Study:Summer festivals hurt galleries

A study on the Laguna Beach art market conducted by a Corona del Mar strategic analyst and venture capitalist has many gallery owners stewing.

The study’s most contentious finding was that art sales during the summer months were flat; it also found that contemporary art is much more lucrative than Laguna’s storied plein-air art.

Gallery representatives — none of whom wished to be identified for this story — also claim that the study’s methodology was skewed.

Study creator Lou Volpano, founder of consulting company ascertain-ment, has a background in corporate turnaround and strategy, in particular in the entertainment industry.

Volpano held an introductory meeting with artist Wyland’s management, where he said he discovered a potential “niche” industry and began seeking investors and entrepreneurs. He then decided to conduct his own research to further his endeavors.

His company conducted an on-site study of the Laguna retail art market during December 2006 and January 2007 that Volpano describes as “the most in-depth economic analysis and the most comprehensive survey of art in Laguna Beach ever taken.”

“I chose to do the study because I’ve heard from so many people about how large the art market was. I really wanted to know firsthand what it was comprised of,” Volpano said.

Called “The State of the Art in Laguna Beach 2007,” the study has galled some gallery owners who refuse to take the study seriously.

Volpano defends his methods.

“We had people going into every gallery for on-site research,” Volpano said. “We had a small crew of grad student interns walk into each gallery and scout. They looked at the prices and what types of art are hanging. We believe we have a very low margin of error.”

Volpano conducted the study with UC Irvine economist Volodomyr Bilotkach, who was out of the country at press time and unavailable for comment. He specializes in airline economics, according to his website.

Taxing sales tax figures

Volpano’s team also examined Laguna Beach taxable transaction records from the State Board of Equalization for 2003 through 2005. They determined that 58 galleries amount to approximately 11.5% of the total business permits for the “other retail stores” category.

Critics of the study point out that overall sales transactions are not broken down into specific businesses, including art.

“There’s no way to tell specifically what the gallery sales figures are,” City Treasurer Laura Parisi said. “Art is lumped in with clothes, seashells and other retail items.”

Volpano conceded. “These are very rough numbers, and the only ones available,” he said.

The study also used state and city sales tax figures to estimate that $20.4 million in art sales was made in Laguna in 2005, and averaged that amount to $357,000 per gallery.

“Certainly the revenues that these galleries are generating is nothing to sneeze at,” said Steve Creech of the Wyland Foundation, who supports the study’s findings.

The on-site surveyors found that the estimated retail total of the works on display in the 58 galleries was around $25 million during the study period. They also estimated that there were more than 11,000 works in gallery inventories.

‘The numbers don’t lie’

“You can take to the bank that what’s hanging on the walls in Laguna Beach stores is what’s selling,” Volpano said. “There’s so little room for error.”

The study found that Laguna’s contemporary art market is far larger than that for plein air art, but that the majority of Laguna artists create plein air works.

“Two to one, contemporary art is what’s selling,” Volpano said. The estimated dollar value for contemporary art also was nearly twice that of the plein air pieces, they found.

“I’m a big believer in ‘perception is reality,’” Volpano said. “What’s on the wall is on the wall, and it’s up there is for a reason.”

While some gallery owners complained that the inventory totals and categories listed for their galleries were incorrect, others found them accurate.

“We weren’t surprised by the numbers, and we’ve been seeing steady growth in our galleries as the Wyland name has grown nationally and internationally,” Creech said.

“These are direct observations from a sample of the population that far exceeds that of a ‘normal’ survey,” Volpano said.

Summer art sales flat

When examining sales by quarter, Volpano found no increase in general retail taxes during the peak summer months, suggesting that tourists who visit Laguna in the summer do not purchase art.

“Somebody’s got to look into that,” Volpano said. “If that’s really true, and there’s no increase in sales in the summer months, there’s an anomaly worth pursuing. I thought that there would be at least a five to 10% increase to reflect the tourists.”

“There’s only 2,000 [hotel] rooms [available] each night, so I have to believe they run at 90% capacity; that’s 14,000 rooms of people a week. With those numbers, you’ve got to be able to sell a couple of paintings a week,” he said.

He hypothesized that that the festivals attract business away from the galleries during the summer, so the same amount of disposable income was simply spent elsewhere.

“There is another market outside of what Laguna Beach calls their fine art market,” Volpano said. “Let’s say that half of the annual tourists come in the summertime, and that 75% are day trippers. If each only spends $10, that’s still big money, and it’s just not showing up in the sales tax records. If that market is really being untapped, as I suspect it is, that’s really worth addressing.”

“What I was surprised at is that you don’t see a bump in peak tourist times — maybe we should reevaluate the opportunities there,” Creech said.

“We do reach a lot of tourists, so I’m not really sure what we would do at this point, but I think we’re going to evaluate that fact.”

Volpano cited recent multi-million-dollar sales by Rohrer Fine Art as examples of another niche that was unfilled until recently.

“It’s really a great example to show people that the market’s really there,” Volpano said. “Those customers are out there. It really raises the bar.”

A whale of a business

Volpano cites the success of sealife artist Wyland as being indicative of the potential for Laguna artists, as he has all price points covered — from $10 to $10,000 — in his galleries.

“Wyland is Laguna Beach, as much as plein air is,” Volpano said. “I think that being a plein air artist is really a noble, noble profession, but how can you differentiate yourself when there are 600 or 700 other people in the same business?”

Volpano said that this is why he introduced Wyland’s management to Dennis Power, the president of Laguna College of Art & Design.

He said he also arranged for the artist to make the keynote speech at this year’s commencement, where the college will award Wyland an honorary Ph.D.

“I stand shoulder to shoulder with Wyland,” Volpano said. “He’s got three galleries open, where most artists are struggling to maintain break-even. He’s got purpose. He’s directly linked to the sea life, to the ocean, to the ecology, to the art, to the broad market in terms of licensing — he’s the only one that’s done that. He’s got a Disney deal!”

Volpano said he also has been asked by LCAD to arrange an introduction with MTV, which has developed a successful “Virtual Laguna Beach” online world, to start a new computer and video game division for the school — thus capturing another lucrative market.

“I’m sure Wyland takes a lot of heat for his commerciality, but he’s got differentiation,” Volpano said. “You can’t be a great artist unless you can pay your rent, pay your doctors, sustain yourself. You can train a lot of really good artists, but if they can’t earn a living, what good is it? Artists have to learn that numbers are something they should concern themselves with. They can’t just be dismissive of them.”

Market issues

“Markets change, and we need to look at the demand side of art more seriously. There’s a big difference between your vision and your hallucination,” Volpano said.

However, Volpano was quick to emphasize that there’s more to his study than doom and gloom.

“Laguna’s got a great future ahead of it,” Volpano said. “People recognize that this is a very, very quickly growing market, and there’s a hell of an opportunity for the art community here to get its piece of the pie. But it’s obvious they’re missing out on a part of it.”