While the 1990-91 ski season was one to forget because it was the second worst year in the history of the economic study, the 1991-92 season is one to remember for its rebound and the solid improvement in economic performance.
Good snow conditions resulted in a sharp reversal of the downward trend in skier visits the previous two seasons when snow conditions were poor. Skier visits recorded an 8.8 percent increase, revenue a 10.2 percent increase, operating profit a 33.7 percent increase and, before tax cash flow, a 60.8 percent increase. Average dollar profit before tax increased to $598,000 from $26,000 the previous season for a 2,114.8 percent gain. This spectacular gain was possible only because of the unusually poor season in 1990-91. To put things in a clearer perspective, this before-tax profit was a 3.6 percent return on gross fixed assets.
Consequently, the 1991-92 season will be known as the year the trends turned around and headed in the proper direction even though there was a slow economy.
Major Changes
Readers of the 1991-92 report will find a number of important changes. The first change is that the report was prepared by the Denver, Colo., office of KPMG Peat Marwick rather than the University of Colorado at Boulder where it was conducted for the last 18 years.
The second change is that the report looks solely at ski areas operating in the United States. Canada is no longer included, which means the Western Canada region has been dropped. This brings it in line with the “USIA End-of-Season National Business Survey” prepared by Marvin W. Kottke, which includes only U.S. areas. I would hope that in the future we could see a separate report prepared for both the U.S. and Canada ski operations.
The third change is in some key terms in the report. Operating profit before interest, taxes, amortization and depreciation are reported, but readers should know that previous reports did not deduct depreciation from operating profit — only interest and taxes. Additionally, 1990-91 profitability was based on a return on Gross Fixed Assets while the 1991-92 season report expresses profitability as a percentage of gross revenues.
A fourth change is in the treatment of revenue per skier visit and cash operating costs. Readers of previous reports will need to recognize the new treatments used.
A fifth change is in the report’s overall layout. It features more charts and graphs than in the past.
A sixth change is that the report has become available in November, before the new ski season starts, for the first time in the history of the study. Previous reports were published in the December to March time period. The new time frame should work to everyone’s advantage.
Some Highlights
- Skier visits were up 8.8 percent (50.8 million vs. 46.7 million).
- Operating profit increased by 33.7 percent.
- Balance sheets were stronger through an average reduction of debt.
- Gross Fixed Assets were up as ski areas continued to invest in physical plant.
- Average gross revenue was up 10.2 percent.
- Snow, which came at the right time for early openings and late closings, resulted in a dramatic increase in operating days (134 vs. 116).
- Colorado set a new record with 10.4 million skier visits, surpassing the old record of 9.98 million in 1988-89, and accounting for 20.5 percent of the nation’s skier visits.
- Insurance costs declined 3.6 percent.
- Profit before tax was up dramatically.
One of the brightest spots in the financial picture was before-tax cash flow (before-tax profit plus depreciation), because cash flow provides a measure of a resort’s ability to retire debt. For the average area responding, cash flow was $1,624,000, a 60.8 percent increase from the $1,010,000 in 1990-91.
Discounting continued at a less vigorous rate than in the past. The average weekend lift ticket price was $28.48, the average ski lift ticket revenue was $21.06 or 73.9 percent of the listed price, which compares to 71.5 percent in 1990-91. This is to be expected in a good snow year when early season discounts don’t have to be given for as long a period and other discounts don’t have to be offered due to marginal conditions. Ski area managements still need to improve yield with less deep discounting and more innovative pricing strategies.
Profitability
With the new definition of operating profit, over 90 percent of the areas reported operating profits (profit before interest, taxes and depreciation). Of the 124 responding areas, 89 or 71.8 percent reported profits before tax in 1991-92 compared to 49.3 percent in 1990-91.
Table 1 shows the profit picture of the average ski area responding to the survey as well as the top half, bottom half and loss areas. The top half areas continued to perform well above industry averages, recording an operating profit of $3,410,000 and a 16.0 percent operating profit on GFA. The bottom profit areas recorded an 8.2 percent operating profit on GFA. The top half profit areas recorded a before-tax profit on equity of 17.6 percent. Note the footnote to Table 1 as it explains the new method of defining top half and bottom half profitability.
Regional Standings
Table 2 presents a summary of the average data by region. All of the regions recorded an operating profit in 1991-92 and all of the regions recorded a profit before tax. The Midwest recorded the most impressive performance with operating profit as a percent of GFA at 43.9 percent followed by the East with 16.3 percent.
The California/Nevada region again led in revenue per skier visit with an average of $41.52. This was followed by the Central Rockies region with $40.43, New England with $39.57, the East with $38.40, the Northern Rockies with $38.20, the Midwest with $38.11 and the Pacific Northwest with $26.73.
