Honors Econ Research Paper

May 11th, 2015

Honors Economics

For Niroj Bhattarai

By Wulfgar Pfaus-Novak

How Estes Park Deals With the Seasonal

Fluctuations in Tourism.

Abstract

This paper focuses on uncovering the quantitative data that shows Estes Park’s

seasonal fluctuations in tourism, in addition to uncovering the qualitative components

that promote Estes Park businesses ability to survive these drastic seasonal

fluctuations. Furthermore, it is an aim to understand the micro and macroeconomic

factors that play into the quantitative analysis and qualitative components of answering

the thesis. After uncovering the business cycle like fluctuations in Estes Park’s revenue

generated, in addition to the seasonal variations in visitors, several business owners

were interviewed. The predominate trends propagating Estes Park businesses ability to

make it through the included, staying open, having detailed strategies and systems,

filling a specific niche, maintaining a core staff, providing a ‘Colorado’ experience, and

reducing variable costs. The economics assessing why businesses are more successful

when they did not shut down in the unprofitable winter were addressed, followed by a

brief speculation into Estes Park’s ability to grow in the future.

Clean air with the smell of pine trees, the sight of rugged mountain tops,

rushing rivers and Elk, the experience of gift shops, myriad restaurants, and a lodge

tending to your every need – If this doesn’t seem like a vacation for you, there are

over 2million Estes Park guests each year(Heart-Adams,2012) that would

disagree~. Recently ranked the ‘Best Small Town to Visit’ by the Smithsonian, Estes

Park’s popularity is only increasing; yet despite this seemingly promising indication

of growth, Estes Park businesses struggle to make it through the winter. The vast

majority of the 2 million guests that pour into Estes Park do so in the summer, taking

advantage of the comfortable weather, and the businesses geared towards

enhancing their experience. The catalyst to the remarkable amount of guests

pouring into such a small town is Rock Mountain National Park, ranked the 5th most

visited national park. Estes Park is the entrance to Rocky Mountain National Park,

and is the most intuitive place to stop and stay if your vacation plans include visiting

the park. A typical day in the busiest parts of summer assures no place to park,

obscene traffic, and a guaranteed wait at almost any restaurant in the town.

In contrast, the winter season brings in cold and windy weather, leaving

once bustling streets empty. The previously flourishing business are forced to

survive on rations of their summer profit, and to spend the winter drought

questioning whether or not it is more economical to stay open, or to simply close due

to lack of demand. This struggle is even further enhanced by the less than 6,000

permanent winter residents of Estes Park, whose population is not nearly large

enough to support the 98 restaurants TripAdvisor ranks. Stepping into a warm

restaurant in the middle of winter still leaves a cold atmosphere - hardly any guests

will be present even in peak dining times. Having lived in Estes Park for 13 years, in

addition to having watched numerous businesses not make an entire year without

exit, it was natural to question the qualities that determined a business’s success.

The primary question, however, is ‘How do Estes Park businesses deal with

the seasonal fluctuations in tourism?’ Put more simply, how do Estes Park

businesses make it through the winter?

Methodology, Results & Discussion.

In order to answer this question, it is necessary to first produce data that

shows the seasonal fluctuations that we have presumed Estes Park businesses

endure. The sales tax data can be used as a representation of the amount of

revenue generated by Estes Park. However, the sales tax must be converted to

revenue by dividing by the varying sales tax rates to assure that the data isn’t

skewed. Inconsistent sales tax rates, particularly when the sales tax increases,

makes it appear as though additional revenue had been generated, which reduces

the credibility of the graphs produced. It is important that the sales tax data also

spreads over the course of several years in order to assure its validity and to better

analyze the seasonal fluctuations in revenue over time. To satisfy this, the previous

9 years of sales tax information (2005-2014) was collected. Furthermore, increasing

the specificity of the sales tax data acquired will help more clearly and accurately

distinguish trends. In the 9 years of sales tax information gathered, each year is

divided by months, and therefore showing the sales tax per month, from 2005-2014.

