Millions of visitors are spending billions of dollars in Montana every year, and as tourism continues to boom in places like the Flathead Valley, the industries charged with handling those guests are developing at an equally rapid pace. Chief among those industries is lodging, and hotel operators are banking on another busy summer to overcome a handful of evolving obstacles, including market saturation, the prevalence of short-term rentals, the specter of recent wildfires and the variability of business in a seasonal vacation destination.
In Kalispell, the opening of the My Place Hotel earlier this month gives the valley’s largest city 1,947 available hotel rooms on a nightly basis, with another 1,100 in Whitefish and around 3,500 total in the Flathead Valley. Since 2016, nearly 600 rooms have been added to that mix, including last year’s opening of the Marriott TownPlace Suites (Whitefish) and Country Inn & Suites (next to Glacier Park International Airport). And those numbers do not include the hundreds of short-term or vacation rentals, properties that are listed via online platforms like Airbnb and VRBO.
Growth, however, is not without its drawbacks. Officials in Kalispell and Whitefish do not believe the number of available rooms has reached the point of oversaturation, and both cities report an occupancy rate of right around 80 percent in recent years during the summer. But in the offseason, particularly the shoulder seasons of spring and fall, occupancy rates dip below 50 percent. Dylan Boyle, the executive director of the Whitefish Convention and Visitors Bureau, added that average nightly rates in Whitefish have been slowly trending downward over the last year, a bit of good news for travelers but not the hotels that greet them.
“To me, that’s an indication that there’s a lot of increased competition,” Boyle said, citing both short-term rentals and new hotel properties. “You really do want to see those rates increasing because to me that means there’s good value being shown … From a tourism perspective, a lower price can mean to a visitor that it might not be as good of an experience. When the rate’s being driven down, that’s not necessarily a positive.”
No matter which direction rates are trending — and Boyle said there was a slight increase in the average room rate in April of this year — the price of a hotel room remains heavily dependent on the season. Matt Sease, general manager at the Hampton Inn and Suites in Whitefish and board chair of the Montana Lodging and Hospitality Association, said his hotel’s rates could go as high as $435 per night during the summer and dip as low as $89 in the shoulder season. Likewise, occupancy at the Hampton Inn has been as high as 98 percent and as low as 10 percent, depending on the time of year.
“Hotels, especially in this destination resort area, we make our money in the summer to survive winter,” Sease said. “Rates have to go down to stay competitive.”
The competition from short-term rentals further complicates the issue for hotel operators. Additional local government regulations have been placed on rental property owners in recent years, with Kalispell, Whitefish, Columbia Falls and Flathead County now all formally regulating short-term rental properties (those rented for fewer than 30 days). Depending on the specific locale, property owners may be subject to the same rules as hotels, including health inspections, fire safety and other code inspections, and may have to apply for local and state licenses, and may pay bed and resort taxes.
In total, Kalispell and Whitefish have about 200 short-term rental properties currently registered and operating, and to prevent rogue properties from avoiding regulation, both Kalispell and Whitefish are using third-party software to identify rentals advertised across the internet. If those properties are unregistered, owners are contacted and asked to come into compliance with municipal regulations. Planning department officials in both towns said owners who have been found in violation are almost always responsive and quick to file the appropriate paperwork.
“I really haven’t gotten any pushback,” Major Robinson, a code compliance officer at the City of Whitefish, said. “They really don’t have a leg to stand on; either they come in or they stop doing it.”
At the county level, however, no such software is utilized, and officials instead rely on tips or complaints from residents to spot unregulated rentals. Mark Mussman, Flathead County’s director of planning and zoning, said he estimated rentals that are not fully compliant number “in the hundreds” although he added enforcement has improved since the county adopted official regulations in 2017.
Sease is “definitely concerned” about the impact short-term rentals could have on the hotel industry, particularly if those properties are not subject to the same stringent insurance, code and tax requirements as hotels. A bill to regulate the short-term rental industry on a statewide level was tabled during this year’s Montana Legislative Session, although legislation is likely to be reintroduced in 2021.
“Competition is competition and we’re a commercial state, so I’m not worried about that,” Sease said. “But what we have to have is a level playing field.”
The summer of 2019 is expected to be even busier than the last two in the Flathead Valley, with the addition of a handful of new direct flights to Glacier Park International Airport leading the Transportation Security Administration to project a 12 percent increase in passengers this year.
Whether or not visitation and spending end up setting new records in 2019 could have a lot to do with something much harder to regulate and predict than short-term rentals or air travelers.
“The unknown that will change up our occupancy are the wildfires and smoke,” Dawn Jackson, group sales manager at Discover Kalispell, said. “Within the last two years, the wildfires have had an effect on our occupancy for sure.”
Last year, the Howe Ridge Fire in Glacier National Park closed the iconic Going-to-the-Sun Road from Lake McDonald to Logan Pass for parts of August and September, and two years ago fires throughout the region caused a number of closures and intermittent air-quality warnings during the latter parts of the season. This year, Sease said he has seen a decline in the number of bookings for the last two weeks of August, which he connects to travelers’ fears about a return of smoke and fire to the Flathead Valley.
“That’s reality now,” Boyle added. “Our fire years are getting more prevalent, they’re getting more severe and it’s becoming a yearly occurrence. We certainly see impacts, especially when you have it in back-to-back years like we just had.”
In order to combat the problem, local visitor bureaus are promoting Glacier Park’s webcams as a way for visitors to see which parts of the park are or are not impacted, and pushing a long list of other activities and recreation opportunities available in non-fire-stricken areas. Jackson and others also say that among their biggest challenges is battling misconceptions about Montana’s geography and the reality of conditions during fire season.
“They will have their reservation already booked and they will hear about the wildfires and just cancel,” Jackson said. “And the unfortunate part of that is sometimes they just feel like the whole state’s on fire; instead of really looking into it, they’ll just cancel.”
“Hopefully those folks that canceled last year will rebook,” Boyle said.