Severe weather takes toll on Michigan tourism

A storm earlier this month that brought 100-mile-an-hour winds to Glen Arbor is but the latest weather event to harm Michigan tourism (photo courtesy of MLive)

The Homestead resort and wedding venue near Glen Arbor was full of guests on the afternoon of Sunday, Aug. 2. Then, the sky turned green.

At about 4 p.m., a severe thunderstorm rolled off Lake Michigan onto the western shore of Leelanau County. Straight-line winds of up to 100 mph uprooted or felled so many trees along M-22 heading into town that roads became impassable.

Glen Arbor was cut off — no power, no phone lines, no easy way in or out. For tourism-focused businesses like The Homestead, which depend on seasonal revenue, one bad storm can mean disaster for the bottom line — especially if it happens during the busiest weeks of the season. How much depends on the size of the business and length of its season.

By 10:30 a.m. the day after the storm, The Homestead was nearly empty. Almost all of its guests packed up and left, said Bob Kuras, president of the high-end resort. Its pools, golf courses and restaurants were closed.

Electricity wouldn’t be restored for three full days.

The resort, which can do six figures in revenue per day during the summer on room rates that can top $700 a night, instead found itself calling guests who had booked trips last week to encourage them to stay home — not the kind of calls a hotel operator wants to make.

Losing that business is “a very, very large number for us,” Kuras said. “I don’t know that anyone believed we could have had that severe a storm in this area, or that it could do the damage it did in such a short period of time.”

Business interruption

Filling hotel rooms and restaurants in the summer is particularly important in the greater Traverse City region, where some census estimates peg service jobs alone as more than a fifth of the local economy. Traverse City Tourism, the local convention and visitors’ bureau, commissioned a 2013 study that says the tourism industry accounts for nearly a third of the region’s jobs.

If business owners buy insurance policies that include coverage for business interruption, such as that wrought by a severe storm, they might be able to recoup some of the financial losses. Those include losses such as structural damage, lost revenue and spoiled food. The Homestead does have such a policy, and Kuras said the final impact of storm-related losses will depend on the outcome of his claim.

Those owners that don’t or can’t afford to purchase that kind of coverage might face a double whammy of lower revenue from fewer visitors and higher costs elsewhere, particularly to run generators or replace damaged goods.

Smaller hotels often don’t buy the coverage because they bet the odds are low of needing it and thus want to avoid paying higher premiums, said Steve Yencich, president and CEO of the Okemos-based Michigan Lodging and Tourism Association.

“It’s a question of cost versus risk,” Yencich said. “People tend to budget and want to pay the lowest premium possible. And, of course, when the claim ensues, you want the most coverage possible. It’s been a long-standing enigma for the insurance industry.”

The main financial factor, he said, is cash flow: “How quickly am I able to return to operations and start putting heads in beds?”

Hotels weren’t the only businesses disrupted by the storm. Restaurants, wineries and business tied to big attractions like Sleeping Bear Dunes National Lakeshore, mostly closed since the storm, were also impacted.

In Glen Arbor, Art’s Tavern was one of the few restaurants in town to operate daily since the storm, but its owner is spending $400 a day to run a generator.

“I’ll tell you in December what the impact was,” said Tim Barr, the owner of Art’s Tavern.
Barr said the bulk of his daily customer base is made up of locals who have no power at home — rather than tourists. With the generator buzzing away to keep the restaurant functioning, he’s cutting into his profit margins until the power comes back on.

Nearby, the Glen Arbor headquarters of the Cherry Republic retail chain on M-22 lost a quarter of its typical sales last week, but made up for it slightly with higher business at its store in downtown Traverse City.

Fruit losses

Then there are the agriculture businesses.

Horticulture experts say some apple and grape growers might not be able to harvest their whole crop due to wind and hail damage. Wineries on Grand Traverse County’s Old Mission Peninsula, which took a direct hit, also were closed for several days.