A Sales Tax and Classifications document was received from Steve McFarland, the

Finance Officer of Estes Park, at the Estes Park Town Hall. The document

contained the sales tax of Estes Park from 2005-2014, monthly, and broken up into

the individual sales tax classifications. The data required was used to create the

graph below.

An easier to read version is listed under Appendix (A). The sales tax rate,

surprisingly, was fixed at 4% up until July of 2014. This does not include Colorado

State or Larimer County’s sales tax rate. In addition, it is consistent across all sales

tax classifications, which are covered later. In order to convert the sales tax to sales

revenue, the original amount of sales tax was divided by 0.04. This was continued

monthly from 2005-2014 up until July. In July, the sales tax rate increased to 5%.

The remaining months in 2014 were converted by dividing the amount of sales tax

by 0.05%. This graph is particularly useful in analyzing the trends in Estes Park

revenue on a monthly basis over the course of 2005-2014. In addition to this, you

can compare individual months across the years by picking out a color coordinated

to the year you wish to analyze. The upward trend in the sales revenue is relatively

easy to depict, especially in the months of June, July, and August. This graph also

shows obvious seasonal fluctuations in revenue over the past 9 years. The revenue

received tends to grow slightly in May before exploding from June to September. It

then sharply falls off to the pre-tourist season levels. If you examine the grey bar,

representing 2013, you can also see the dramatic drop off in sales revenue starting

in September – a result of the September flood. It was particularly surprising to see

2014 generate the most revenue Estes Park had generated considering because of

the flood, however, the publicity Estes Park gained from the flood may be the cause.

Having the data separated by sales tax classifications was especially helpful –

it allows individual classifications such as food to be analyzed in comparison to the

overall sales tax; or in other words, as a percentage of the whole. To assess Estes

Park’s businesses dependency on tourism, the tax classifications that were most

affected by visitors needed to be selected. The most intuitive selection was lodging,

which would solely be influenced by visitors spending. The other classifications that

were chosen were food and retail.

Estes Park is about a 45min drive, or 33 miles, from other towns that would

have a grocery store. Visitors are unlikely to make this drive due to inconvenience,

and instead spend their money in Estes Park, therefore, food is a good indicator of

visitor spending. The small winter population of Estes Park also diminishes the

influence of local spending on food and retail. Local spending is defined as spending

from those who live in Estes Park and spend their money on local goods within the

Estes Valley. Visitors generate the majority of revenue in the food and retail

classifications. Over half of the retail tax revenue generated accrue from the ‘Gifts,

Variety’ category, a category that is unlikely to be exploited by local spending.

Another roughly 25 percent of the retail tax revenue is from clothing, primarily aimed

at tourists e.g. a t-shirt with “Estes Park, Colorado” on it. Again, retail is another

classification that is not greatly affected by local spending.

FOOD RETAIL

Bakeries, Candy, Cheese Video rentals Appliances, Radio

Grocery Stores Boot & Shoe Stores Door-door, catalog, internet sales

Restaurants/Liquor Clothing Stores Drug Stores

Retail Liquor Stores Fabric, Yarn, Macrame Gifts, Variety

Artists, Galleries Camera, Jewelry

LODGING Crafts & Craft Stores Leather, Leather Goods

Hotel & Motel Special Events Office Supplies, Xerox

Cottages, Rentals, Sales Carpet, House Furnishings Sporting Goods

Musical Instruments Plants & Flowers.

The types of businesses that are used in food, lodging, and retail are on the chart

above. Originally, until a change in 2008, retail was absent of the Apparel, Arts &

Crafts, Furniture, and General categories. These originally were grouped under their

own individual classifications. The types of businesses that fit under those

categories were combined under Retail in 2008 and are represented in the chart in

addition to later calculations.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 $50,000,000.00 $70,000,000.00 $90,000,000.00

$110,000,000.00 $130,000,000.00 $150,000,000.00 $170,000,000.00 $190,000,000.00 $210,000,000.00 $230,000,000.00

