Sonoma Valley’s fires and The Black Swan

My wife and I moved to Sonoma in April of 1990 after purchasing a six-room bed and breakfast inn on West Spain Street. It was later in that year, in November, when we first encountered what we used to call “the slow season.” By December, reservations dramatically slowed down, and in January, our occupancy dropped so low we thought about closing for the month.

In the years after, we actually looked forward to “the slow season.” Fewer tourists in town meant things were less hurried and crowded; with no guests on many nights we’d relax, go out to dinner, see a movie–you get the idea. We’d also use that time to do the maintenance and touch up the inn required, work that generally could not be done while rooms were occupied day after day. We’d do “deep cleaning” and repainting, and find work for our loyal manager and housekeeper so that their hours were not cut severely.

Knowing that “the slow season” was coming, we’d plan our yearly budget to accommodate it. Though the flush income of “the busy season” was great, we knew it wouldn’t last and that when things slowed down, we’d need to put money into the business instead of taking it out.

As Sonoma became more popular, our occupancy increased each year. By the year 2000, we hit 84%; the profit was high but the stress and demands were higher too. And then, in 2001, 9/11 sent shockwaves across America. Flights were grounded, reservations canceled; the economy went into a tailspin. What had been one of our best months collapsed, as did the rest of the year. Economists call it a “Black Swan” event, something powerfully transformative that is totally unanticipated.

Luckily for us, our experience of “the slow season” had prepared us. We knew that there were times when business would slow due to circumstances beyond our control, and we’d accumulated reserves against just that situation. We survived. We sold the Inn in 2003 after it became clear to us that the traditionally quaint nature of small inn-keeping had changed.

Since then, I’ve watched as the efforts of the Tourism Improvement District’s huge investment of money has nearly eliminated “the slow season” in Sonoma. The businesses that are tourist-oriented have accommodated themselves to a higher, less seasonal level of activity, and have set their expectations and budgets accordingly. Now that “the slow season” is nearly a thing of the past, the expenses of many small businesses are based on aggressive sales forecasts, and herein lies the danger of a non-diverse, ramped-up tourist economy.

The recent fires are a “Black Swan” event; they’ve scared the tourists away and that will last for a while. The ramped up promotion of Sonoma has created ramped-up business expectations and the ramped-up rents and loans that are predicated on ramped-up forecasts. Many small businesses in Sonoma have never had to survive a severe or prolonged slow-down, and their business skills and resources will be tested. Some won’t survive.

The “big guys” will survive because they’ve got deep pockets; the little guys will struggle. The value of thrift, hard work, long-hours, and creativity will reemerge as essential business skills. Most importantly, unless Sonoma diversifies its economy it will continue to be vulnerable to any hiccup in tourism, Black Swan or otherwise.