Terrain, Lifts, and Gravity: Advantages in Summer Activities; Thoughts on survival and what used to be the off season for winter resorts.

Summer has been a hot topic in resort circles for years. I’ve run a couple of snowboard companies so understand what extreme, snow dependent, seasonality means. I’ve visited resorts, written about resorts, but never worked for one. SAM, I think, thought I was the right balance of insider and outsider for this assignment.

At the beginning, this was supposed to be a straight forward article on summer business. I started with the simple idea that summer provides welcome cash flow in the off season. I figured out pretty quickly that summer activities at winter resorts is no longer an isolated topic, but part of the broader (and changing) circumstances winter resorts are facing.

That is, summer operations should be considered as one of the factors that will affect resorts’ success in the future. For some, summer ops could provide a bit of off-season cash flow; for others, it could become a major revenue source. I think there’s a group that’s going to need it to survive.

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More on Winter Resorts Targeting Baby Boomers: I’m Not the Only One Who’s Worried

You may recall (or not) that about a month ago I wrote an article expressing some concern that winter resorts were targeting baby boomers. My point was that dependence on high income baby boomers couldn’t be an exclusive, long term strategy because, inconveniently, those people are going to get older sooner and stop snow sliding. When that happens, it would be nice if we had some other customers. 

Now, a gentlemen I’ve never met named Roger Marolt, a columnist at the Snowmass Sun in, unsurprisingly, Snowmass, Colorado has written a really good rant (I mean that in very positive way) on the same subject. He makes some points I didn’t make and it’s a pretty fun read.
So here it is. Go and read it.     



Winter Resorts Targeting Baby Boomers: I’m a Little Worried.

Well, you know me. I’m always a little worried about something. But hopefully, the fact that I have a tendency to bring up issues people wish would just go away is part of the reason you read me. 

We’ve all known that winter resorts tend to be dependent on the baby boomers for a big chunk of their business. You need a lot of disposable income and free time if you’re going to visit them regularly. I just took that as a fact and didn’t think much about it until I saw this article called “Best Ski Resorts for Senior Skiers.” It talks about programs that resorts have in place for senior skiers/boarders.
“Well, that sounds great,” I thought. But then I read, “All the marketing to boomers seems to be paying off as the National Ski Areas Association reports an 11 percent increase in skiing and snowboarding for people 45 and older. Strangely, on the flip side, there’s been a decrease in skiers 35 and younger.”
I kind of new that too. But seeing the two statistics in juxtaposition made my alarm bell go off. I wondered if by doing marketing, building facilities, and holding events that targeted the baby boomers, you weren’t guaranteed to be turning off younger (and more importantly potential) boarders/skiers. I wonder what the decrease in skiers 35 and younger is, what the size of that group is, and how it compares to the 11 percent increase in the over 45 crowd.
I’m sure you can see where I’m going with this. The over 45s are going to stop visiting winter resorts a lot sooner than the under 35s and I don’t think there’s any amount of marketing or new programs that can change that. Every resort is different, and it may be a great tactic to attract older people with lots of money. But strategically, if you look beyond some limited number of years, it’s kind of a recipe for self-destruction. I mean, I don’t ever want to get the point where there are emergency medical care facilities on the mountain instead of bars, most skis are sit down, and some visitors need minders on the mountain so they don’t get lost (Oh-shit-I’ve gotten lost a time or two).
Haven’t we been spending, as an industry, a whole bunch of money and effort to attract new participants? If we’ve had so little success, why is that? Or maybe we’ve been successful, and the decrease in the under 35 crowd would have been a whole lot worse without it. But even if that’s success, it’s not enough success.
The devil is in the details, and it’s certainly possible for a given resort to balance its programs and facilities to appeal to a wider demographic spread. And yet, I would not be the only person who believes that if you think everybody is your customer, then nobody is your customer.
Maybe the Mountain Rider Alliance has some good ideas about how to manage this. Look at the way they are defining their potential customers. Full disclosure; I’m on the Mountain Rider Alliance (unfortunately unpaid) Advisory Board.
Hell, maybe resort managers have decided they can milk the boomers until global warming turns some of them into summer resorts. I don’t really think that’s true, but some years ago I had occasion to attend and make a presentation to the scuba diving association. They had some issues remarkably similar to the winter sports business. I learned a lot, and got quite a good perspective. You know, it wouldn’t hurt for NSAA to start a conversation with the golf trade association if they haven’t already. Golf is another sport that takes a lot of time and money to participate in (In my case, without much in the way of results). I’m not suggesting this because I believe all winter resorts can or should build golf courses (though of course some have) but because I think the cross fertilization of ideas concerning attracting participants might be valuable.
What I guess I’m reminding you of is that dependence on baby boomers cannot be a long term strategy. And dependence may reduce your ability to transition away from them as demographics will eventually require (is requiring?). It is also possible (I think likely) that this country’s economic profile over the next couple of decades may require winter resorts to rethink their offerings and financial model.