78.00%

79.00%

80.00%

81.00%

82.00%

83.00%

84.00%

Food, Lodging, and Retail

Total Sales Revenue (year) Total Sales of Food, Lodging, and RetailFood,Lodging, and Retail % of Total

The graph above shows the relation between Total Sales Revenue, the

combined total of food, lodging, and retail, and the ratio of those totals. Food,

lodging, and retail make up 80% or more of the total sales revenue Estes Park

generates. In addition to this, when food, lodging, and retail are a larger percentage

of the sales revenue, the overall sales revenue generated is likelier to grow from the

previous year. This can be seen in the grey line going across the graph. The same

grey line very noticeably outlines the effects of the flood on Estes Park’s total

revenue. The total sales revenue per year was acquired simply by totaling each

month’s sales revenue in the given year, and the total sales of food, lodging, and

retail was acquired by adding up the individual classifications monthly for the given

year.

Food

Lodg

ing

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Food

Lodg

ing

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Food

Lodg

ing

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Food

Lodg

ing

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Food

Lodg

ing

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Food

Lodg

ing

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Food

Lodg

ing

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Food

Lodg

ing

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Food

Lodg

ing

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Food

Lodg

ing

Reta

il2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

0.002,000,000.004,000,000.006,000,000.008,000,000.00

10,000,000.0012,000,000.0014,000,000.0016,000,000.00

JanMar

MayJul

SepNov

Revenue comparison between Food, Lodging, and Retail from 2005-2014

The above graph can be found in greater detail under Appendix C. Unfortunately,

much of the data available in this graph cannot be interpreted correctly without the

use of excel isolating the colored ‘Mountains’. This graph shows the relation

between food, retail, and lodging and retail yearly and by month. You can see how

food and lodging typically create the majority of revenue produced, with one

exception; 2009. Only a year after the 2008 recession, visitors were much less

inclined to spend additional income on lodging, and likely decided to reduce their

visit to Estes Park to a single day. This reduction in spending would be expected to

be seen in food and retail as well, in addition to producing a dramatic reduction in

visitors. We will later see that the number of visitors visiting Estes Park actually

increases from the previous year. The cost of a vacation is much more when you

choose to travel out of state, so visitors from states other than Colorado would be

less inclined to visit. However, people that are seeking a vacation and already live in

Colorado are able to travel a relatively short distance and spend perhaps only a day

or two. This provides the cheaper vacation they require, and also lowers the amount

of revenue lodges can generate without lowering the revenue of food, retail, or the

number of visitors.

After Estes Park’s dependency on food, lodging, and retail was calculated, the

number of visitors visiting Estes Park needed to be gathered. In 2012 Summit

Economics did a study on the effects of Tourism on Estes Park. In this study, they

labeled Estes Park as the gateway to Rocky Mountain National Park. Unfortunately

there is not a visitor count devised specifically for Estes Park, however, there is one

for Rocky Mountain National park. The number of visitors in this count may be

slightly underreported because there are certain hours of the year that operators

aren’t at the entrance of the park and count the number of visitors. The hour’s

operators are not likely to be at their stations, however, also coincide with the least

busy parts of the day and year. The visitor count for Rocky Mountain National Park

has been diligently recorded since the 1970s, and it was therefore easy to access

the monthly visitor count from 2005-2014. The following graph shows this data in a

similar style to the sales revenue graph on page 11. It can also be viewed more

clearly under Appendix (C).

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

RMNP Visitors (Per Month)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Several similarities exist between the Sales Revenue Graph and the RMNP

Visitors (Per Month) graph. A similar, yet less exaggerated upward trend in visitors

appears on a monthly basis. Furthermore, the amount of visitors that come into

Estes Park begin to rise in May before falling off in September – Exactly the same

as the Sales Revenue Graph in Appendix (A). The explosion in sales revenue

generated in Estes Park occurs in the same June to August period. Again, choosing

out the grey bar representing 2013 will also show the effects of the flood, greatly

reducing the number of visitors below average.

The following graph on page 10 further accentuates the correlation between

RMNP Visitors and sales revenue. It can also be found under the Appendix (C). The

trends in totals sales and total visitors are very similar on a yearly basis. In addition

to this, the effects of the recession in 2008 can also be viewed from a decline in both

total sales and total visitors.