Study Availability
The 1991-92 study is the 24th annual study conducted for the Economic Study Committee of the United Ski Industries Association. The study was conducted by KPMG Peat Marwick, Denver, Colo. The 123-page report is presented in one volume containing over 80 tables and numerous charts. Copies of the 1991-92 season “Economic Analysis of United States Ski Areas” may be obtained for $175 from: United Ski Industries Association, 8377-B Greensboro Drive, McLean, Virginia 22102; (703) 556-9020. Copies of prior year reports can be obtained from: Business Research Division, Campus Box 420, University of Colorado at Boulder, Boulder, Colorado 80309-0420, (303) 492-8227.
| 1990-91 Respondents | 1991-92 Respondents | Top Halfa | Bottom Halfa | Loss | |
|---|---|---|---|---|---|
| Gross Fixed Assets | $16,062 | $16,763 | $21,288 | $12,800 | $9,585 |
| Total Gross Revenue | $8,520 | $9,391 | $11,102 | $8,717 | $3,156 |
| Operating Expenses | $6,907 | $7,234 | $7,692 | $7,667 | $3,318 |
| Operating Profit (Loss) | $1,613 | $2,157 | $3,410 | $1,050 | $(162) |
| Depreciation and Amoritization | $983 | $1,026 | $1,350 | $725 | $551 |
| Interest | $604 | $533 | $668 | $353 | $557 |
| Profit (Loss) Before Tax | $26 | $598 | $1,392 | $(28) | $(1,270) |
| Number of Respondents | 130 | 124 | 63 | 49 | 12 |
| Total Sample | New England | East | Midwest | Central Rockies | Northern Rockies | California and Nevada | Pacific North West | |
|---|---|---|---|---|---|---|---|---|
| Sample Size | 124 | 21 | 23 | 14 | 20 | 16 | 19 | 11 |
| VTF/Hour (000) | 8,143 | 9,318 | 4,161 | 1,980 | 14,116 | 8,092 | 11,650 | 8,100 |
| Gross Fixed Assets (000) | $16,763 | $20,077 | $8,728 | $2,954 | $31,134 | $12,132 | $25,024 | $10,136 |
| Total Average Revenue (000) | $9,391 | $11,068 | $6,451 | $3,074 | $18,686 | $6,176 | $11,623 | $5,954 |
| Less: Direct Expenses (000) | $4,748 | $5,400 | $3,364 | $1,259 | $10,138 | $2,981 | $5,381 | $3,021 |
| Gross Margin (000) | $4,643 | $5,668 | $3,087 | $1,815 | $8,548 | $3,195 | $6,242 | $2,933 |
| Less: General Expenses | $2,486 | $3,592 | $1,660 | $519 | $4,011 | $1,779 | $3,367 | $1,670 |
| Operating Profit (000) | $2,157 | $2,076 | $1,427 | $1,296 | $4,537 | $1,416 | $2,875 | $1,263 |
| Less: Depreciation (000) | $1,026 | $1,198 | $543 | $106 | $2,040 | $728 | $1,553 | $552 |
| Less: Interest (000) | $533 | $813 | $304 | $56 | $1,123 | $282 | $688 | $108 |
| Profit Before Tax (000) | $598 | $65 | $580 | $1,134 | $1,374 | $406 | $634 | $603 |
| Before Tax Cash Flow | $1,624 | $1,263 | $1,123 | $1,240 | $3,414 | $1,134 | $2,187 | $1,155 |
| Critical Ratios: | ||||||||
| Health (Debt/Cash Flow) | 3.6X | 6.8X | 3.3X | .6X | 4.0X | 2.1X | 2.8X | 1.2X |
| Profitability: | ||||||||
| Operating Profit/Gross Fixed Assets | 12.9% | 10.3% | 16.3% | 43.9% | 14.5% | 11.7% | 11.5% | 12.5% |
| Before Tax Profit on Equity | 8.8% | .9% | 37.1% | 136.6% | 7.4% | 7.9% | 8.0% | 17.6% |
| Performance | ||||||||
| Average Utilization | 28.6% | 31.5% | 19.0% | 12.2% | 51.2% | 27.5% | 31.8% | 18.2% |
| Day/Nights Operation | 134 | 127 | 133 | 142 | 118 | 145 | 129 | 151 |
| Policy and Planning: | ||||||||
| Capital/Capacity Ratio | $2,867 | $3,342 | $1,555 | $782 | $4,447 | $2,711 | $3,713 | $1,268 |
| Operating Cost/Capacity | $9.27 | $11.82 | $6.75 | $3.31 | $17.06 | $7.34 | $10.02 | $3.76 |
| Total Revenue/Skier Visit | $39.16 | $39.57 | $38.40 | $38.11 | $40.43 | $38.20 | $41.52 | $26.73 |
| Skier Visit (000) | 223 | 240 | 141 | 65 | 424 | 178 | 278 | 219 |
