The Business of SKiing

When there’s snow, there’s a chance to ski and enjoy outdoor entertainment. Ski resorts have long been a destination for those seeking recreational activities during the winter, and the economics of the ski industry are varied depending on region and structure. Skiing as an industry is unique since the competitive environment is set: the cost of entry is so high that no new resorts enter the market. Of grave concern to the industry, however, is the impact of climate change on factors relating to the ski industry: precipitation, temperature, skier days and skier retention. In order for ski areas to continue to grow, they need to attract new skiers and convert them to a core customer. A decrease in these factors forces ski resorts to make adjustments to their product in the form of reduced hours of operation, staffing, increased snow making and variable ticket pricing. Each of those has an effect on the consumer’s decision to frequent their local area. Skiers who rate themselves as beginners are more likely to leave the sport altogether, thus losing the chance to increase this core customer group.

When looking at ski resort financials, you can see start to discover trends within the industry. While ticket sales make up the majority of revenue to a ski industry (about 50%) there is still plenty of opportunity for increased revenue from cross selling and upselling, including dining, rental, ski school programs and overnight stays if the resort owns the hotel. Resort and hotel ownership is also one of the ways for a ski area to increase its total value. Resorts that are struggling financially seem to be doing so by having a larger percentage of revenue going to operations and staff, as well as having a high debt load that increases the interest payments on loans or increased leasing costs. Financially strong resorts have been able to decrease their total debt load, while increasing revenue and controlling expenses.

As resorts work on their marketing plan, they should also break their consumers into segments. Different sub groups of skiers have different preferences; women and men view resorts and amenities differently, as do intermediate and advanced skiers. Resorts that have more difficult terrain tend to attract higher level skiers, who value the difficulty of the terrain and are less concerned with amenities, while easier resorts would be better suited by focusing on the customer experience and the inclusion of a nice dining area.

The current state of the industry shows positive economic impact of ski resorts, as well as providing insight for managers of resorts. To adequately see a return on investment, resorts should understand their current consumer and target skiers of similar demographics. Resorts should also focus on viewing skiing as a complete experience, including the snow, quality of runs, customer service provided members, onsite lodging and dining experiences. Viewing the experience as a whole allows resorts to increase their revenue from multiple streams, while supplying their customer with everything required to meet their needs.

Conclusions:

• Segment the customers to better create marketing plans for each segment based on their usage and preferences
• Try to hedge against poor snow by investing in snow making and focusing on the complete customer experience
• Keep an eye on finances, especially operating costs and debt load to remain solvent
• View skiing as a total resort experience and have cross selling and upselling opportunities available
• Convert beginner and new skiers to core consumers by creating an enjoyable skier experience

References:
Belin, D. (2016). Eye on the industry: 2014-15 economic analysis of US ski areas. National Ski Area Association Journal, Spring 2016. http://www.rrcassociates.com/wp-content/uploads/2016/08/Economic-Analysis-1415.pdf
Faullant, R., Matzler, K., & Fuller, J. (2008). The impact of satisfaction and image on loyalty: the case of alpine ski resorts. Managing Service Quality, 18(2), 163-178.
Fredman, P. (2008). Determinants of visitor expenditures in mountain tourism. Tourism Economics, 14(2). 297-311.
Matzler, K., et. al. (2008). Customer satisfaction with alpine ski areas: The moderating effects of personal, situational, and product factors. Journal of Travel Research, 46. 403-413.
Rutty, R., et. al. (2015). Behavioural adaptation of skiers to climate variability and change in Ontario, Canada. Journal of Outdoor Recreation and Tourism, 11. 13-21.
Thompson, D. (2012). No business like snow business: The economics of big resorts. The Atlantic; February 7, 2012.