Unfortunately, data

collected at the county level

is not particularly useful,

and wouldn’t be an effective

comparison to Estes Park’s

figures in sales revenue.

Larimer County is

predominately filled by Ft. Collins, which because of its size, completely dominates

the statistics at the county level. The noticeable effects of the recession that Estes

Park displayed in sales revenue and RMNP visitors can also be see in the United

States Real GDP, and Colorado’s Real GDP. The graph below shows both of those

values.

2005 2006 2007 2008 2009 2010 2011 2012 2013 20142,000,000

2,200,000

2,400,000

2,600,000

2,800,000

3,000,000

3,200,000

3,400,000

3,600,000

125,000,000.00135,000,000.00145,000,000.00155,000,000.00165,000,000.00175,000,000.00185,000,000.00195,000,000.00205,000,000.00215,000,000.00225,000,000.00

Total Sales Vs. Visitors (From 2005-2014)

Total RNMP Visitors (per year) Total Sales (Per Year)

In addition to the recession, you can see how the GDP for Colorado is also

beginning to grow at a quicker rate, which may be a component of Estes Park’s

recent growth.

Survey

After all of the data had been accumulated depicting the seasonal fluctuations

in Estes Park’s Revenue and demand (RMNP visitors), in order to better answer

‘How Estes Park businesses make it through the winter’, the individual businesses

needed to be surveyed. Understanding the qualitative factors that business owners

determine help their businesses succeed, especially when compared to numerous

other business owners advice, allows numerous aspects of a successful business to

surface. After determining that Food, Lodging, and Retail were the most prolific

factors in determining Estes Park’s overall sales revenue, businesses in the same

classifications were surveyed. Two businesses in Retail, in addition to an overall

view of the general types of Retail stores in Estes Park, two lodges, and three

restaurants were surveyed in total. The rationale behind selecting certain

businesses to be surveyed varied from business to business – However, businesses

that were surveyed were scatted in different areas of Estes Park, and were not

selected simply by convenience. In addition to this, businesses surveyed were done

so at non-peak busy times. For example, restaurant owners were interviewed

halfway between the typical lunch and dinner time in the middle of the week. This

was done to grant more time for interviews, in addition to relieve pressure and

therefore give time for the owners to offer more thought out answers.

Once business owners were contacted, there were specific primary questions

asked, followed by a variety of supplementary questions. There were two primary

questions:

1. What are your summer and winter hours? Is there a time you close during the

winter – Why?

2. How does the size of your staff fluctuate from summer to winter?

After the primary questions, the supplementary questions would try to define

more clearly what the own thought allowed there business to be successful, or what

qualities a successful business in Estes Park would have. An example of the

supplementary questions would be:

1. What is your experience in Business – How long have you been the owner of this

business?

2. What are qualities about your business that help it succeed?

Many additional questions were potentially asked to help gauge what qualities

helped the businesses make it through the winter.

The first retail business interviewed was Trendz, a gift shop, home décor, and

memorabilia orientated place. Carrying unique goods that were priced higher than

most similar gift shops, it was surprising to see Trendz thriving 8 years after their

initial opening. Their winter hours consisted of weekends only from 10-5, which then

grew in the summer to every day. Because of the extremely contracted winter hours,

only 2-3 additional people were employed on top of the owners. Trendz winter hours

was an outlier in comparison to the other winter hours of businesses. When asked

about their success, several answers were given. Constantly throughout the

interview, the owner highlighted their primarily Colorado made merchandise. This

Colorado merchandise would be unique and custom – The store was also filled with

a diverse selection of goods, huddled around specific Colorado themes. It was noted

by the owner that visitors come to Trendz want to buy something that symbolizes

their Colorado vacation; more specifically, their Rock Mountain National Park and

Estes Park experience. When asked about the use of the additional time off in the

winter, the owner emphasized all of the research that goes into the business yearly,

making sure to keep up with the trends of Colorado. Additional pricing and

placement strategies were discussed as well. The owner also mentioned filling a

particular niche of high quality and unique Colorado goods.

