SPECIAL REPORT: SE GROUP – FUTURE OF THE INDUSTRY SURVEY 2012

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by Claire Humber, SE Group
Part 1 of a six-part series on the Future of the Industry survey conducted by SE Group. Comments welcomed and appreciated!


INTRODUCTION

In a continual effort to understand our core ski industry business and anticipate “what’s next?” SE Group recently completed an informal survey about the future of the industry. Respondents represent a true cross section of the industry—all regions of the country, destination resorts and day-use ski areas, old guard and young guns, suppliers and consultants, GMs and moneymen.

We asked all participants for their thoughts and ideas for what the future holds: What does your crystal ball show you about the future—opportunities and challenges? How do you see the industry changing? What are you doing to grow your business as you think about the next 10 to 20 years?* What is your greatest opportunity for growth? What is the most troubling aspect of your business as you look to the future?

* As responses began to come in it became immediately apparent to us that our 10- to 20-year outlook was inappropriately long, and that a more reasonable timeframe was three to five years. As one respondent put it, “I do not think any business in today’s environment projects out that far.” As well, “Business needs to be flexible based upon the changing landscape. Business plans are three to five years, not 10 to 20.”

The end result of our survey was nothing short of eye-opening and thought-provoking. We were amazed, though not completely surprised given the list of respondents, at the depth of thought found within the responses. Amazed, and somewhat at a loss about how to compile and summarize the information. As we organized the comments by subjects, a unifying theme emerged: CHALLENGE = OPPORTUNITY.

This industry is full of passionate folks who continually show tremendous tenacity, perseverance and ingenuity. This was evidenced by the numerous opportunities that were identified by respondents as responses to the evolving challenges faced by the industry.

So, we decided to break down the results into six Challenge=Opportunity categories and present each one over the coming months. Our hope is that you will join the discussion in this digital forum, not just read them. We invite all of you to investigate the challenges facing the industry, and to explore the opportunities each challenge avails.

CHALLENGE #1: THE ECONOMY

While the economy was not the most frequently mentioned challenge by our respondents, it is a topic that has had a pervasive presence in all business discussions over the past four years, and thus seems a good place to start!

“Continued domestic and international economic uncertainty/volatility will likely prevail over the next 12 to 24 months at minimum, forcing operators and developers to be stingy with additional investment in the mountain, lodging and residential real estate projects. The current tepid flow of capital—both on the debt and equity side—will not change any time soon, forcing developers to halt projects, allow for assets to depreciate further into obsolescence, and postpone investments in personnel.”

Enough said!

OPPORTUNITY: THE ECONOMY (ATTITUDE RESET!)

The industry has been dealing with the fallout of the economic crisis since 2008. It’s just business as usual for many.

But never waste a good crisis. Skier visits held, but many areas faced the realities of decreased yields, fewer overnight stays, a disappearance of the resort real estate market, a tightening of operational budgets and an absence of capital for upgrading or improvements.

In general, this restrained business environment has caused an “attitude reset” for both business operators and consumers. Within the ski industry, this reset has included a refocus on the success and longevity of operations, and a reprioritization of long-term thinking rather than short-term gain. It has also reminded many to get back to basics, and that the sport of skiing is one of the best ways to spend time with family and friends.

“Recognizing the hand it has been dealt, the industry (and its capital sources) is beginning to think more long term by taking a holistic approach to resort development, analyzing the mountain/real estate connection more closely and making sure that when all of their real estate is sold, the operating asset can succeed irrespective of volatile weather patterns or economic nadirs.

“More specifically, the industry is beginning to focus on leveraging off of its greatest assets—access/ownership of mountains/natural beauty—to create unique vacation experiences that are not necessarily defined by the amount of snow on the ground, but rather by the multitude of recreational opportunities available to the guest/owner.

