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Speakout & Issues

SPEAK-OUT: LOWER DEBIT CARD SWIPE FEES FIZZLE


Relief was just three weeks away when the Federal Reserve caved to special interests, and businesses learned their heartburn over debit card swipe fees would continue until October. Even then, relief won't be complete. 

Under the Wall Street reforms signed into law in 2010, the debit card transaction fees that banks charge merchants became the purview of the Federal Reserve Board. Banks could no longer set excessive "swipe fees," which had increased 300 percent over the past decade. The Federal Reserve's new "reasonable and proportional" swipe fees were to take effect July 21 under the Durbin Amendment. The central bank had proposed capping the fees at 12 cents, down from the 44 cents on average the big banks have been charging retailers every time a consumer swipes a debit card. 

In the end, the Fed caved to pressure from the big banks and credit card companies and pushed out the effective date for reduced fees until Oct. 1, and raised its swipe fee cap to 21 cents. What's more, if a financial institution complies with established fraud prevention rules, the Fed will grant them permission to charge up to 24 cents per transaction. The Fed's decision is a $6 billion annual windfall for the banks compared to the revenue they would have received from a 12-cent cap. 

This decision will continue to have a large impact. Increasingly, consumers are relying on debit cards. In 2009, the usage of debit cards exceeded that of credit cards for the first time. Experts believe the trend will continue; debit cards appeal to consumers who want to be sure to live within their means. 

This windfall for the banks is not what millions of small business owners campaigned for and it's certainly not what our elected representatives voted for. Unfortunately, a board of unelected individuals has seen fit to ignore the democratic process and undermine these common-sense reforms.

 

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SPEAK-OUT -- ARE NEW LIFTS ALL THAT BAD?


As we suggested in Blue Pages last month, many of the lifts installed in the 1960s, '70s and '80s are approaching retirement or refurbishing. Those that remain in service will require greater and continuing care and attention to maintenance and repair. (That's the subject of "Give Your Lifts a Hand.

In either case, the fact remains that the era of low capital costs for lifts is closing. Many lifts have been in that sweet spot where they have been fully paid for, but are still new enough that they haven't required a great deal of maintenance. As they age further, though, they need more TLC. Tower and sheave alignment, gearboxes, bullwheels, chair grips, electronics, chairlifts have a lot of moving parts. Whether resorts invest in new or rebuilt lifts, lift expenses are headed up. The alternative is an increasing incidence of lift failures and the attendant costs of settling those-and then paying the costs of repair or replacement, too. 

There has been much grousing about the lack of competition among lift companies and resulting higher prices for new chairlifts. The complaints are understandable, lifts are a major expense. However, there are pressures keeping prices from skyrocketing, too. The manufacturing capabilities of Doppelmayr CTEC and Leitner Poma, coupled with that of the new Skytrac, surely exceeds demand. Resorts have some leverage over pricing still. 

And new lifts can be a sound investment. New designs are even more reliable than the older ones; the industry has learned a great deal in the past 50 years. And technology has brought improvements as well. 
Make no mistake, the quality of your lifts is vital. Lifts are the ultimate guest convenience and that's why we sell "lift tickets." 

The bad news, from an accounting standpoint, is that chairlifts are major expenses that must be depreciated, and that impacts the bottom line. That's not fatal news by any means. It's also one of the true costs of doing business as a ski resort, one that sure beats having no lifts, or poorly functioning, fear-inducing lifts.

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SPEAK-OUT -- ABOUT THOSE DEBIT CARD FEES...


Having been in and around the credit card industry for 30 years, and having received a phone call from a ski area customer that had just read your article, "Keeping Your Money," (SAM, March 2011) I would like to comment on the Durbin Amendment. 

Certainly, the Durbin Amendment is the biggest topic of interest in the credit industry today, and it was the hottest topic and seminar at our most recent payment card industry trade show, held by the Electronic Transactions Association. 

There are two things pertaining to the Durbin Amendment that I want to point out. First, the Durbin Amendment will require a reduction of debit card interchange fees to no more than $.12 on all swiped, authorized and settled debit cards (if issued by a bank with more than $10 billion in assets), whether they are PIN-based or signature (accepted like a credit card). Second, it's possible that implementation will be delayed for a year or so while the details are sorted out. 

The bottom line? It looks as though the Durbin Amendment will give you a cost reduction whether you use PIN pads or not. There's no need to buy them right away. Nobody really knows what the final legislation will be until the dust settles. 

So, our advice is, "sit back and relax." Right now the Durbin Amendment looks like a win-win situation and you won't have to do anything to benefit from it. 