An entirely different niche was filled with Alpenglow Images & Accents, a retail

gallery that sold high priced artwork and beautiful photography projected over

canvases. This store was selected with little to no bias randomly. Again, the items in

the retail store were very noticeably geared towards the ‘Colorado experience’. The

majority of the artwork embraced the scenery that the Rocky Mountains have to

offer. The winter hours were 10-5 daily, worked almost solely by the owner. In the

summer, the hours expanded to 9-9 daily, more similar to the majority of the

businesses interviewed. Being a very small fine art shop, the amount of labor

employed did not grow significantly in the summer. The owner guessed she would

likely hire 6+ employees. Unlike most of the retail businesses in Estes Park,

Alpenglow focused on much more expensive merchandise, not relying on the low

price high volume sales model. This was said to be particularly helpful in the winter

as long as you were open daily. Having higher priced goods meant fewer people

would buy your merchandise, however, it could be any random visitor in the week

that would decide to by a highly priced item, and greatly increase sales for the

business.

“You never know which day will be the busy” - Alpenglow Owner.

Another fundamental that Alpenglow’s Owner pointed out to being successful and

assuring your business made it through the winter was location. Having moved

several times in locations away from the main strip of Estes Park, the owner pointed

out that regardless of high rent (or fixed cost), being on the main strip was

quintessential for a retail businesses. The final word of advice the owner mentioned

was about having a core staff.

The seasonal fluctuations in tourism means that there are seasonal

fluctuation in staff in order to meet the demand. Part of this demand is met by J1

Visa students, however, continually introducing new staff makes it difficult to assure

quality customer service. Having a core staff that stays in Estes Park throughout the

winter can help remedy this issue. In order to maintain this core staff, however, you

must be able to offer them full time jobs so they can pay their living costs throughout

the winter. Unfortunately, being able to cover the additional variable costs, especially

in retail, is exceedingly difficult in the slow winter.

The vast majority of retail businesses in Estes Park are located on the main

strip. Many additional retail stores were visited to gain a better perspective of what

kind of merchandise was sold. The preponderance of stores contained low priced

gifts and memorabilia, in addition to a variety of clothing options labeled with ‘Estes

Park, Colorado’. These stores fit very comfortably in providing a Colorado, RMNP, or

an Estes Park experience in the merchandise that they sold. A Survey conducted by

Summit Economics produced interviewee’s who claimed that “Shops that are clean

and change their inventory frequently stay busy” and that too many shops are “dusty

old places that never change…”. It is also stated that a large portion of Estes Park

visitors are return visitors. Assuring that your inventory is renewed and kept up to

date incentivizes more return visitors to return again back to your store, which

increases the chances of selling more merchandise.

Once some perspective was gained from the retail side of businesses in

Estes Park, lodging and food remained to be surveyed.

The two lodges interviewed were Discovery Lodge and Riverview Pines. Both

lodges were chosen with as little bias as possible and randomly. In order to

compensate for the reduction in demand in the winter, both lodges reduce the

number of rooms open. This leads to a decrease in variable costs by reducing the

cost of utilities. The Discovery had been in business since 1961, while Riverview

Pines had only been in business for two years – their first year therefore being

affected by the flood. Both businesses were primarily run by their owners during the

winter, with as little additional help as possible. In order to compensate for the

increase in demand for the summer time, both lodges expanded their labor force to

include additional housekeepers.

Methods of obtaining guests differ – Discovery Lodge offers extremely

competitive pricing to incentivize visitors choosing their lodge. The lodge also has

several buildings that can accept a large amount of families, helping the low prices

succeed by assuring a high volume of paying guests. Their proximity to other lodges

helps explain the low prices as well, because they are sandwiched between a long

strain of hotels and motels on both sides. Without having a specific niche to fill,

Discovery Lodge also stays competitive by aggressively requesting reviews. Of

course in order to promote positive reviews quality room service and the lodge’s

condition need to be superior. The combination of aggressively requesting reviews,

in addition to boasting the positive end result to potential customers, is a very

important factor in the competitive lodging market.

