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INDUSTRY EVENTS NSAA CONVENTION 2007: FOCUS ON THE PROFIT MOTIVE The NSAA convention May 6-8 drew 861 movers, shakers, and assorted groupies to Palm Springs, Calif., for three days of meetings, trade show, cocktail parties, and networking. The formal program focused on profitability through leadership, innovation, real estate, and other trends in cutting-edge management. The hobnobbers included 486 resort representatives from 128 resorts, along with 375 suppliers from 131 companies.Keynote speakers Steve Farber and Lowell Catlett each addressed leadership, though from quite different perspectives. Farber described his “extreme leadership” principles, based on love (you for your job, employees for you, customers for you and your employees), energy, audacity (willingness to take risks), and proof (doing what you say you will do). “Do you want to scare yourself enough to change the world?” he asked. A leader must live for those “oh, sh*t!” moments when everything is on the line, he declared. Catlett suggested leaders find opportunities by looking at and understanding change from a different perspective. His message: customers are saying, “give me what I want, where I want, when I want it,” as illustrated by the revolutionizing success of the iPod. Companies that deliver on what, where and when will profit handsomely, he argued. As family sizes shrink worldwide and as more families around the world rise into the middle class—a billion people each decade—people are spending more on entertainment. Resorts can get their share from these trends, if they deliver on the “what, where, and when” that people want in their leisure travel. Workshops largely focused on the practical knowledge and steps that can move the ski business in that direction. A few examples: The Future of Resort Real Estate A distinguished panel of high-end developers expounded on the steps that made them successful. Bill Kane, with decades of experience in Aspen, focused on what he called “synthetic real estate”—that is, mountain clubs, which provide members with the benefits of slopeside living (walking distance to the slopes, slopeside amenities similar to a home), even if they can’t afford to buy slopeside. He termed clubs a way to recapture some of the real-estate value created by the resort that stays outside of, but nearby to, the resort. Clubs also provide a social context, a place for members to mingle and be part of the community, which creates the special experiences that people crave. “They will spend a fortune for that,” he said. Other panelists echoed these themes. Gary Raymond, formerly of Intrawest and currently with Mammoth owner Starwood Capital, focused on generating recurring income and value. He pointed out that timeshares achieve the highest occupancy rates, and therefore are the best source of “hot beds.” He urged resorts to resist the temptation to build only high-end real estate. Smaller units, he said, cost less to own or rent, and thus also contribute to higher occupancy. He also advised against making units too comfortable, lest owners want to move in—the goal is to encourage rental and occupancy, not residency. The Details on REITS and Innovative Financing Continuing with the real estate/value theme, this well-attended session helped explain why REITs are beginning to buy up the ski industry. REIT spokesmen explained that REITs are attractive because they provide a tax-advantaged way for an owner to sell a property and avoid paying exhorbitant taxes, and at the same time remain in control of the resort—most deals are sale-leasebacks, with leases running for 10 to 20 years. For a family-owned business, the tax benefits can be huge. REITs can also be a source of new investment funding; that’s part of how they make money. The catch? REITs are looking for steady cash flow. That’s why they have moved into such fields as hotels, movie theaters, bowling alleys, and other sources of steady income. While they understand that winter resorts are more variable than these industries, they also see the long-term potential for revenue growth. In addition, REITs focus on the return on their investment. They are not “trophy buyers,” as Michael Birger of Entertainment Properties Trust said. They look for areas that manage their businesses well, and who will continue to manage them well. “We would pass up on an overpriced situation,” Birgir added. “We won’t pay up front for future potential.” How to Stay Competitive in a Changing World This wide-ranging session was all about finding innovative ways to maximize profitability, from closing down for a year to assess an area’s long-term future to using a president’s blog to communicate directly with guests. It began with that last item. Dave Riley, president of Mt. Hood Meadows, extolled the virtues of having a president’s blog. Last season, Riley created an online community built around himself. This grew out of a reassessment of the area’s vision/mission statement: to be “best in the West” in employee and guest loyalty. Dave’s Blog makes that goal personal—it puts the prez himself on the line, every day. Between composing his thoughts and replying to guests (4,000 posted comments to his blog and each got a reply), Riley spent between 30 minutes and 3 hours on the blog each day. This forced Riley to delegate more, and change his entire approach to management. Risky? You bet. Controversial? Of course. Worth it? And how. “It’s an accountability tool,” Riley said. If guests complained about an employee or department, his response was there for all to see. But it also allowed Riley to set the agenda and lead the discussion on a variety of issues, from mountain safety to emergencies, as the blog received hundreds of thousands of hit over the season. And it helped Meadows thrive in a trying season, in which a flood wiped out the access road and delayed the opening by a month. The blog kept loyalists informed, and they swarmed to the resort as soon as the road was rebuilt. Result: a much better season than anyone could have imagined, and a happy and engaged clientele. The session ended with Art Berry of Camelback describing how the area has incorporated its winter facilities for ticketing, parking and food and beverage into an efficient waterpark. The base area does double duty, and the park keeps 100 key employees on the payroll year round—including electricians, snowmakers, and others whose skill sets translate easily to summer ops. Over a period of years, the gradual expansion of the waterpark led to more than 300,000 summer visits annually, and greater numbers in summer than in winter in 2005-06. Skiergraphics: Greater Targeting for Greater Effectiveness How many niches hide within the