David Eldredge, author of "Keeping Your Money," (SAM, March 2011) replies:

Yes, there are a lot of moving parts regarding the Durbin Amendment. By now, either it has become law or not. I do believe in the law of unintended consequences, and fully expect there to be a domino effect following the announcement on Apr. 21. But exactly what the effects will be is anyone's guess. 

I do not know where the Electronic Transactions Association gets its information regarding debit card transaction fees. Senator Durbin's website clearly states that his legislation will only affect PIN-based debit, and that the amendment was not created to regulate interchange fees on credit and non-pin debit transactions. 

Focusing on PIN debit fees misses the greater point of the article, which is that "processing fees" are becoming less vital, and "payment acceptance costs" are becoming a more accurate gauge of what it costs to accept payments. Credit card processors tend to focus on "rate," but in today's market, that accounts to maybe 5 percent of the total cost of accepting payments. 

That's why the article mentioned a technological advancement (CenPOS), and focused on seldom-talked-about topics that comprise the other 95 percent associated with payment acceptance. Issues like chargebacks, routing rules, signature capture, reporting, downgrade surcharges, etc., are all important parts of processing-and using technology to accomplish those tasks is vital to keeping payment acceptance costs as low as possible. 

I don't expect ski areas to go out and purchase PIN pads before the legislation is final. If they wanted to, they would go through their merchant acquirer, who hopefully is knowledgeable and would advise them accordingly. 

The bottom line is that it may still make sense for a merchant to enter a customer's PIN number to get the best rate after the Durbin Amendment hopefully passes.

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SPEAK-OUT - MIDWEST GREATS


[Within days of one another, two industry greats from the Midwest died-George Petritz from Crystal Mountain, Mich, and Paul Augustine from Afton Alps, Minn. The following is an excerpt from Augustine's eulogy, given by his son, John P. Augustine. Through hard work and treating people right, these two men are examples to us all about how to run a successful ski area.] -Ed 

My father, Paul Augustine, was blessed-or some would say cursed-with an incredible work ethic. Years before the automated answering systems, on Christmas Eve, the one time we knew the slopes would be closed, he would plug a phone into the business line in our house so that someone could answer the questions of people planning trips to the area over Christmas vacation. In the early growth days of Afton Alps, he did almost every job there. He made snow, groomed the slopes, plowed the parking lots, answered the phones and sold tickets. 

My father was a real, straightforward man of the people. He believed in equal opportunities and in second chances for those who seemed deserving. In industry organizations he fought to keep dues affordable for smaller operators. At his ski areas, he gave a little extra break to people just trying the sport, because he saw himself as an ambassador of skiing. And not everything was about the bottom line-he would stay open past times of peak demand and even reopen to let an out-of-town group experience the area. He knew that any given day could be that person's one chance to be on the slopes that year, and that word-of-mouth marketing was his most effective marketing. 

As an owner, he set a powerful example by working directly with customers, going through the line in the cafeteria, and being willing to pitch in wherever needed. 

My father was prudent. He saw building his businesses and acquiring possessions as a gradual process. He built a very large Midwestern operation, but started small. 

There were some things that really annoyed my father. He didn't like ski bums who thought they could sneak onto the slopes undetected, or those who felt entitled to special treatment because of skiing prowess or connections. He didn't like people expecting a discount just because they worked for some big corporation. He opposed selling passes to hard-core skiers at such a discount that it risked them taking their experiences for granted. He resisted overplanning the operational details of his business because he knew that he had to be flexible enough to adapt to changing conditions, especially the weather. 

He really didn't like listening to people who talked big, but never followed through, or wasted his time with lots of excuses for poor performance. However, as nearly anyone who worked with him can attest, he was very forgiving of mistakes, as long as you showed a commitment to doing better and being there when he needed you most. 

Of course, he was human and made some mistakes as well-all you have to do is look at my Dad's old pickup truck to see that he should have left the driving to others long before he did. 

There's no questions that my father was a stubborn taskmaster, but he was also very much a mentor through the examples he set.

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SPEAK-OUT -- MORE MAS


The Multiculturals in Action Sports Report, 2010 Hispanic Snow Summary, more simply called the MAS Report, is a wake-up call to U.S. resorts. It shows how large the potential multicultural market is. It puts the lie to the notion that "minorities can't afford to ski and ride." And it suggests that skiing and riding could well be a cultural fit as well. 

Millennials-Americans ages 14 to 29-are already forming a new sense of what it means to be "mainstream." That notion will continue to evolve, as African American and Hispanic American Millennials are the fastest growing segments. 