Whereas staying ahead of the competition with low prices sufficed for

Discovery Lodge, a different model was used for Riverview Pine. Plentiful rooms

were replaced with higher quality individual cabins for guests. The opportunity cost

of this ‘higher luxury’ is charging more to compensate for the fewer guests you will

be able to accommodate. One unique quality the Riverview Pine owner mentioned

that differed from Discovery Lodge changing the rates in the winter. Ultimately the

owner worked at her lodging business year round. Although the rates were cheaper

in the winter, it is more economical to provide some version of revenue than shutting

down due to lack of guests accepting the high summer prices. This statement varies

according to the variable costs, however, considering it is primarily the owner with

minimal extra help, the variable costs are likely very low. In addition to the higher

quality cabins incentivizing visitors to pay more, the owner of Riverview Pines also

emphasized filling a specific niche. The specific niche filled was allowing pets,

primarily dogs. Because of the difficulties with dogs and cleanliness, several other

lodges in Estes Park do not offer the same commodity. A higher occupancy can

accumulate from being able to provide for guests who are unable to find other

lodges that fill a similar niche. Similar to the retail restaurants surveyed, offering a

unique commodity can further improve revenue generated.

Finally, the tax classification that generated the most revenue for Estes Park;

Food. Nearly all of the personal insights observing the seasonal fluctuations in

tourism occurred from visiting restaurants. The first restaurant owner interviewed

was the owner of Pepper’s Fresh & Fast Mexican Grill. Pepper’s was selected

biasedly based on previous visits. The owner had considerable business

experience, in addition to owning restaurants that were successful in other parts of

Colorado. Pepper’s style is extremely similar to the chain restaurants Qdoba and

Chipotle, with arguably higher quality ingredients and atmosphere. Staffing

difficulties were readdressed, and the owner admitted to keeping open the majority

of the week in winter in order to assure she could maintain her core staff. Several

moments throughout the interview the owner hinted that her business was

struggling, which came as a surprise. Being in business for only 3 years, one of

which was effect by the flood, made surviving through the winter extra tedious.

There were other speculative factors that did not fit the trends of businesses

struggling less. Pepper’s certainly filled a unique niche, however, it was difficult to

assess how they attended to providing a Colorado experience. When visitors have

an opportunity to choose a restaurant that serves food unique to the Colorado

atmosphere, they may be less likely to choose one that is not.

Contrary to Pepper’s, Hunter’s Chophouse catered very specifically to

providing a Colorado experience. Hunter’s Chophouse was chosen with as little bias

as possible and randomly. The majority of the atmosphere and menu was dedicated

to providing traditional Colorado foods, in addition to ‘exotic’ items such as elk. The

restaurant had changed owners only 3 months prior to my survey, and the owner I

interviewed had not actually been in business to survive a winter. In opposition to

the other businesses interviewed, the owner didn’t offer immediate insight into

qualities that would help his business survive the winter. His previous business

experience was having various jobs in the restaurant industry, in addition to jobs in

sales. When asked further about what qualities would help his business survive the

upcoming winter, answers that apply to the restaurant year round were given, such

as quality of food and service must be good. Similar changes existed in expanding

labor for the summer demand, however, the typical hours that the other businesses

used were very different. Typically, retail and restaurants would open at around 10-

11am, and then close from 7-9pm, depending on the time of the year. The

Alpenglow Images & Accents owner described Estes Park as a ‘Sleepy town’.

Personal experiences also attested to this ‘sleepy town’ ideology. The owner

suggested that he intended to stay open potentially to 2am, which was drastically

different from other businesses. Furthermore, instead of staying open the majority of

the winter, Monday, Tuesday, and Wednesday the restaurant would close. These

were described as the slowest days for customers in the week, however, there are a

variety of differing speculations on that matter.

