EconSouth (Third Quarter 2007)
EconSouth (Third Quarter 2007)Grassroots
Panama City Cruises Past Spring Break
Bob Warren has nothing against pickup trucks or college kids on spring break. But in the world of resort marketing, he's looking to trade up.
Warren, president and chief executive officer of the Panama City Beach Convention and Visitors Bureau, is helping transform the north Florida beach town on the stretch of Gulf Coast once famously dubbed "the Redneck Riviera." That phrase, by the way, is one that Warren has outlawed in his offices.
Panama City has traditionally been synonymous with spring break rowdiness, mom-and-pop beach motels, airbrushed T-shirts, and the 1960s-vintage Miracle Strip amusement park. Today, the Miracle Strip is a memory as high-rise condos are shoving aside old motels. MTV's spring break program decamped for Mexico last year, even though a quarter million students still spend $60 million in Panama City each March, making it the beach's third-highest revenue month, Warren said.
So no one's ready to kick out the kids just yet. Still, a condominium building boom has hiked real estate prices and helped draw wealthier beachgoers. A proposed $330 million regional airport, expected to open in about three years, could push Panama City up another socioeconomic notch.
Beachgoers flash more green
Already, the profile of the typical Panama City Beach visitor has changed. Five years ago, the average guests were a family with two kids and an average annual household income of $45,000, Warren said. Today the average visitor's household income is $75,000, still "middle of the road," in Warren's view. To keep that figure climbing, his group is trying to lure a wealthier demographic and "snowbirds" coming south for the winter from Canada and the Midwest.
"We're not ever going to be the mom-and-pop hotel community that we were 40 years ago," Warren said. "We still have a few small hotels and motels, but it's mostly very high-end resort accommodations. That's the trend we've made."
The trend is built of stucco, concrete, and glass. In late 2004, according to the Convention and Visitors Bureau, Panama City Beach had 16,000 rooms available to guests. Today, because of the condo crop, there are more than 27,000 rooms, and that figure could approach 40,000 in four to five years.
Trying to fill those units creates a lot of work for Warren and his staff. And it's straining the local real estate market.
As beachfront prices soared in the early part of the decade, speculators and developers rushed in. Multifamily construction permits issued by Bay County nearly quadrupled in 2003, to 2,363, from 505 in 2002. Builders took out a similar number of permits in 2004 before another jump to 4,009 in 2005.
A look at price appreciation explains why. In 2004 Bay County's average condo sales price was $312,103, and each of the 1,399 units sold that year sat on the market for an average of 51 days, according to the Bay County Association of Realtors' multiple listing service statistics. Prices peaked in 2005 at an average of $401,171—a 29 percent rise in one year.
Hot condos cool off
Then, because of oversupply and tighter credit, according to local real estate brokers, prices began slipping. In 2006 the average sale price dropped $50,000, according to the Realtors group's figures. During each month in 2006, three and a half times as many condos were actively listed on the market compared with two years earlier. As a result, it took a year to sell most units whereas the average condo sold in less than two months in 2004. Sales dipped only 4 percent in 2006, but developers began pulling back: Multifamily building permits issued plummeted 46 percent, according to the U.S. Census Bureau, to the lowest number since 2002.
In the first six months of 2007, monthly condo sales were down 26 percent from 2006, while the average price fell another $27,513, according to data from the Bay County Association of Realtors.
"It's a classic boom-bust," said Ray Fieler of Fieler Group Inc., a real estate broker in the Destin-Panama City area for more than 20 years. "It's just like in the late 1980s and like the dot-com boom. Everybody rushed in and got greedy."
At the current pace, it would take two years to sell all the condos that were on the Bay County market in June, according to data from the Realtors Association. That sales lag doesn't account for units under construction or planned. Fieler estimated two dozen condo projects are on hold, including a half dozen in which he has been involved.
Beyond the beach
Fortunately, tourism is only one pillar of the Panama City economy. Tyndall Air Force Base is the area's largest employer, providing 5,000 jobs. A U.S. Navy weapons research and development station, Naval Support Activity Panama City, employs an additional 2,000 people.
The city's leading employers are state and local government, the military, full-service restaurants, the federal government, lodging establishments, and limited-service eating places, according to the U.S. Bureau of Labor Statistics and Economy.com.
Local economic developers would like to diversify the job base and hope the proposed airport will help. Bay County officials have been working for several years to move the existing 714-acre airfield to a 4,000-acre parcel donated by the St. Joe Co., a real estate development concern that plans to develop extensive holdings near the proposed airport.
The project has been delayed at various points and continues to face opposition from environmental groups. But in mid-August, the U.S. Army Corps of Engineers issued the final environmental clearance needed to begin construction. The Bay County Airport and Industrial District, the airport authority, then announced that construction would start immediately and take about two and a half years.
Local developers hope the airport will not only make Panama City Beach accessible to national and international markets—Warren said 83 percent of visitors today drive from within eight hours—but will also spark employment growth. The airport would be part of a larger development plan that includes 3,000 acres intended for commercial and office development. Ted Clem, executive director of the Bay County Chamber of Commerce, said the idea is to bring higher-paying jobs to an economy currently reliant on tourism and the military bases.
"One thing holding Panama City back at the moment is a lack of locations for employment centers, places where companies can locate," Clem said.
As the beach goes upscale, local officials hope the overall economy can go the same route.
This article was written by Charles Davidson, a staff writer for EconSouth.