Housing Prices cause a Godzilla-like problem

Another good article in the business section of today’s Los Angeles Times (1/6/11) . Technically, it’s not about tourism, but about the incredible drop in housing prices. Title: “Some cities may suffer for decades”.

Per Federal Statistics, Central Valley property values decreases from 2006-8 (not even factoring in the drops since!): Stockton down 75!!!, Modesto down 73%, Bakersfield down 46%, Fresno down 45%, Sacramento down 44%, and Visalia down 39%. (By was of reference, SLO fell “only” 29% over that period.)

As the article title indicates, the general belief is that the woes for the Central Valley of too many unsold houses, foreclosures and wiped-out equity will last a LONG time.

Now as long as the Central Valley has summer temperatures reach above 100 degrees and the Central Coast beach areas are only about 75 degrees, tourists will continue to flock to the Central Coast. It also helps that the underlying economies of Fresno and Bakersfield – based on food and oil production –  are doing well.

HOWEVER, a middle class couple with no equity in their house – or maybe foreclosed on and saving for a down payment on a another one, are not likely to splash out on more premium hotels. They are also likely to continue to cut back on the length of their stays, restaurant meals, etc.

Of course, local hoteliers and tourism promotion agencies can concentrate even more on the huge markets of LA, San Francisco. Unfortunately, LA and San Francisco are two of the most expensive media markets in the WORLD. Even so, their residents are already bombarded with ads for competing domestic and foreign destinations with MUCH more money to spend.

International tourists are also coming back, but they are harder for the local tourism industry to target. How do you reach the couples planning their trips in Sydney, London, Berlin, Seoul etc? They  aren’t even sure that they will come to California, let alone the Central Coast. Yes, the international California tourism promotion offices are incredibly helpful, but it is a much less direct sales approach. AND, let’s also keep our fingers crossed that these international sales offices  survive the coming budget crunch.