Vail’s Annual Report; What’s the Future of Resort Real Estate?

This 10K was filed a couple of weeks ago for the year ended July 31. There are about 760 ski areas in North America. Vail owns five major ones that accounted for 7.7% of skier visits (about six million) during the last season. We don’t get many chances to see individual data from many of them, so taking a look at this is worthwhile. It’s particularly interesting, in our current economic circumstances, to see how the real estate component of Vail’s business is faring.

 Numbers by Segment

 Let’s start with a little table that shows Vail’s revenues over the last five years broken down by its three business segments; mountain, lodging and real estate. The numbers are rounded to the nearest millions of dollars and are for the years ending July 31.
                                                2010       2009       2008       2007       2006
Mountain                               638         615         686         665         620
Lodging                                169         176         170          162         156        
Real Estate                            61         186         297          113            63
Total Revenue                      869        977     1,152           941          839
Here the operating expenses for each segment:
                                                2010       2009       2008       2007       2006
Mountain                                456         451         470         463         443
Lodging                                  167         169         160         144         143        
Real Estate                              71         142         251         115           57          
Total Expense                       694         763         882         722         642
And here is the EBITDA (earnings before interest, taxes, depreciation and amortization) for each:
                                                2010       2009       2008       2007       2006
Mountain                               184         164         221         202         177        
Lodging                                   2              7            10           18           13
Real Estate                             (4)          44            46             (2)           6
Total EBITDA                        182         215         277         218         196
Some of the above numbers don’t add precisely because of rounding and some minor accounting stuff. I’ve ignored that to minimize the eyes glazing over factor.
The Mountain segment “…is comprised of the operations of five ski resort properties as well as ancillary services, primarily including ski school, dining and retail/rental operations.” Lift tickets are about 45% of revenues there. Of the three segments, it contributes by far the most revenue and EBITDA. You can see that segment revenue in 2010 is only about 3% ahead of where it was after peaking in 2008.
Lodging revenues come from owning and managing hotels near their resorts. It also includes revenue from golf and a transportation company they own. It follows a pattern similar to the Mountain segment, peaking then falling in the recession and ending up just 8% higher than it was at the end of fiscal 2006. I should note that the Lodging revenue numbers include $19 million and $18 million in 2010 and 2009 respectively for transportation. That’s from a company Vail bought and there were no transportation revenues in earlier years. One could argue that lodging revenues are really up only about 3.5% over five years, similar to the Mountain segment.
Real Estate
Real estate is the development and sale of homes and condos of various sizes. Look at the 2008 peak in real estate revenues in the chart above. 2010 real estate revenue, at $61 million, is only 3% below the 2006 amount of $63 million. But the 2008 real estate revenue peak of $297 million is almost 5 times the 2006 or 2010 levels. You don’t see that level of rise or fall in either the Mountain or the Lodging segments.
Though accounted for separately, the three segments are closely related as Vail discusses. Selling real estate and increasing the lodging options increases the bed base and options for customers. Putting in a new high speed lift or opening new restaurants or retail makes the resort more attractive and may increase the value and desirability of the real estate. At the risk of oversimplifying, mountain development makes the real estate more attractive and real estate development can make the mountain more attractive. The trick is to coordinate development so as to maximize the value of both. 
The real estate revenue stream is highly variable due to the nature of the business. Even when you get deposits and sign sales contracts for a property, you don’t recognize any revenue until the title to the property passes to the buyer. Your revenue depends on when you start the project, how big the project is, how well it sells, and any delays you incur in completing it. When you do close a sale and recognize the revenue, it’s in amounts of at least hundreds of thousands of dollars (the recently completed One Ski Hill Place project had an average selling price per unit of $1.4 million). You don’t have thousands of closings of similar, smaller amounts like you were selling lift tickets.
