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End of a boom: Sales drop at Palm Springs shops for first time in years

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4 months ago

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End of a boom: Sales drop at Palm Springs shops for first time in years

Tax figures reflect slowdown after 5 years of increases

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For around 30 years, customers of Crystal Fantasy in downtown Palm Springs could expect the same thing. The gift shop offers a variety of new age items like gemstones, incense and sage. The store has developed a loyal following over the years, but regulars may be in for a surprise the next time they visit. For the first time in decades, Crystal Fantasy has raised prices.

“I didn’t like doing it,” said owner Joy Meredith, who is also the president of the Main Street Palm Springs business association. “It made me feel weird, like reality setting in again.”

The increase in prices can be seen as the symptom of twin headwinds facing local businesses over the summer. Sales are slumping for the first time in years, and costs have shot up.

The city of Palm Springs projects a roughly 5% decline in sales tax revenue for Fiscal Year 2024, which ended in June. That indicates an overall decrease in shopping throughout the city, likely bringing to a close what had been a lucrative period for local businesses.

The city forecasts earning around $31.4 million in sales tax revenue for FY 24, according a recent staff report to the city council. The roughly $1.7 million drop from the prior year has forced the city to adjust its financial expectations to contend with reality.

“We are now seeing things level off after COVID,” said Palm Springs Mayor Jeffrey Bernstein, who also owns the downtown retail outlet Destination PSP. “This is when you become more creative on how you run a business and from the city point of view.”

Since the start of the coronavirus pandemic in 2020, the city has experienced a boom in sales, as tourists flocked to Palm Springs to get away from bustling urban areas like Los Angeles. The city received around $23.4 million in sales tax revenue in FY 2018, and has watched as subsequent years saw revenues increase by around $10 million.

As the impacts of the pandemic have receded, so to has the swell of visitors to Palm Springs. Local businesses reported seeing less foot traffic, especially as the heat has increased. The downturn has come at an unfortunate time as the costs of goods as well as payroll have gone up with inflation.

“It’s just that double whammy coming from both sides,” Meredith said.

With slower sales and higher costs, some business owners are fearful Palm Springs may return to summers of an empty downtown.

“This is the first slow summer,” said Niels Kosman, an owner of midcentury modern furniture store Palm Springs Homeboys. “If this trend continues, then for sure we will be moving back to pre-COVID times when the city shuts down in the summer, where even we may consider closing the showroom for a couple of weeks.”

He added that the closing of even a few businesses could create a domino effect that results in others closing due to a decline in foot traffic.

“Before you know it, you only have an active town from Thursday night to Sunday,” he said.

Some consensus has emerged, however, that the slower-than-usual sales are an aberration that will be corrected in coming years. Election anxiety, business owners say, may be keeping some potential customers home as they worry about the future. Costs too, will likely not rise indefinitely.

“I don’t think there are any big alarm bells right now,” Bernstein said. “From a city point of view, things are going well. There’s some drop, but there’s not a huge drop. I think we are still pretty fiscally secure in our city. There’s a lot of new businesses opening, too, which will happen next fiscal year.”

For the time being, businesses appear to be holding fast as they wait for the customers to return. The city expects sales tax revenues to grow by 2% in the fiscal year that just began, accounting for roughly 18% of the city’s general fund.

But until the tourists come back, businesses must focus on the residents who stay in the Coachella Valley. Enticing them to downtown stores may be the key to surviving the summer.

“I’ve always liked to say that the locals are my bread and butter and the tourists are the icing on the cake,” Meredith said. “You have to build a relationship with the locals that are here year around.”

Sam Morgen covers the city of Palm Springs for The Desert Sun. Reach him at smorgen@gannett.com.

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