In the mare's-nest that is today's economy, no one is safe from the cold. That includes ski resort country, where pricey homes pepper an area once generally regarded as recession-proof. These days, local dealers are no different than their counterparts down in the valley, though their strategies for managing the downturn are dictated by their high-altitude circumstances.
Dealers typically make their first–and biggest–cuts by trimming labor. In resort areas, however, there is so much competition for good workers that labor is prized and retained at all costs. Resort-area dealers say it's cheaper than laying off people when business is minimal and then scrambling for new workers once the building season gears up.
"The biggest problem is our labor force," says Russell Ellis, general manager of the contractor division at Big John's Building & Home Center in Glenwood Springs, Colo., near Aspen. "We keep our guys on full time, but we try to instill in our people the need to watch their overtime." Ellis has to compete for workers with well-paying Halliburton, which operates natural gas extraction fields nearby.
In Truckee, Calif., near Lake Tahoe, Breeze Cross, co-owner with his wife Ruth of Truckee-Tahoe Lumber Co., also maintains a full staff but has them take their vacations in the winter when the flow of jobs slows to a trickle.
New homes in ski country are often second or even third homes, and tend to be elaborate and high dollar. But even in these areas, customers are pulling in their horns and delaying projects. "Our customers say they have clients who have their architectural plans drawn up and permits pulled, but they are waiting to build," Cross says. "It's understandable, particularly when you are seeing 20% to 30% of your wealth disappear in the stock market."
Cross estimates his sales are down 40% since 2006, largely because of the drop in new-home construction. Meanwhile, area dealers report remodeling work is steady or increasing. At Truckee-Tahoe, Cross says remodeling jobs account for 50% of sales vs. 20% in 2005. Still, many of these projects tend to be smaller and bring in fewer bucks.
This is no news to Mike Perry, president of Goodro Lumber in Killington, Vt., where the skiing is good and most of the homes built are second residences. "A lot of our customers are affected by the stock market," he says, and notes that his seasonal business has dropped about 10% in the past two years, though remodeling has remained steady.
The days of moguls building huge mountaintop retreats–like the 55,000-square-foot ranch of Prince Bandar bin Sultan, the former Saudi Arabian ambassador to the United States–are over, to the regret of Big John's Ellis, whose company supplied materials for the project.
"It took 3-1/2 years to build, had a heated driveway that looked like [the approach to] a Radisson Hotel, nine bedrooms, and 21 bathrooms. I've seen shopping centers that were smaller," jokes Ellis. "But if you've got the coin, that's what you do."
Even royalty is trying to downsize. Bandar put his luxurious Aspen residence, called Hala Ranch, on the market at $135 million, but pulled it off in November 2007 when the property didn't sell. He has since sold a more modest, 15,000-square-foot home on the same property for $36.5 million.
Apart from the business losses that ski country LBM dealers have experienced with the market meltdown, these dealers have challenges unique to their locales. Those include abundant snowfalls and the need for heavy equipment like snowplows to keep lots clean; tire chains for vehicles that must negotiate steep mountain roads, which often are merely graveled rather than paved; and a labor force trained to work with frozen materials.
"Our snow removal budget last winter was $30,000, and it wasn't even a hard winter," says Cross of Truckee-Tahoe. "We keep a full inventory in our dry shed, and we're dealing with our back stock being frozen even though it's wrapped. If workers are not wearing gloves, frozen materials will actually cut their hands."
Though some ski country LBM dealers, like Goodro Lumber, work seasonally–"generally May 1 through the end of the year," says Perry–most slog on throughout the year.
"We go year-round," says Ellis. "Up in the mountains, you have to adapt. [Our customers] just throw a big tent around the work, heat it, and keep on going." Tent wrangling "was a full time job for one guy on Prince Bandar's property," he recalls. "We sell a lot of reinforced poly up here." He's not kidding. Ellis estimates that each season, Big John's moves 50 to 60 rolls at 4,000 square feet per roll and $200 a pop.
While dealers in resort areas say they don't really stock specialty items for use in snow country, they do tend to stockpile certain materials. Like Big John's reinforced poly, builders lay in large amounts of steel to reinforce foundations to carry the snow load.
In the Truckee-Tahoe area, builders have to construct roofs to withstand loads of 128 to 450 pounds per square foot, Cross says, "whereas in non-snow areas, you're dealing with loads of 40 pounds per square foot."
The same stockpiling goes for insulation, timber, and engineered wood, since builders often find that stick lumber is not strong enough for the snow load, Ellis notes. Glass is another material that is widely, if not always wisely, used in ski resort areas.
"It's not cost efficient, but people want to maximize their views," says Goodro's Perry. "If you can afford a $400,000 to $600,000 second home, then you aren't worried about fuel costs."
Dealers says they also have to contend with their customers' specific requirements for the delivery, amount, and maintenance of building materials on-site, requirements mandated by the homeowners' associations that manage the upscale gated communities.
While the requirements and rigors of building technically complex and architecturally demanding homes in a rugged environment are business as usual for the LBM dealers in ski resort country, it's the chill of a faltering economy with enough power to arrest the spending habits of the super wealthy that has them worried.
Says Cross: "It's pretty painful for us. We're just scratching our heads and wondering how we're going to survive this."