With that as background, what’s Vail’s take on real estate and real estate development? The first thing I’d note is that “Real estate held for sale and investment” was $422 million at July 31. That’s up 35.7% to $311 million from the same date last year. The amount the previous year was $249 million. Vail specifically states that “…we currently do not plan to undertake significant development activities on new projects until the current economic environment for real estate improves. We believe that due to our low carrying cost of real estate land investments combined with the absence of third party debt associated with our real estate investments, we are well situated to time the launch of future projects with a more favorable economic environment.”
Talking about their One Ski Hill Place project, they note that they “… closed on 36 units, or 61% of the 59 units that were under contract…while 23 units that were under contract defaulted. Additionally, we have another real estate project substantially completed (the Ritz-Carlton Residences, Vail) which units under contract will begin closing during the first quarter of Fiscal 2011. We have increased risk associated with selling and closing units in these projects as a result of the continued instability in the credit markets and a slowdown in the overall real estate market. Certain buyers have been or may be unable to close on their units due to a reduction in funds available to buyers and/or decreases in mortgage availability and certain buyers may successfully seek rescission of their contracts…We cannot predict the ultimate number of units that we will sell, the ultimate price we will receive, or when the units will sell. Additionally, if a prolonged weakness in the real estate market or general economic conditions were to occur we may have to adjust our selling prices in an effort to sell and close on units available for sale, although we currently have no plans to do so."
Back in April, when I wrote about Vail’s January 31 quarter, they had reported that 13 holders of contracts to purchase Ritz-Carlton Residences had sued to get out of the contracts and get their deposits back because of a disputed delivery date. I wrote,
“If you really wanted your new 2nd home, you probably don’t sue because it’s a little late being finished. Maybe you negotiate for some free upgrades (heated toilet seats?), but you don’t sue to get out of the deal. Unless, of course, you can no longer afford to buy the place and/or it’s now worth a lot less than you’ve agreed to pay for it.”
The problem appears to be worsening and I’m quite certain Vail isn’t the only resort that develops real estate that has these kinds of issues.
The Financial Statements
I hate resort balance sheets. When you see a current ratio that’s deteriorated from what, in traditional financial analysis, would be called a dangerous current ratio of 0.91 to an even worse 0.51 over the year you get worried. But then you remember (especially if your introduction to this industry was trying to run an equally seasonal snowboard company) that it’s all about cash flow, and you don’t borrow money and pay interest just to make your current ratio look better at the end of the year.
The total liabilities to equity ratio improved slightly from 1.44 to 1.40. Debt maturities are only $1.87 million in 2011, but increase to $35 million in 2012.
The decline in current assets is almost completely the result of a fall in cash and cash equivalents from $69 million to $15 million. Total liabilities have hardly changed at all.    I would note that cash flow from operations has fallen from $217 million in fiscal 2008, to $134 million in 2009 to $36 million in 2010.
You’ve seen the revenue and expense numbers by segment in the table above. Vail worked hard to reduce and manage its expenses, but income was down.   Operating income was $69 million, down from $106 million the previous year and $176 million the year before that. Net income was $30 million, down from $49 million in 2009 and $103 million in 2008. Net income as a percentage of revenue fell from 8.9% in fiscal 2008 to 5.0% in 2009 and 3.5% in 2010. 
As explained above, Vail’s three business segments each support the other. The Mountain and Lodging segments took a hit in the recession and are still impacted, but are starting to recover. The real estate is not and I don’t see that happening in the immediate future. As Vail management notes in the lengthy quote above, real estate development is off the table until the economic improves. They are uncertain about their ability to sell or close on sold properties and are concerned that prices might have to be reduced. They’ve got a lot of cost in completed units and undeveloped property and at some point could have to recognize some reductions in carrying value.
As I said when I started, we don’t get to see the numbers for most of the large resorts. The value in looking at Vail is not just in knowing how Vail is doing, but in understanding some of the pressures that any resort with real estate is likely to be under.         