Following the least experienced owner I spoke to, was the most experienced

owner; the owner of Poppy’s Pizza & Grill. Having owned the business for 20 years,

and another successful restaurant in Estes Park for 13 years, a wealth of information

was given about surviving through the winter. There were similar trends in

expanding labor, however, Poppy’s typically employed more people in both summer

and winter than any other restaurants, despite a similar size. Typical summer

opening and closing hours were also used. The popularity of the restaurant can only

partially attest to the larger amount of labor used. The owner explained having

different systems for summer and winter, primarily developed to help smooth out the

process of providing food for the changes in demand. Poppy’s is also notorious for

providing great customer service, which is partly a product of good employees, but is

also likely a product of the specific systems used. Providing a consistent quality

experience is essential to keeping people coming back to your restaurant.

Employing more people to have less wait times not only increases the happiness of

your visitors, but also your return visitors, and most importantly, the locals.

Restaurant recommendations are asked at almost any location in town from tourists.

A quality experience is easier to provide when you assure that you have specific

systems to uphold it. Surprisingly, Poppy’s ‘takes a break’ during the winter during,

that lasts anywhere from 2-3 weeks. Initially, after observing data gathered from

other business owners, this seemed counterintuitive. The 2-3weeks closed remains

a very important planning phase for the owner, in addition to a cleaning, preparation,

and teamwork phase that employees are paid full time to undertake. In contrast to

the owner of Hunter’s Chophouse, considerate effort and planning was taken to help

prepare the business for the fluxes in demand.

Originally, it seemed unintuitive to stay open during the winter the majority of

the week, especially because of the low demand. There are several important

factors that judge whether or not it is more economical to stay open or to close at

any given day. This graph contains

three things – Marginal Cost (MC),

Average Total Cost (ATC), and

Average Variable Cost (AVC).

Marginal costs are the cost of

producing one more unit of output,

and it typically rises as increasing that

unit becomes more difficult, and

therefore more expensive. Average

Total Cost is the total cost of production, divided by the quantity. The average total

cross initially decreases as you begin using you equipment for efficiently, and then

rises once your variable costs start increasing. Average Variable Cost is the variable

cost divided by the quantity of output – a good example of a variable costs is labor.

Hiring labor can help the business be more efficient, but eventually the opportunity

cost of hiring one more employee outweighs the benefits, and wastes money. This is

why the variable cost rises, and also why labor is typically cut in the winter Months of

Estes Park. There is not enough demand to justify hiring more staff. Another

important factor in businesses ability to make it through the winter is Fixed Cost. A

good example of fixed cost in this scenario would be rent, which is typically high

along the main strip of Estes Park. Where Average Variable Cost and Marginal Cost

cross is the Shut-Down Point – where it is more efficient for a business to shut down

rather than stay open. Essentially, if you are maximizing your Marginal Revenue

(Revenue produced for one more unit of output), which ideally is equal to your

Marginal Cost, and you still aren’t able to cover your Average Variable Cost, it is

more economical to close. At that point, you are only making it less profitable by

adding the additional Variable Costs you must pay, rather than simply being unable

to cover the Fixed Cost. Often times, unsuccessful business in Estes Park close

during the winter, and end up losing more revenue than other business that are

competing and staying open. Likely, these businesses stay open because they’re

variable costs are already very small from the reduced staff, and they are making

more revenue than the shut-down point.

After creating the graphs showing the upward trend in both revenue and

visitors, I saw a very bright future for Estes Park. Several issues block out this bright

future, primarily the difficulties imposed with expansion and housing. Not having

housing employees reduces the number of employees available, but also the

number of employees who can work for you during the winter making a core staff

very difficult to obtain. A town that will not expand in order to accommodate the

additional guests and workers it receives creates a ceiling for the amount of revenue

it can obtain, and hurts its opportunity of growing.

Conclusion

Ultimately, there are several factors that help businesses make it through the

difficult Estes Park winters and be successful. Every business surveyed reduced

their hours open in the winter, which cuts some variable costs like labor and utilities.

