Ticket to Tahoe: Will region resort prices fall?
Editor’s Note: This is the first part of a three-part series examining season pass prices in the Tahoe Basin.
The season pass. A linchpin of the Tahoe economy. A status symbol. An emblem of the Tahoe lifestyle, worth more than a car to some. And getting a season pass to a ski area for as little money as possible means as much as the pass itself. As Rachel Woods, public relations coordinator for Alpine Meadows, said of the proverbial ski bum, “Part of the challenge is finding the cheapest way (to ski).”
People are willing to do outrageous things to meet the challenge of riding the lifts for a discounted price. In fact, it has been the impetus for some to wed. In Tahoe’s version of marrying for an immigration green card, a woman married an employee of one of North Lake Tahoe’s largest ski resorts earlier this season to take advantage of the dependent pass price. While the woman was in love with her husband previous to their $23 Chapel of the Bells wedding in Reno, she said the couple had no plans of getting married and didn’t tell their families.
“We never had a reason to get married, but (the pass) was a reason. We didn’t really believe in (marriage) otherwise,” she said.
If marriage isn’t an option or drastic measures aren’t in the ski bag, then the choices are simple for the pass-hungry: throw down big money, timing it so the early-bird window is thrown wide open, work at the resort or go without and earn your turns.
No matter the preferred method of gliding down a mountain, riding a chairlift up is expensive. Lift-serviced snowsports are pure luxury, decadent to the core. Skiers, unlike the old days, aren’t delivering the mail. After all, who said luxury was supposed to come cheap?
However, due to relatively flat skier growth industry-wide, leading to stiff competition in places like Colorado’s Front Range, some ski resorts across the country have lowered pass prices the past three to four years. And for several of these resorts, the results have been astonishing – selling tens of thousands of passes and generating millions of dollars in revenue before the season’s first skier rides the chair.
A number of Lake Tahoe ski resorts are succumbing (or catching up) to these progressive marketing tactics. But do lower-priced passes mean more or less skiers, and therefore proportional profit for the resorts and the community? Do lower pass prices devalue the resort product and thus diminish the skier experience? Will Tahoe resorts be forced to take up arms in California’s version of a price war? Will resorts ultimately be the casualties? Would it be an unnecessary war?
Lift ticket labyrinth
Determining the pricing structure for a spot on the chair remains, according to Squaw Valley Ski Corp. President Nancy Wendt, one of the most difficult things for resort operators and a “very complex” issue.
Pricing begins with the daily lift ticket. It’s still the top revenue generator for most area resorts and certainly one of the most sensitive and studied topics in the industry. The key to the daily ticket is yield – what the resort actually earns per ticket, after taking into consideration discounting, promotions, season passes, children’s tickets, complimentary tickets, etc. The higher the yield ratio (ticket price vs. revenue per visit), the happier the resort.
“The ski industry has a reputation for being expensive based in large part on advertised ticket price, yet actual average ticket prices paid by the consumer are considerably lower than retail window prices,” states the Kottke National End of Season Survey 1999/00. The survey is produced annually by the National Ski Areas Association, a trade organization for ski area owners and operators based in Lakewood, Colo.
Heavenly Ski Resort, the largest Tahoe resort in terms of acreage and skier visits (4,800 acres and 897,490 visits in 1999-2000, according to the National Ski Areas Association) may be charging $57 for a lift ticket this season, but, on average, that is not what the resort is making, especially if Joe Consumer knows how to navigate the cheap ticket trail.
When people continue to pay premium prices for lift tickets at the
major resorts, the resorts don’t need to charge less for a pass. And, considering most skiers aren’t going that often, areas need to make the money where and when they can. The estimated overall average number of days for skiers and snowboards in 1999 was 8.8 visits, reports the National Ski & Snowboard Retailers Association. Over the last decade, the average number of visits for skiers and snowboarders was approximately 8.6 times. Just under 50 percent of snowboarders got a lift more than 10 days and 10.7 percent of skiers rode the chair more than 20 times in the 1998-1999 season – those who would most benefit from a pass and most likely have one.
The season pass usually has been priced to favor those who purchase passes – the local or avid person who intends to ski or snowboard a high number of days (20 or more), according to the Kottke survey. That same local doesn’t make money for the resort. That local typically works for the resort or an arm of the ski industry in exchange for the pass. It is the visitor who brings the money; therefore, that’s whom the resort is interested in. Still, four of the top five employers in the North Lake Tahoe-Truckee area are ski resorts; the other is affiliated with the ski industry. Ensuring the health of the ski area helps the Tahoe economy, according to some local business owners.
“Just getting people to Tahoe helps us all out. And the pass keeps people coming to the area,” said Dave Wilderotter, owner of Dave’s Ski Shop. He added that the bigger resorts cannibalizing each other for visitors didn’t necessarily help his business or others. The success of Dave’s Ski Shop – and others of its ilk – however, hinges on the success of the resorts, Wilderotter said.
The number of visits is pivotal to the ski resort. But how to increase the number of visits, which has hovered around an estimated 50 million for more than 20 years, is debated. Some ski industry mavens insist the key to growth is attracting new skiers. An estimated 11 million people in the U.S. skied or snowboarded in 1999, according to the National Sporting Goods Association; the current population tally by the U.S. Census Bureau 2000 count is 281.4 million.