overall wintersports market? Speaker Bob Taber identified six key cultural segments among the four million "core" skiers who account for 80 percent of destination visits. He noted that, tellingly, only half are there for the actual skiing/riding experience; the rest are there for social reasons. Families, he noted, comprise 53 percent of total visits. They are typically a high-income group intent on skiing and riding together; for them, this is a bonding activity, even though the parents spend more than 30 hours a week on average with their kids. By and large, the kids’ ages determine the destination. Luxury seekers are after pleasure and comfort. With incomes over $200,000, they want to reap the benefits of their hard work. They feel entitled and are very demanding. Chasers are the wannabes: they head out at 10 and are done by noon. They hang in the bars, though, telling stories about their epic day on the mountain, or perhaps about the night before. They are young, single, college students or recent grads with busy lifestyles. Adventure travelers seek unique experiences. They are just as likely to go to Hawaii for a new thrill as go skiing; when we talk about competing with all other forms of leisure travel, not just other resorts, these are the skiers and riders we have in mind (aside from families, of course). They tend to be career-oriented young couples or, increasingly, older empty nesters who are returning to their pre-family pursuits. Adventurers tend to prefer sophisticated brands. New schoolers hang in the parks or out of bounds. They are explorers who seek activities that appeal to their independent streak and desire to express themselves, but they also want to be part of the group (so long as it is not a country club—that’s definitely not their scene). They prefer cheaper brands, since they are often still in school, and they are likely to be renters, not homeowners. They also spend more than 10 hours a week on the computer, which is a good place to reach them with your marketing message. Old school folks are the hard core. They seek first tracks away from the crowds. They are predominantly white, blue-collar men with $100,000 income. They prefer authentic brands and local pubs. If married, their wives support the lifestyle. Futuristic Demographics: Who Will Your Customers Be? In movies from “Bladerunner” to “The Fifth Dimension,” Hollywood has presented the future as a place with huge disparities in wealth between upper and lower classes. Well, guess what? It’s happening. In this session, RRC’s Nate Fristoe gazed into his crystal ball and saw the following: The gaps in education and the financial situations of families and couples, as well as in household incomes, are spreading. This is separating rich and poor, whites and blacks and especially Hispanics. This is occurring at the same time that immigration is rapidly increasing. There are also disparities from region to region. Fristoe pointed out the differences between the average east coast, midwest and west coast families: • East coast families typically make at least $100,000 annually and spend 50 percent of their income on transportation and housing. • Midwest families make less, and after spending almost half their income on housing and transportation, they have much less to spend on leisure time. • West coast families tend to be younger, often a couple without kids. Yet their incomes are higher than East coast families, and therefore have more disposable income for leisure activities. Class separation is reinforced by the fact that the rich tend to marry other rich folks, the poor marry the poor, and this contributes to the widening income gap between the two. This gap makes marketing to a general demographic much harder than in the past. Baby Boomers, Fristoe said, demand a completely different experience than the younger generation coming into the industry. And while they are still important, they will become less active in the coming few years. Therefore, trial, conversion and retention will be even more important in the future than they have been in the recent past. It will take a stronger youth marketing effort to offset the exit of the Boomers. The Guest Lifestyle: From Start to Finish Guests expect a great experience from the start of planning until after they have returned home. Three panelists described what they were doing to make the three phases of the resort experience—pre-arrival, onsite, and post-visit—better for the customer and more attractive for their mountains. For the pre-arrival period, technology is key for making informational immediately available. Even better: provide content on demand, such as a mobile phone web connection with mountain stats, snow report and weather report. Easy access to information gives your mountain a leg up when the customer is deciding where to go. When skiers and riders are on their way to the mountain, this information could be the deciding factor in where they go. There are several ways to make the onsite experience easy and friendly. Resort charge programs are one. This eliminates the headache of multiple money transactions and avoids possible confusion. An all-inclusive option to the resort experience, like Disney provides, would be the ultimate expression of this. Park City has augmented its ticket windows with kiosks, and broke the two-million transaction mark this past winter for ticket transactions. Kiosks can make the ticketing process faster and more efficient, not unlike the kiosks at airports. They can also reduce staffing needs, always a consideration these days. Still, kiosks are not perfect; they reduce face time with customers, and therefore an opportunity for making a personal connection with the guest. Plus, not all customers are tech savvy, and would rather deal with a person. The same applies to anyone who has questions about the ticket options; machines can’t always answer those easily. And finally: do customers want their hometown hill to turn into an airport? That may not be the most positive association. Post-visit contact is essential. Building the post-visit relationship will increase return visits. Plus, returning customers will often bring new customers with them. Incentives such as free or discounted lessons or tickets can sweeten the deal. Resorts can incentivize individuals and turn them into group leaders by giving them credit toward resort purchases. One Park City guest responded by recruiting more than 100 new people in a season. As with any incentive program, keep it simple, honest and easy to understand. Those elements will make it attractive to participate in the program.
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EVENTS WRAPUP 
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