I Think I See a Plan. News From the Ski Industry Summit

Okay, what was I doing at the Ski Industry Summit (formerly known as Ski Week) and why am I writing about it for Snow Biz?

Anybody got a problem with some early season turns in Vail when there’s hardly anybody here? Didn’t think so. Also, there was an open bar each night.
But aside from the obvious hedonistic reasons to show, the winter resort business has to do some things differently. Baby boomers are showing up less as they get older, and kids and younger people, overall, are either doing something besides coming to winter resorts or trying it, not liking it, and not coming back. The retention rates for beginners basically suck. If as an industry (and I mean the winter sports industry, not just the winter resort industry) nothing happens and demographic trends and retention/conversion rates continue on their present source, the National Ski Areas Association (NSAA) projects that total visits to resorts will drop 27.2% from 52.2 million to 38 million in 15 years. 
Forget the ski versus snowboarding, them versus us, “they don’t get it” stuff. If present trends continue, there will be fewer resorts around, less money to spend on half pipes, terrain parks, new lifts, and developing new runs. Snowboard hard goods and apparel sales will drop. So it’s not just their problem. We are part of the winter sports business and snowboarding’s success is related to the resorts’ success. As far as I know, nobody has figured out a way to snowboard without a mountain.
The Ski Industry Summit got three hundred people together to talk about this issue from December 3rd through 6th. This is hardly a new issue, but there was a sense of urgency and an attempt to focus on specifics that was positive, refreshing and to some extent overdue. People were interested in specifics.
In the same study that suggested what might happen if we do nothing, NSAA showed that if the industry can increase the number of beginners by 6% each year (subject to some statistical limits that keep growth rates from getting ridiculous) and boost the conversion rate of those beginners by 1% a year, we can have 69 million visitor days annually by 2015.
There was general agreement on the need for action, at least among the attendees. Obviously, this kind of conference is self-selecting for people who already recognize that need. And there also seemed to be a consensus that concentrating on getting more people on the slopes and working to make them stay was an appropriate focus.
Formally and informally, people had different ideas about exactly what should be done by whom and what the opportunities and obstacles to success might be. There wasn’t an overall program presented. Still, from the studies I’ve seen from SIA and NSAA, the comments made at the conference, and my own experience working with companies that had to change, there was an implicit program that came out of the discussion. Recognizing that I don’t know much about running a mountain resort, here’s what I think I heard the elements of such a program might be.
Every Mountain is Different
There are 300 or so people out there who use to own snowboard brands who would have killed for the competitive differences that exist among winter resorts. Each is unique, and can utilize its uniqueness in attracting and retaining customers. But how is it unique? Step one is to find out. I don’t mean from anecdotal evidence, informal surveys, or perceptions from 15 years ago. An ongoing program of carefully structured, unbiased, thoughtful market research is required.   I know it costs money, is a pain in the ass, and leaves you with more questions than you had when you started. But you still have to have that the information.
Marketing Schizophrenia
Male or female? Skier or snowboarder or neither? Day tripper or destination visitor? Young or older? Rich, or not so rich? Real estate buyer? As an industry, it seems hard for the resorts to know where to focus its marketing efforts, although, of course, individual resorts may and often do have a clearer focus. But it’s never as easy in the skateboard business, where north of 90% of the customers are male and between the ages of eight and seventeen. What can resorts do to get that kind of focus?
Teaching and Retention: The Customer Experience
My perception, reinforced at the summit, is that the winter resort industry generally agrees that the battle has to be won by getting beginners to the slopes and motivating them to come back and by attracting back lapsed participants. There’s no need to market to core participants. They show up no matter what.   What has to happen so that the others show up?
They have to have a good experience. Short lines. Rental boots that fit. No confusion about where to go. Warm and dry. Access to bathrooms. Minimal caught edges during lessons. There are, no doubt, 100 others I haven’t mentioned or don’t know about. What’s the magic of this? Rich or not so rich, male or female, skier or snowboarder, young or old, the visitor to a winter resort wants this kind of good experience. They want to have fun. There shouldn’t be a penalty that can border on a fraternity hazing to become or remain a snow slider.
Magically, this is a big step in managing the winter resort’s Marketing Schizophrenia. The confusion caused by the apparently irresolvable market segmentation problems and the conflicting demands of each segment is suddenly dramatically diminished. It may not be as conceptually simple as being in the skateboard business, but suddenly a resort can say, “All our customers want this!”