Apple growers in the worst of the storm band might lose a lot of their crop to rot, said Nikki Rothwell, a Michigan State University Extension specialist and coordinator of the Northwest Michigan Horticultural Research Center based in Leelanau County. That’s because the severity of the storm, bringing hail damage and apple puncturing, plus season-long wet weather have been a challenge.

Some apples might be salvageable for juice, she said, although growers won’t earn as much in juice as they would by selling fresh apples at markets.

Grape growers are coming off two hard winters, and the French hybrid grapes grown here don’t like cold temperatures, Rothwell said. Last year’s wine grape crop already was smaller as a result, and this year’s is shaping up to be the same.

At one vineyard near her office, she said, between 20 percent and 40 percent of the already-minimal crop suffered hail damage.

Experts have not yet estimated the dollar value of the lost fruit, nor do they know whether any growers will experience a total crop loss.

If there’s a bright spot, it’s found in a bowl of Michigan cherries; the cherry crop harvest isn’t impacted by the recent wild weather. Nearly all of the region’s sweet cherries and 66 million pounds of tart cherries — of an estimated total 83 million pounds — are already off the trees.

Varied impacts

From 2012 to 2014, 39 percent of leisure vacations to the northwestern Lower Peninsula started during June, July and August, according to Travel Michigan, which cited data from McLean, Va.-based tourism research firm D.K. Shifflet & Associates Ltd.

The state has used the firm’s data, based on national traveler surveys, since 1992 and analyzes it by region and county.

In last year’s study, Grand Traverse County ranked third among Michigan’s 83 counties for leisure travel, with estimated spending of $924.5 million, data show. Leelanau ranked 33rd, with $99.8 million.

“Certainly, those summer months are very important to the bottom line of hotels and tourism-related businesses in those areas,” said Michelle Grinnell, a Travel Michigan spokeswoman.
Many businesses that are truly seasonal, such as recreation rentals, might be hit the hardest since they have fewer days to make their money for the year, said Sarah Nicholls, an associate professor of tourism at Michigan State University and a co-author of the state’s annual tourism forecast.

“For larger/year-round companies, the impact of any one event is relatively less,” she said via email.

This, Nicholls said, illustrates the importance of diversification, both in the types of services or products businesses sell and in how many seasons they operate.

“That, of course, is hardest for the smallest entities and for companies that are just getting started,” she said. “Hopefully, we have a long, warm and dry autumn that can at least help these kinds of businesses recoup some of their loss.”

Katy Wiesen and her husband, Matt, are in that camp. They own three stores in Glen Arbor — M22 Glen Arbor, which sells clothing; Crystal River Outfitters, which rents kayaks and stand-up paddleboards; and The Cyclery, a full-service bike shop that also rents bicycles.

Their storm-related losses are mounting: They include the physical — trees fell on a storage garage, on a shuttle vehicle used to take kayakers to the river and on employees’ cars — but most are financial.

The stores — typically open from 9 a.m. until 8 p.m. seven days a week in the summer — were closed for more than three days during the peak of its season.

“These are numbers that we will not be able to make up,” Katy Wiesen said, declining to offer sales figures. “We wait all year for this. You know, it’s not like our business is spread out 365 days a year. We have 90 days — not even that — we have 60 days to make our money for the year.
Bob Sutherland, president of Cherry Republic, said the Glen Arbor store was trailing a typical August sales week by about 25 percent, although he wouldn’t cite exact sales figures.

On a typical day, he said, 2,000 customers can come through the door. On a single day last week, he estimated nearly 500 would.

That impact is softened, in part, because Cherry Republic’s Traverse City store was outperforming normal sales goals by 10-20 percent and because it does business in multiple cities year-round, especially at Christmas.

“This three days or four days of missed business is microscopic,” he said. “But I could see for some of those stores, where it’s the only store and there’s … really six big weeks to make it — and losing one of your big weeks — that’s a much bigger difference.”