet.

While I’d like to think they’ll all be around to celebrate a successful, if difficult, season when April brings the World Ski and Snowboard Festival to town, I’m pretty certain some won’t be. But as a respite from the doom and gloom that’s spreading like kudzu around the globe, the take-away message I’ve received from everyone is this: This is a town of boundless energy and optimism and smart, hardworking people, many of whom have struggled through difficult seasons before and who are ready to do so again.

Plan B? Hell, some of ’em are already shaping Plans C, D, E and F.

I don’t know what your Plan B looks like but mine pretty much consists of chanting to pagan gods for snow, keeping debt at bay, spending every dollar wisely and, most importantly, spending them all in local businesses owned by my neighbours and friends. Oh yeah, and being especially nice to tourists. I figure there’s something valuable to be learned from people with discretionary income in tough times.