Why do some areas in the US seem so underdeveloped?

Question

Not living in the US, I have the perspective of an overseas tourist so my apologies if this is a stupid question (I'm pretty sure I heard @Brandon Turner say that there's no such thing as a stupid question on the BP forums but I do sometimes wonder if I'm putting this words to the test ;) ).

So, what I'm seeing is some places get overcrowded with tourists in season and there's simply not enough room for everyone to stay at reasonable prices. Specific places which come to mind -

Yellowstone National Park, Glacier National Park (the Mani Glacier area), Yosemite, Seward, AK, and there are many others.

Take for comparison Gatlinburg and Pigeon Forge in Tennessee, where there is also some seasonality but there are also many more place to stay, so prices are more affordable for us tourists.

So, for example, looking at the town of West Yellowstone, MT or even the hamlet of Babb, MT, there's no shortage of space there. Plenty of empty lots in West Yellowstone and as for the Babb area, you can't actually buy a small lot, just a really huge chunk of land. Why aren't investors getting more motels or vacation rental units up in these areas?

I realize these two parks are extremely seasonal, but still here's my line of thinking -

Get plot at West Yellowstone for $70K

Build a small motel/resort with 20 rooms for another X amount of dollars.

Rent the rooms at $120 a night and you'll likely be booked solid throughout the season, so that's 4 months a year.

120 * 20 * 160 = 384000 in revenue

Rental vacation management costs are 30-50%, let's say 50%, so you end up with $192K every year.

I have no idea as to what the building costs might be for a 20 room building but with almost 2 million dollars in profit every decade, surely you'll be covering the costs fairly quickly?

So, why isn't this happening? I'd be seriously tempted to do this myself, I just figure it's way above my league as someone with zero experience in real estate and/or the hotel industry.

I am guessing this could be where I'm getting things wrong -

1. High building costs due to the location (with nearest urban centers being at least a couple of hours away).

2. Local regulations preventing this somehow.

Would love to hear input from people invested in vacation rentals, multiplex building or these areas of Montana. Alaska works too - I've been spending this morning making reservations for our Alaska trip of 2017. Some places are already booked solid a year in advance!

Anne M. · Answer

I wonder if someone from Montana can comment on the difference between a place like Big Sky which is a developed resort town and West Yellowstone which is surprisingly smaller and Babb which I'm not even sure is technically a town... It has one motel which is in a great location for visiting the Mani Glacier area and is fully booked in season, even though they don't even have a website. Issues with taxes? Or maybe Babb is Blackfeet tribal territory, making this more complicated?

Anne M. · Answer

Thanks for the input. That's very interesting, especially the information about the cost of building in Alaska. Wow.

Coming from a very crowded country, I can see the appeal of wanting to keep these areas empty. That said, where there's a national park, like the Kenai Fjords NP or Yellowstone, it's bound to get crowded during the season, so investing in infrastructure and local businesses would be so much better for everyone.

Levi T. · Answer

Jay is spot on. While I don't know much of anything about that region, I've owned homes and operated properties near resorts for years. People like wide open spaces, and those who live out there will fight tooth and nail to keep it that way, even if your just trying to pave a road. While most people see utilities as a necessity of life, them folks see it as the Government and big Corporations trying to take something away from them.

In a mountainous or wilderness areas, 10 miles can be a 45 minute drive, or more. One of my homes where 6 miles from the center of the resort, it took 30 minutes just to get there. That in itself almost cuts the prices we could charge for rent in half. It's very seasonable. Normally some operation like larger hotels and resorts control most the market with the sub market feeding off of the overflow or people looking for larger homes or deals on pricing.

Intrawest Resorts Holdings, Inc is a public company, and it is a developer and operator of destination resorts and a luxury adventure travel company that operates all over the US. They manage to get by IMO. I've seen seasons where they and the towns around them just about go under due to poor weather or other events that reduce the tourist numbers. It's a hard game, and it's not overflowing with tourist as one might think.

In short, most people will stack up close to the destination, and will sub out to someone to handling bookings and repairs, that normally being the resort franchise itself that owns or licenses the land in the region.

Jay Hinrichs · Answer

you have small issues.. like Zoning.. Sewer capacity.. water capacity.. traffic impacts.. NIMBY by the locals..

some places are just more popular than others... many of the places you mention are unique and can't be duplicated.. forest in Tennesse kind of all look alike with little variations.

and as you mention the season in the Rockies is very short..

Why do some areas in the US seem so underdeveloped?

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