Ultimately, customers always get what they want- from somebody. How shall we give it to them?
Management Commitment
It starts at the top, and there’s never been a truer cliché. Well, maybe one. I’ll get to it in a minute. If you run or own a winter resort (or any other business for that matter) and you think that your future success, and maybe your survival, depends on doing some things differently, you better be leading the charge. If you don’t- if you aren’t involved and seen to be committed every day- the organization won’t change. The customers will get what they want somewhere else.
Andy Clurman, President of The Skiing Company, suggested that each resort should appoint a Director of Learning and Retention, or some such title. Great idea. I’d add that the new Director should report directly to the General Manager or President of the resort and have instant access to them.
Nuts and Bolts
ASC reported at the Summit that the conversion rate for beginners who participated in their new Learn To Ski program was 30%. That program emerged from a complete reevaluation and restructuring of every detail of their teaching program and from measuring the results. It had nothing to do with running ads or showing people jumping off cliffs or selling the latest and coolest technology. It required changing the compensation structure. It meant a two-day seminar where instructors were turned, initially kicking and screaming it sounds like, into sales people. It meant new facilities and processes. No detail of the teaching and conversion process was left unexamined.
Opportunities- Not Problems
ASC Chairman Les Otten, addressing the Summit, said, “We don’t have a problem- we have an opportunity.” That’s the even truer cliché I mentioned earlier.
I think perhaps part of the audience did take it as a bit of a cliché. I didn’t get a chance to ask Mr. Otten, but here’s what I think he meant.
When a company needs to change, it resists. Of all the company’s I’ve worked with, I can’t think of one where that wasn’t the case. Inevitably, in addressing the issue, they try to do what’s worked in the past to fix the problem. “More of the same,” no matter how rigorously applied, doesn’t usually work. It also grinds you down. Pretty soon, if all you do is deal with problems you can’t solve, life sucks. It’s depressing, demoralizing, and no fun. There’s no way to succeed. And the worse it gets, the harder it gets to change. You trap yourself in an endless downward spiral.
Unless you’ve got an opportunity. In which case, you can create a positive environment, move forward, have fun, give credit, do good things and celebrate a little bit. And by the way you may have accidentally taken a step towards solving that problem that just wouldn’t go away. Pretty soon, you don’t have to “step outside of your box” to use another cliché. You’ve created a new, bigger and more comfortable box to be in.
Mr. Otten and the ASC management team saw an opportunity. It just so happens that it helps solve a problem.
Finance and Factories
General Motors hates it when the production line slows down or stops. They don’t want to repaint fenders. They can’t stand sending back parts. It drives them nuts when a poorly trained employee connects a wire wrong. They moan with every warranty claim.
Because every one of these things costs them money.
People aren’t cars. Still, the process by which a resort moves a beginner, or any customer for that matter, through the process of getting to the resort, getting equipment, learning, getting on the hill, and committing to come back is a bit of a production line. And people yell louder then cars on an assembly line when you connect their wires wrong. Every customer who’s boots don’t fit, who can’t find where the lesson starts on time, who gets wet and cold in the middle of the lesson, costs you money due to the disruption of the process. Not to mention potentially a future customer.
I love it when the marketing and the financial strategy seem to dovetail. I’ve discovered that usually an indication that a strategy makes sense. The operationally oriented approach that the Summit suggested is required to attract and retain snow sliders seems to make financial sense. Not only because of the medium and longer-term impact on visitor days, but because it requires an efficient (i.e., customer friendly) operation that saves you money right now. I also wonder how it might impact your spending on advertising and promotion over the longer run. I note from SIA data that 87% of visitors to winter resorts have internet access. If you’ve better identified your customer, have made it easier for them to come and have fun and have their email address, perhaps some of your other marketing expenses can be reassessed.
I don’t want to underestimate the financial implications of some of the ideas presented at the Summit. It costs money to undertake some of these initiatives and cash flow is a hard thing in all parts of the winter sports industry. Still, I can probably guarantee that resorts that don’t start now will have a harder time starting later.
What can retailers and suppliers do? You share some responsibility for making sure people know how much fun we have on the mountain. If you can equip them right, and the resorts can make sure they have a positive experience, maybe we will be looking at 69 million visitors in 15 years.