Consider: Multicultural Hispanic and African American Millennials make up a quarter of their respective populations (24 percent of all African Americans, 27 percent of Hispanic Americans). 

Combined, the African American and Hispanic American Millennial segments make up 32 percent of the total U.S. Millennial segment. That's roughly 21.5 million Americans. 

Yet multicultural snow sport participation stands at only 3.4 percent. Clearly, there's room to increase that. 

The multicultural Millennials' age is not, by itself, an obstacle. Newcomers don't enter our sports only as kids. The recent NSAA Journal, an issue devoted to the aim of converting newcomers into core participants, notes that half of all first-time lesson takers are adults. Age is simply not a barrier to trial. 

Do these Millennials have the income to take part? The MAS Report makes it clear that a surprisingly large number do. The report identifies seven markets most likely to produce Hispanic American skiers and riders: Denver, Los Angeles, Chicago, New York, and the greater metro areas of Sacramento, San Francisco, and Washington, D.C. In these areas, approximately 62 percent of Hispanic American households, more than two million, have incomes of $50,000 or more. More than 18 percent have incomes over $100,000. Hispanic Americans meet the same benchmarks we have for our current customers. 

Will they want to take part? Non-profit programs such as SOS have answered that one: skiing and snowboarding definitely resonate with multicultural youth. 

Resorts have long accepted that ethnic minorities face cultural barriers in the mountains that have discouraged participation. That assumption looks outdated, too. MAS reports that 40 percent of Hispanics consider themselves bicultural-that is, comfortable in both English- and Spanish-speaking worlds. They float between the two as they please. And the percentage of bicultural Hispanic Millennials is certainly greater than 40 percent; most Hispanic Millennials have been born in the U.S., and 98 percent of native-borns are comfortable with English. 

There are many other issues related to beginner trial and conversion, and they apply to Hispanic and African Americans, too. But it's time we abandoned our misperceptions about all the additional barriers ethnic groups face. Those barriers are much smaller than we imagine. Next step is to figure out how to invite them to our mountains-knowing that doing so will transform our sports into something more inclusive, too.

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SPEAK-OUT -- HUMANS WERE NOT MEANT TO HIBERNATE


When your industry attracts only 3.5 percent of the U.S. population, there is plenty of potential for growth. That's why 16 state and regional associations, representing more than 300 resorts in 32 states, along with a number of individual resorts, NSAA, PSIA-AASI, NSP, SIA, the industry's consumer media, and a variety of retail and rep groups are supporting Learn to Ski and Snowboard Month (LSSM). It's an investment in all our futures. 

About 30,000 took lessons in January last year, and we hope to double that number in January 2011. But the real intent is to keep those new customers engaged. 

This effort comes not a moment too soon. Many other recreation industries have been using a grassroots approach to grow their markets for years, even decades. Tennis, golf, in-line skating, biking, bowling and archery all have aggressive programs to draw in elementary school youths. The National Football League's "Play 60" initiative does, too. These industries have one thing in mind: produce future customers. 

Winter resorts are now following suit. LSSM is a flexible, grassroots approach to growing the market. Resorts and their partners can decide how best to pursue the goal in their own situation. The few ground rules: focus on trial and conversion as outlined in NSAA's Model for Growth, and use January as a hook. 

Still, a coordinated approach can help leverage one another's efforts. That's why LSSM partners are asked to use the LSSM logo, as well as the program's "Humans Were Never Meant to Hibernate" slogan, the ad creative developed by Cultivator Advertising and Design, PSIA-AASI's ad agency. Industry consumer magazines are running LSSM "Bring a Friend" ads in their January issues and on Websites, since most people learn our sports because a friend or family member introduces them. 

The financial benefits of developing loyal and returning customers at an early age are real. Growing the Snow Sports Industry research conducted by SIA indicates that 10-year-olds who take up winter sports spend an average of $64,000 on snow sports, while those who begin at 24 spend an average of $19,000. 

The snow sports industry needs to replace aging Baby Boomers with new customers in order to grow. We have the ingredients to be successful: thrilling and visually inspiring sports, engaging personalities like Lindsey Vonn and Shaun White, and superb outdoor winter facilities. Our challenge is to promote these benefits and develop loyal enthusiasts. 

That's why every company and organization in this industry should take part in Learn to Ski and Snowboard Month. If you are not already involved, you have several weeks in which to change that. With only 3.5 percent of the population participating in snow sports, you can hardly afford not to do so.

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