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Home My WebLink About01. 2026_Revenue_and_Economic_Update_Update TO: Vail Town Council FROM: Economic Development and Finance Departments DATE: January 6th, 2026 SUBJECT: Economic Update I. SUMMARY With a slow start to the winter season, staff has prepared an update for Council outlining what the Town is hearing from local businesses and the steps being taken to prepare for a mild winter and potential revenue impacts. II. DISCUSSION Through November 2025, the Town’s sales tax collections total $36,376,756, up 2.72%, or $1,088,993 above the annual sales tax budget with the most recent month, November, reflecting a decrease of 3.1% or $56,676 from the prior year. Even with a slower start to snowfall this winter season, it is anticipated that the Town will meet or exceed its overall revenue budget for 2025. When combined with expenditure savings, this performance is expected to contribute to the Town’s fund balance. Looking ahead to 2026, Finance staff will continue to closely monitor revenues and will work with the Tourism and Economic Development Department to update forecasts based on anecdotal information from local businesses and information from Destmetrics. The Town’s 2026 budget already reflects a conservative outlook, including a 2% decrease in revenues with a flat revenue forecast in the General Fund. As a result, the adopted budget includes a projected General Fund surplus of approximately $2.1 million. Staff has evaluated several revenue impact scenarios related to potential declines in guest visitation during the current winter season and into the following winter season (November/December 2026): Scenario 1: 5% Decrease in Revenues Due to the conservative nature of the adopted budget and stronger than expected 2025 revenues, there is already a built-in revenue buffer. Under this scenario, staff would recommend managing staffing vacancies and reducing capital project expenditures by approximately 5– 10%, with no reductions to operating budgets. - 2 - Scenario 2: 10% Decrease in Revenues Staff would recommend managing staffing vacancies, implementing a 5% reduction in operating budgets, and reducing capital project spending by approximately 10–15%. Scenario 3: 15% Decrease in Revenues This scenario would require reductions in staffing services and/or merit increases, an 8–10% reduction in operating budgets, and a 15–20% reduction in capital project expenditures. Scenario 4: 20% Decrease in Revenues Staffing reductions would be required, along with elimination or reduction of merit adjustments, a 10–15% reduction in operating budgets, and a minimum 20% reduction in capital project spending. An additional option that could be considered is a temporary modification to the sales tax allocation (shifting more to General Fund) to prioritize maintaining staffing levels, operations, and service levels while focusing primarily on capital projects for reduction in spending. For context, the Town has a strong history of responding quickly and effectively to changing economic conditions. During the COVID-19 pandemic, the Town adopted five supplemental appropriations that implemented budget reductions while also strategically increasing funding to support tourism and economic development. In 2020, sales tax revenues declined by approximately 14.1% compared to 2019, while total revenues declined by approximately 7.0%. The Town did not utilize reserves. The following year, 2021, sales tax revenues increased 37% with overall revenues increasing 18.0%; a record revenue year for the town. During the Great Recession beginning in 2009, Town revenues declined by approximately 24.3% compared to 2008, with sales tax revenues declining by approximately 13.8%. The Town only utilized reserves within the RETT Fund that year due to a contribution, with a 5-year payback, to the Vail Recreation District. By 2011 revenues had recuperated and were back to 2008 levels. Lodging Occupancy, Cancellation and Pacing Occupancy Season-to-date, Vail’s hotel segment is showing higher occupancy (+3% YoY) but at a lower ADR (-7%), indicating hotels are using price to sustain volume in a more uncertain demand environment. In contrast, professionally managed homes & condos are down in occupancy (- 6%) but up in ADR (+3%), reflecting a “rate-first” posture and less nimble pricing behavior. Cancellations An anonymous lodging pulse survey was conducted by the DMO from January 29-31. The 35 lodging-partner responses reflected a mix of inventory with 51% vacation rentals and 40% hotel/resort properties. Most respondents reported cancellations have increased over the last 7– 10 days—37% citing a slight increase, 23% moderate, and 26% significant—while 11% saw no change. Cancellations appear to be happening closest to arrival date, with 46% concentrated 0–7 days out and another 34% occurring 8–21 days out (only 11% were 22–45 days out). 91% of the cancellations reported were due to low snow/snow conditions (91% of responses), with only a handful mentioning flexible plans or illness/injury. - 3 - On whether cancelled guests are rebooking Vail for later dates, the most common answer was “sometimes” (49%), followed by “rarely” (23%), with the rebook window most often landing in February and March. Key Data source data indicates cancelled room nights are pacing +3% YoY for Dec 1–Apr 30 arrivals, with a noted concentration of cancellations for arrivals from Dec 1 through Jan 22, while later winter and spring plans are “mostly unchanged.” For upcoming peak windows, performance is mixed by segment: Christmas/New Year shows softness across both segments (hotels occ. -8% / rates -2%; homes/condos occ. -7% / rates +4%). President’s Week and Spring Break show hotels driving volume through lower rates whereas homes/condos are holding with higher rates (President’s Week hotels occ. +8% / rates -8%; Spring Break hotels occ. +33% / rates -5%) as homes/condos protect rate but give up occupancy (President’s Week homes/condos occ. -8% / rates +7%; Spring Break homes/condos occ. -13% / rates +7%) Pacing Looking ahead, near-term booking pace is softer: for the next 30 days, 46% reported being down 1–10% YOY and 29% down 11–25%. Only 14% of properties reported being ahead. The picture improves later in the season—31–90 days out is pacing 38% ahead, with the remainder mostly down 1–10% (35%) or down 11–25% (26%). Relative to western mountain resort peers, the report suggests Vail is maintaining stronger visitation—especially in hotels—by offering lower room rates: Vail hotels are occ. +3% / rates -7%, versus peers at occ. -13% / rates +3%, implying Vail is outperforming on volume by leaning into price while peers hold rate with fewer visitors. Homes/condos are more in-line on pricing (rates +3% for both Vail and peers) but Vail shows slightly softer occupancy (-6% vs. -4%), reinforcing that the biggest competitive differentiation right now is in the hotel segment’s price-driven occupancy strategy. Tactical Recommendations When lodging properties were asked what support would help most right now, respondents prioritized sharable non-ski itineraries/event content (30%), clear and factual conditions messaging (29%), and real-time updates on terrain, conditions and weather to combat misinformation (20%), with demand-driving promotions/campaign amplification also noted as a reasonable tactic (16%). III. RECOMMENDATIONS The Town Manager’s office and the Finance Department are evaluating capital projects that can be delayed that do not result in losing grant dollars or create an operational/maintenance issue. New occupancy and ADR data will be available after January, 12, 2026. Staff would propose that we evaluate economic data at the February 3rd meeting. We could also provide any updates needed as part of the Council retreat on 19th and 20th. As mentioned, we can rapidly implement the above-mentioned scenarios. Since weather is a major factor in our winter economy and is unpredictable, we will need to be nimble in responding to our local economy and the macro and micro issues that will affect it. Again, we will hope for the best but be prepared for uncertainty.