Napa Valley's Unrealistic Assumptions

Visitation is down in the California wine regions. Napa being the "star" means the focus is on them and what happens in Napa often spills over to other wine regions, especially next door in Sonoma. Some still think the low visitor count is a temporary issue with the post-Pandemic economic reset. Others are making unrealistic assumptions of how they are going to pull out of the downturn.

In 2012, as we pulled out of the Great Recession, Napa saw almost three million visitors. By 2018, just six years later, it was four million. That's a huge increase in a short time. New wineries, restaurants, and lodging popped up, and much of it was high-end. Lagging supply couldn't keep up with demand, so prices went up. And the good times were going to continue, right?

Even though occupancy in the lodging took a dive in the past couple of years, revenue is at an all-time high because of high prices.

Some people in the industry have made what I consider some bad assumptions on their salvation:

• Chinese tourism will return. Except the Chinese economy has problems and there is a strain in relationships that will not allow this to happen.
  
  
• Saviors from the south. The Canadian economy is hurting like the U.S. economy, plus the strong dollar makes it likely we'll see fewer visitors from the north. So some are thinking Mexico will make up for this. They don't say why they think this will happen.
  
  
• Increased corporate spending. Inflation is putting the kibosh on big companies throwing money around on unnecessary expenses. Consumer confidence isn't great right now, and that means individuals and entities.
  
  
• Americans went overseas this year; next year they'll be back. Yes, an increased number of Americans are going overseas. The number are back to pre-Pandemic levels. So why are they all coming to Napa next year? I don't know why anybody assumed 2024 was going to be the year of Americans traveling in mass in their own country. With inflationary prices, overall travel may be down or people may just stay closer to home. If the latter happens, that may be good because what the wine industry needs are more Californians in the wineries. Florida, Texas, and NY are the biggest buyers of CA wine. If I were in wine marketing, I'd be spending advertising dollars on those top states and their cities. If any of these assumptions is going to actually happen, it'll probably be this one, and let's hope it does and everybody visits their favorite American wine region next year.
  

Napa's high prices are covering up for the slowdown in visitation, for now. Is this sustainable? I don't know. But I think a reality check is in order.