Outer Banks Tourism Threatened as Earl Aims for North Carolina

Hurricane Earl threatens to derail the Outer Banks’ most successful tourist season in seven years and weaken already depressed property values on the barrier islands off the coast of North Carolina.

A mandatory evacuation order was issued for Hatteras Island visitors today at 8:09 a.m., requiring up to 30,000 of about 130,000 people on the islands to leave immediately, said Dorothy Toolan, spokeswoman for Dare County Emergency Management. The storm is expected to pass about 80 miles (129 kilometers) off the Outer Banks early Friday morning, the order said.

“Real estate here is in the dumps, no question,” said John Bone, president of the Outer Banks Chamber of Commerce in Kill Devil Hills, North Carolina. “People don’t feel comfortable putting money in a house now. They don’t feel we’ve reached the bottom.”

Median home prices fell to $301,000 in July from a peak of $529,000 in June 2006, according to Outer Banks Association of Realtors Inc. data released on Aug. 10. Tourism has rebounded from 2009’s low for its best year since 2003, when the Outer Banks drew aviation fans marking the 100th anniversary of the Wright Brothers’ first flight at Kitty Hawk, Bone said.

Earl, a Category 3 hurricane with maximum winds of 125 miles (205 kilometers) per hour is bearing down on the Carolinas just ahead of Labor Day weekend. That’s one of the year’s busiest holidays, Bone said.

“Our economy is driven by tourism,” he said. “This year, people were feeling good when they were making reservations.”

The storm was located about 780 miles (1,255 kilometers) south southeast of Cape Hatteras as of 8.a.m. Miami time, the National Hurricane Center said.

The National Hurricane Center issued a hurricane watch for the area from Surf City, North Carolina, to Parramore Island, Virgina, and a tropical storm warning is in effect for San Salvador Island in the Central Bahamas. A warning means storm conditions are expected within 36 hours. A watch is typically issued 48 hours before anticipated arrival of a storm.

Hurricane Isabel

The last big storm to hit North Carolina, Hurricane Isabel in 2003, killed at least 16 and caused $3.4 billion in damage on its path up the eastern U.S., according to the National Hurricane Center. The federal government spent or committed almost $114 billion in recovery and relief efforts since Hurricane Katrina and two following hurricanes hit the Gulf Coast in 2005, said Meg Reilly, a spokeswoman for the Office of Management and Budget. That includes housing loans, grants and the cost of reconstructing levees for 100-year flood protection.

Residents of Dare County in the Outer Banks, where Cape Hatteras bore the brunt of Isabel, received about $400 million in insurance settlements after the storm, Warren Judge, chairman of the Board of Commissioners in Dare County, said in a telephone interview from Manteo, North Carolina.

‘Stimulus’ to Economy

“Certainly any time hundreds of millions of dollars are pumped into the economy, there’s a stimulus,” Judge said. “But insurance settlements don’t always make the homeowner whole and they don’t always rebuild.”

North Carolina had about $133 billion of coastal property covered by insurers, according to 2007 data from AIR Worldwide, distributed by the Insurance Information Institute. Nationwide Mutual Insurance Co., State Farm Mutual Automobile Insurance Co. and North Carolina Farm Bureau Insurance Group are the biggest property-casualty carriers in the state by premium revenue, according to North Carolina Department of Insurance data.

“The storm’s a double-edged sword,” Judge said. “It pinpoints the threat of buying on the coast. It also brings a lot of attention to the area and that tends to bring business.”

Homes damaged by a storm may not be eligible for replacement, because North Carolina’s Coastal Area Management Act prohibits construction and insurance of homes on property beyond the permanent vegetation line, Judge said. Wooden skeletons are all that remain of many homes damaged by Isabel.

Water’s Edge

North Carolina requires new beachfront homes to be at least 60 feet (18 meters) from the water’s edge, and an undisclosed number of existing homes don’t meet that criteria, said Michele Walker, spokeswoman for the North Carolina Division of Coastal Management. If a home is damaged by a storm and repair costs exceed 50 percent of the property value, home owners need to receive a Coastal Area Management Act permit before rebuilding, she said.

North Carolina has about 8,000 structures that are considered ocean-front on 115 miles of developed land. The state hasn’t estimated how many homes are out of compliance or kept track of how many property owners have been blocked from rebuilding because of state laws, she said.

The Outer Banks’ occupancy tax revenue increased more than 10 percent in July from the previous year and August is likely to also be much stronger, said Lee Nettles, managing director at the Outer Banks Visitors Bureau.

Tourists Cancel

“From all reports, August has been gangbusters,” Nettles said. Storms often cause short-term occupancy increases due to reporters and emergency workers coming into the market, he said.

Cancelation requests have poured in as news reports about the hurricane increased, said Judge, who owns three motels with 138 rooms and 24 rental cottages along the ocean and inland waterfront.

‘If you lose one to three days of 100 percent occupancy, you’re taking a significant blow,” Judge said.

Rather than withhold guests’ deposits or force them to pay the full cost of the rooms, Judge said he encourages them to book another date.

Business picked up at Ace Hardware in Kitty Hawk, where customers prepared for the worst, buying tarps, lamp oil and drinking water, said manager Mary Harrison. The store ran out of sandbags yesterday. More are on order.

Harrison, who rode out Isabel at Kitty Hawk, said business improved after the 2003 storm, when customers returned to buy chainsaws, blowers and bleach and clean up the mess.

“You never want to see something like that happen,” she said. “But you’re happy to be here when it does, because you can help people.”

To contact the reporter on this story: John Gittelsohn in New York at johngitt@bloomberg.net; David Mildenberg in Charlotte at dmildenberg@bloomberg.net.

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