Winter Resorts and Snowboarding; Why Does It Seem Like an Arranged Marriage?

The Medici family of Italy rose to commercial prominence during the renaissance at least partly because of their ability to make or receive payments in widely dispersed geographic locations. Lacking a wire transfer system, they arranged marriages between family members and other prominent merchants in commercial centers that gave them the ability to move money or goods through somebody they could trust. There was no love lost, but the commercial opportunities were too good to pass up.

 Sound a little like winter resorts and snowboarding?   The antagonism of past years has largely evaporated. We don’t have complete enthusiasm, but it seems like we’ve at least worked our way past grudging acceptance. We’re certainly a long way from understanding. If we weren’t, we wouldn’t have had Animal foisted on us as a mascot.
At the National Ski Areas Association (NSAA) last May, the moderator asked the panel of four CEOs of major resorts, “What about snowboarding?” There was a pause before Adam Aron, CEO of Vail and, interestingly enough, a newcomer to the winter sports business said something like, “It’s here, it’s not going away, that’s it.”   There was another pause before the conversations moved on, with what I thought was palpable relief, to another subject. 
Is this any way to treat the sport that represents 17% of lift tickets, is growing rapidly, and, frankly, has saved your posterior quarter while skiing has stagnated?
Maybe. There’s a couple of things that may explain this can’t live with us, can’t live without us attitude and behavior.
Legitimate Lifestyle Differences
The NSAA meeting was my first exposure to a ski industry gathering. Those of you in snowboarding who have never been to one should try it. It really brings home the differences between the two sports. It was more subdued than a snowboard gathering, dress was more conservative (tuckers in button down shirts) and the average age, higher. The number of relationships that went back thirty plus years seemed astounding. The meeting was about business and, for better or worse, the passion and concern for the sport that has been so common in snowboarding was less obvious. A number of ski industry veterans commented on that fact with concern.
I had a good time and don’t make the above comments as a criticism, but as a statement of obvious differences. Skiing use to be a lifestyle but now it’s a sport. Snowboarding is still closely associated with participant lifestyle choices in music, clothing, culture, and other sports.  Skiing and snowboarding are of different generations, with different participant concerns and focuses at their different stages of life. It’s not good or bad. It just is.
These generational differences go a long way towards explaining why the resorts want the snowboarders’ money, but would just as soon we all took up skiing. We share sliding down a hill, and not much else. Really catering to snowboarding requires that the skiing establishment develop a commitment to lifestyle activities they aren’t attracted to and don’t understand.
Remember, this isn’t about finger pointing or right/wrong. We’ve just got groups of people with different life experiences who are at different stages of their life.
Financial Realities
If you take the time to read through the stock offering prospectuses of Vail Resorts and Intrawest Corporation from earlier this year, you’ll quickly realize that there’s a lot more to their business visions than selling lift tickets. It’s not enough, and it’s not accurate, to say simply that they are in the skiing business, or even the resort management business. It’s closer to the mark to say they are in the business of maximizing asset utilization, but I think a better way to put it is that they are in the theme park business.
Yup- just like Disneyland.
Walt Disney and successors have spent and are spending hundreds of millions of dollars on castles, monorails, fancy roller coasters, hotels and retail space. Their ongoing maintenance and operating expenses are big numbers. Even if they shut the parks down, interest expense and depreciation by itself would be a huge financial burden.
