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May 4, 2012
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Officials: Fresh business model helps destination resorts weather lackluster winters

With the Tahoe/Truckee ski season finishing up its last run for the winter season, regional resort managers and executives are taking a retrospective look at the season's economics.

On Wednesday, Vail Resorts CEO Rob Katz appeared on CNBC Squawk Box, and reported a 12.6 percent decrease in skier visits across all Vail Resorts. Skier visits at Tahoe's Vail-owned Heavenly and Northstar California fell further, down 24.2 percent from last winter. The numbers include business from the start of the ski season through April 22, and do not include recently acquired Kirkwood Mountain Resort.

Despite the drop during what Katz called the worst winter in 100 years for ski resorts, he also said lift-ticket revenue was flat, spending-per-skier was up 14 percent and cash flow for the year was down only by a mid-single-digit percentage.

Katz attributed his company's effective stability through the parched winter, in part, to the sale of season passes, which he said pack the double whammy of creating guest loyalty while providing tremendous economic stability going into any one particular season.

This evolving ski industry business tactic is a shrewd one, said Tim Cohee, director of the Ski Business and Resort Management degree program at Sierra Nevada College.

“In the early days of the season pass, the ski area went to the customers, said, ‘Why don't you pay us up front for the average number of days you will ski — based on our research — and you can ski the rest of the season for free?'” said Cohee, a former senior executive at Kirkwood who now owns China Peak Mountain Resort in the central Sierra. “It's a tremendous win-win for the resorts in terms of locking in customers.”

In a February interview with The Atlantic magazine, Katz described Vail's vertically integrated business model, which derives only 46 percent of revenue from ticket sales; the remaining 54 percent comes from other sources such as ski school, dining, retail and rentals.

Under this business model, the ability of a destination resort to create and sustain a loyal, repeat customer — exactly what a season pass holder becomes — is key to the resort's survival. The season pass, Katz said Wednesday, accounts for 40 percent of total lift ticket sales at Vail's resorts.

“Today's season pass buyer has become so incredibly coveted that the market has now become outrageously competitive,” said Cohee. “In the case of Vail, it's a classic market share grab.”

Vail's Epic Pass, offering unrestricted access to six resorts in Colorado and California for $579, was launched in the spring of 2009.

Skiers, since, have seen the price of season passes at certain resorts drop — at some destinations substantially — as areas compete for pass holders. Perhaps the most telling example is at Squaw Valley.

A skier at Squaw would have paid $1,339 for an early bird, unrestricted adult 2006-07 season pass, where as the 2011-12 Gold passes were sold for $699 at first offering.

In Canada, Whistler/Blackcomb, though the decrease is not as large, also dropped its season pass prices from $1,369 CAD to $1,199 CAD in the same time period.

“The resorts try to sell as many passes as they can, but the number of people who want to buy a season pass is ‘X',” said Cohee. “What is left is the battle for the ticket buyer.”

With day ski lift day tickets sold at the window of some resorts for nearly $100, skiers will no doubt be looking for cheaper options. And most will find what they seek, Cohee said.

“Whether you buy online, at Costco or at REI, every ski area has a dozen or so more ways to get a deal,” he said.

A listing of 2011-12 adult lift ticket prices on www.slidingonthecheap.com showed Boreal sold day tickets for $40 at REI, Kirkwood offered $64 tickets for purchase at the Sports Basement and Squaw was offering a buddy pass with the purchase of $10 of gas at participating Shell Stations.

Some ski ticket sellers, such as Mt. Bachelor Ski Resort in Oregon, are experimenting with on-demand pricing, which sets the cost for tickets in real-time according to weather forecasts, snow conditions, lift operations, crowding expectations and other demands defined by the consumer.

And ski-area marketers are continuing to parse the ski experience and price out niche desires of individual skiers. Some of the larger resorts are moving away from the all-or-nothing options of weekend, midweek and half-day pricing, and instead targeting those who only want to ski at lunch, those who want to ski three consecutive midweek days in a row and parents who want to tag-team with each other and take turns skiing and staying with kids.

“And the end of the day,” said Cohee, “the total revenue budget had to be X. The answers to the questions are in the pudding.”


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Tahoe Daily Tribune Updated May 4, 2012 11:22PM Published May 4, 2012 11:20PM Copyright 2012 Tahoe Daily Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.