This reduction in hours open coincides with a reduction in staff, further lowering the

variable costs. Because a business owner is unlikely to have another job aside from

their own business, it becomes exceedingly efficient for them to spend time running

their business in the winter. They control the amount they pay themselves, in

addition to the hours they work, rather than having a boss do so for them.

Businesses that utilize the slow winters in the most effective manor, such as

planning and updating their business products, are able to enhance their ability to

make revenue, which enhances their ability to survive the winter. Appealing to the

guests that have chosen Estes Park and Rocky Mountain National Park for their

vacation is also a tremendous factor in gaining customers. Having a core staff that

can carry your business through the winter is also very important; like a snowball

rolling down a snow covered mountain, that core staff can also help maximize the

revenue generated in summer. Even though a multitude of people pour through

Estes Park each summer, every business in the town is competing for as many

paying visitors as they can. Finally, being unique by filling a specific niche, and

refreshing your merchandise for the large amount of returning visitors can also

increase the amount of customers you have in the summer, further helping your

business survive the winter. Appealing to the locals, especially for restaurants, is

effectively a form of advertising for Estes Park, and enriches the community as a

whole. Work hard, Plan hard, and soon it will be summer again.

References

Blackhurst, Suzy. Estes Park Tourism Information. 3 Mar. 2015. Raw data. N.p.

"Economy in Estes Park, Colorado." Sperlings Best Places. Bert Sperling, n.d. Web. 12 Apr. 2015. <http%3A%2F%2Fwww.bestplaces.net%2Feconomy%2Fcity%2Fcolorado%2Festes_park>.

"Estes Park - Travel, Tourism & Weather for Estes Park, CO." Estes Park. Trip Advisor, n.d. Web. 2 Apr. 2015. <http:/www.tripadvisor.com/Tourism-g60945-Estes_Park_Colorado-Vacations.html>.

Hart Adams, Tucker. The Economic and Fiscal Impact of Tourism on the Estes Park, Colorado Economy. Visit Estes Park. Summit Economics, n.d. Web. 3 Mar. 2015.

Lovejoy, Bess. "The 20 Best Small Towns to Visit in 2015." Smithsonian. Smithsonian, 16 Apr. 2015. Web. 16 Apr. 2015. <http://www.smithsonianmag.com/travel/best-small-towns-2015-180954993/?no-ist>.

McFarland, Steve. Town of Estes Park Sales Tax and Classifications. 27 Feb. 2015. Raw data. Estes Park.

"Recreation Visitors by Month Rocky Mountain NP." Irma.nps.gov. N.p., n.d. Web. 28 Feb. 2015. <https%3A%2F%2Firma.nps.gov%2FStats%2FSSRSReports%2FPark%2520Specific%2520Reports%2FRecreation%2520Visitors%2520By%2520Month%2520%25281979%2520-%2520Last%2520Calendar%2520Year%2529%3FPark%3DROMO>.

Taylor, T. (2014). Chapter 7 and Chapter 8. In Principles of Macroeconomics.

"United States Census Bureau." Estes Park (town) QuickFacts from the US Census Bureau. N.p., n.d. Web. 20 Mar. 2015. <http://quickfacts.census.gov/qfd/states/08/0825115.html>.

Visit Estes Park. Visit Estes Park, n.d. Web. 11 Mar. 2015. <http://www.visitestespark.com/>.

Appendix A

Appendix B & C

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

Estes Park Monthly Sales Revenue

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Food

Lodg

ing

Reta

il

Food

Lodg

ing

Reta

il

Food

Lodg

ing

Reta

il

Food

Lodg

ing

Reta

il

Food

Lodg

ing

Reta

il

Food

Lodg

ing

Reta

il

Food

Lodg

ing

Reta

il

Food

Lodg

ing

Reta

il

Food

Lodg

ing

Reta

il

Food

Lodg

ing

Reta

il

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

0.002,000,000.004,000,000.006,000,000.008,000,000.00

10,000,000.0012,000,000.0014,000,000.0016,000,000.00

Jan

Mar

May

Jul

Sep

Nov

Revenue comparison between Food, Lodging, and Retail from 2005-2014

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

RMNP Visitors (Per Month)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014