Disney’s revenue in the year ended September 30, 1996 was 18.7 billion dollars. Depreciation expense by itself was 3.94 billion. They had long term debt of over $12 billion on which they have to pay interest. Not all of that is associated with the theme parks, but you get the picture.
So how are they going to cover all those expenses and make a buck? By keeping those assets busy. They don’t want you to come for a day and go on a few rides. They want you to come for a least a week, stay in their hotels, eat their food, shop in their stores, play a round on their golf course and ride all the park attractions. And it would be nice if you got there via an airline they have a deal with. Keep those assets busy and hear the cash register go ca-ching!
Now, check out this nice juicy quote from Vail’s prospectus.
While lift ticket sales….have grown each year over the past ten years, revenues from other sources have grown at a much faster rate and, as a result, have increased as a percentage of Resort Revenue from 36% in fiscal 1985 to 51% in fiscal 1996.
The Company’s focus on developing a comprehensive destination resort experience has also allowed it to attract a diverse quest population with an attractive demographic and economic profile, including a significant number of affluent and family-oriented destination guests, who tend to generate higher and more diversified revenues per guest than day skiers from local population centers. While the Company’s Resort Revenue per skier day is currently among the highest in the industry, management believes that the Company currently captures less than 20% of the total vacation expenditures of an average destination guest at its resorts. Vail Resorts’ business strategy is not only to increase skier days and guest visits but also to increase Resort Revenue per skier day by capturing a higher percentage of the total spending by its year round destination and day guests, by continuing to expand the range and enhance the quality of activities and services offered by the Company.
Intrawest says much the same thing.
Intrawest’s operating strategy is to link the staged modernization and expansion of mountain facilities at its resorts with the controlled development of four-season resort villages focused on high occupancy accommodations.
I think it’s a hell of a good strategy, and if I were CEO of a large mountain (not winter!) resort, I’d do the same thing.
I wouldn’t do it because I didn’t like snowboarders. I wouldn’t do it because I didn’t want them on my mountain. I wouldn’t do it because I didn’t like/understand/participate in their activities and life style. I’d do it because it made business sense and my first responsibility was to my shareholders or myself as the owner. I’d believe that right now I can attract more destination guests and make more money on a golf course than a skate board park, because the people who golf have more money than the people who skate. That’s just the way it is.
But it won’t always be. And so the mountain resort community has to deal with a bit of a conundrum that I think explains their sometimes schizophrenic approach to snowboarding. The larger resort’s strategies seem to require them to focus on the current generation of skiers. Given that this group is constant to shrinking in numbers, skier days can only be increased by taking market share from other mountains. This explains some of the consolidation pressure in winter resorts, but it also represents a marketing opportunity for some smaller mountains (Hey-I think I feel another article coming on!).
But those skiers are going to get old and, someday, stop skiing. So are current snowboarders, but not so soon. How do resorts that have to rely on the current skiing generation to achieve their strategic and financial goals keep a growing and important minority of their customers happy?
Do they need to do very much at all? Will snowboarders turn into their parents, have similar disposable incomes, and want the same facilities and amenities their parents wanted by the time they are the destination decision makers? Don’t laugh; it’s been known to happen. I wonder if Nike will come out with an adult diaper someday (Just do it?).
Maybe snowboarding and snowsboarders need to take the time to understand the ski industry that we wish they would take to understand us. Betcha there’s some business opportunities there somewhere.