“Creating new skiers is the goal,” said Wendt. “We don’t believe you can do that by simply reducing the pass price.”
That’s because, in the opinion of Squaw Valley USA and some other resorts, beginners aren’t the ones buying season passes. Findings indicate only 10 percent of skiers and snowboarders are beginners, 65 percent are core skiers/riders and 25 percent are revivals, according to RRC Associates, a research firm in Boulder, Colo., which the National Ski Areas Association contracted for its 2000 model for growth. Of the beginners, 15 percent become core skiers, and of the core skiers, 20 percent lapse.
Others believe frequency, or retention, is what matters. And that’s where the core and lapsed skiers/riders come into play.
“You can look at it as a revenue gain or revenue loss,” said Tim Cohee, Kirkwood Mountain Resort president, in regard to lowering pass prices, but getting more visits from skiers/riders than the average eight to nine days. “I believe it’s a gain.”
Because the more times a skier visits the resort, presumably the more money that person spends and the more friends and relatives they potentially bring, said Cohee. This philosophy goes with Wilderotter’s that the more people who come to visit the resorts, the more money is spent throughout Tahoe.
Conventionally, a few thousand season passes at the bigger resorts, mostly sold in the summer or early season, is regarded as an acceptable number to help offset off-season costs or to insulate against poor seasons.
Smaller resorts usually have passes, along with daily tickets, that are priced considerably lower than their larger neighbors as another way to compete for visitors. However, Tahoe resorts, in general, don’t want to price a pass so attractively that people who would normally buy daily tickets opt instead to purchase a season pass, and, in the long run, make less money for the area.
Looking for a savior
First and foremost, a ski resort is a business. And, one that is evolving. It’s no longer, as Squaw Valley USA co-founder Alex Cushing has described it, “the uphill transportation business.” Skiing and snowboarding are another facet of the entertainment industry and when people recreate these days they want a complete experience, not just a ride. To provide that experience, Lake Tahoe resorts, like many of the top ski resort destinations in the United States, have been pouring money into capital improvements. According to the Ski Lake Tahoe marketing group, more than $1 billion will be spent on development and renovations to mountains in and around the basin before the current investment round ends, including pedestrian villages, advances in snowmaking and grooming and the latest in lift service. The money for these improvements comes from visitors – both day and destination – for most Tahoe resorts.
But where and how the revenue is generated is also evolving, at least in some places. Part of this change is a result of the resorts searching for the next great industry savior.
Echo boomers, those born between 1980 and 2000, are considered to be the salvation of the ski industry, reports the National Ski Areas Association. But this demographic is also primarily ethnic, according to RRC Associates. Looking at snowboarders, 88.8 percent are Caucasian, said Sean O’Brien, editor of SNOWboarding Business Magazine.
Snowboarding has been great for the mountains from Sunday River, Maine, to Snow Summit, Calif., but those numbers are leveling.
Five-year projections for snowboarder visits have remained the same for the past three seasons at 34 percent of total national visits (considerably higher but also holding steady in the Pacific West region at 46 percent.) Nationwide, 26.4 percent of total visits last season were snowboarders, with higher percentages in the Pacific West at an estimated 38 percent. The shaped ski was exciting for many, but appeared to inspire more converts than new skiers. Resorts like Northstar-at-Tahoe and Boreal believe the snow toy family, such as snowbikes, snowfoxes and The Zorb, may help to attract more of the curious from the metropolises. In actuality, real estate, if the resort has the finite resource, has become the industry cash cow of the moment.
Villages and development at Heavenly, Kirkwood, Northstar-at-Tahoe and Squaw Valley USA – four of the Big Six resorts that comprise the Ski Lake Tahoe group and the bulk of ski/snowboard visits in the area – attest to that. Not only does this development promote cash flow up front, but it cultivates income with future mountain visits. But if the resort doesn’t have real estate to develop, the resort has to price its tickets accordingly. Different resorts have different prices for tickets and passes, mostly based on acreage and what’s on it – terrain, lifts and services. Besides yield, other variables affect ticket and pass pricing and the actual selling of either. Most important, and least controllable, is snowfall. No matter what, good snow is the top draw. If there isn’t snow, however, the resort has to make it, which can carry a hefty price tag. Among other costs are lifts – renovation, the speed, vertical feet per hour and capacity of the lift and maintenance. Other costs differ at each resort, but include employees, patrol, ski school, vehicles and numerous others.
“Most people have no idea what it takes to operate a ski resort,” said Katja Dahl, public relations director for Squaw Valley.
After taking into account the weather (and previous season sales) but before determining the cost of mountain operations, resorts focus on how competitors are pricing. Most Tahoe resorts keep a close eye on their neighbors and what is happening in other parts of the country. Historically, Colorado has led the way in pricing with both increases and decreases – a lift ticket costs $63 at Vail Mountain, the most expensive in the nation. There’s the occasional maverick, but for the most part it’s follow the leader, and follow closely. It is this mentality that has led to what have been Colorado’s season pass price wars the past few seasons. But in this war, few losses have been reported so far.
Next week: Part two, Colorado price wars and Mammoth sells 26,000 passes
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