“In short, we’ve recognized that while skiing is a fantastic sport, families don’t visit our resorts to ski per se—they come to us to be together and interact with nature. Offering many opportunities for them to do this does not necessitate extravagant development.”

What do YOU think?

Stay tuned for our next Challenge=Opportunity.
 
 

Comments

Challenge 1 the Economy

Fortunatly the economy is improving though we will still have effects this winter. The biggest thing or challenge facing the industry regardless of the economy is growth. Getting growth with a questionable economic environment is just a bigger challenge. The weakess in our industries perception of growth is that their does not appear to be any unified grass roots effort to truly grow the number of participants. Most ski areas have marketing/advertising geared at captureing more market at the expense of some other area. This is competition and it will always go on to some extent. The Learn to Ski Month programs and bring a buddy programs are fine but we need something that more effectively reaches the masses and gets their curiousity going. More participation in such things as mini mall ski shows etc.

Economy vs SNOW

From my point if view SNOW is still king! All across the country skiers/snowboarder still come out of the woodwork when the snow is plentiful, deep and consistent. Machine snow-making saved the 2011/12 season for many of the resorts. Not because the conditions were great, but because the base was consistent. The market has not dried up. There are more children every year. One only has to experience trying to park at Breckenridge, Copper, Eldora or A-Basin on a weekend day to understand the that skiing/riding demand is still there despite the economy. I believe that the lower season pass rate has fostered many to buy passes at several ski areas to hedge their weather bets. The major players are buying new resorts. Look at the action of the Vail Resorts over the past few seasons. And their stock is still growing. CNL has made capital available and EPT is currently seeking opportunities. As we all know now the real estate arm has temporarily tanked. This vividly illustrates that the ski area operations must be balanced and profitable in their own right. Once break-even has been achieved the bottom line grows exponentially. History shows that the snow will return.

Midwest

Who feeds the destination areas; the Midwest! Is anyone looking at the 50 and over gang? You know the ones who are leaving the sport as they "mature" & become "Silver Skiers". You know, the ones who have the $$ for now to spend so their kids & grand kids can afford to ski. I see NO evidence in general the industry is doing anything to retain the mature skier/snowboarder or even attempting to bring them back onto the slopes. We better become a lot more inventive than we have been because, frankly, we can't afford the sport anymore let alone the real-estate, and a lot of "mature" skiers/boarders do not think the sport is safe for them. These are the feeders for the destination areas & the inventory is running out. Belonging to one of the largest snow sports councils in the US, I see the drastic membership drops in snow sports clubs!

Who was surveyed

Rick - we're asking! What do you see for the medium sized ski area operator? We made a point of interviewing a true cross section of the industry, so that we would get as broad a perspective as possible. That said, we were also hoping to engage additional industry members as this discussion unfolds - please let us know your thoughts. You are right in noting that the quote was from a larger resort. In addition to the real estate vs. operations comment which is a top-of-mind issue for the larger resorts, we felt it was worthy of including in the discussion because of the comment on recognizing why guests come to visit and the focus on delivering on the experience. This is mission critical regardless of size or location. Many of our respondents agreed with your "business as usual" comment. It has never been an "easy" business to be in! Yet, as you so aptly note, throughout the history of the ski industry many challenges have been met and opportunities continue to unfold. We hope you will continue to share your perspective as we look at other challenges and the arising opportunities.

Getting back to basics

Why does it take an economic cataclysm to "get back to basics," which I read as code for doing basic business things it's a good idea to do no matter what the economy is like. I bet those businesses that never got away from those basics are doing okay right now.

Who was surveyed?

Sounds like only the large resort perspective is provided here. Who participated in the survey? Real estate is not in the equation for us in the "ski" business since we make our money selling lift tickets and not real estate. The economy and lack of credit has changed things, as the poor snow year last year but we've dealt with these before. Frankly it's business as usual. My thoughts on the next 3-5 years for a medium sized ski area? Just ask I'll be happy to share my thoughts. Thanks! RC

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