“Down” best describes the economic performance of the 1999-2000 ski season. Mother Nature was unkind to the ski industry as, for the second consecutive year, unusually warm early- and late-season weather shortened the winter season. This forced a decline in revenue, operating profit, pre-tax profit and cash flow. The poor financial year in the Rocky Mountain region greatly affected the national figures, especially profit before tax, which fell 87.3 percent.
As usual, patterns of revenue and profitability varied by resort size and the various regions of the country, so it is important to look at both the national and regional data to get a complete picture of the industry’s financial performance. Table 1 presents profitability data on a national basis as well as by resort size as measured by total vertical transport feet per hour. It shows that the smallest ski and snowboard resorts (zero to 4,500 VTFH) reported their second consecutive year of improved profit levels and the best operating profits on gross fixed assets at 12.2 percent. Table 2 presents the national and regional data broken down to key factors and shows the Midwest had a stellar year, increasing average operating profit from $600,000 in 1998-1999 to $958,000 last season for a 60 percent increase. Even greater improvement came in pre-tax profit, which increased 574 percent, climbing from $55,000 in 1998-1999 to an average of $372,000 for the 1999-2000 season.
The study was prepared by the National Ski Areas Association (NSAA) in conjunction with RRC Associates. As in the past, two-year comparisons are provided for all data. Only resorts that provided complete financial data for both the 1999-2000 and the 1998-1999 seasons were included in the report to ensure validity in the year-to-year comparisons. The basic reporting format has not changed from that of the previous reports and all results are arranged by overall national totals, by regions, by the size of resort as measured by VTFH and then broken down within regions by size. This year the authors added a category called “snow play” to the section dedicated to revenue and expense by department. It was added to break out financial data generated by tubing, snowshoeing, nordic skiing and other non-traditional types of alpine resort recreation credited with helping the bottom line at some resorts.
1999-2000 vs. 1998-1999 Results
- Profit before taxes dropped from $1,051,000 to $134,000, a slide of 87.3 percent.
- Average operating profit fell from $3,843,000 to $3,228,000, down 16 percent.
- Operating profit on gross fixed assets recorded a decline from 12 percent to 10.3 percent.
- Average gross revenue at resorts nationwide went from $18.2 million to $17.2 million, decreasing 5.7 percent.
- Before tax cash flow was hurt, falling 28 percent from $3,016,000 to $2,172,000.
- The weather contributed to an average season for 1999-2000 that was six days shorter than the previous season, shrinking it from 134 days to 128 days, down 4.5 percent.
- Ski and snowboard resorts earned a little more per guest as average revenue per skier visit climbed slightly from $58.23 to $58.48, an increase of 0.4 percent.
- Average lift ticket revenue climbed from $25.47 to $26.51, an increase of 4 percent.
- Overall average ticket yield as a percentage of the average weekend adult price remained steady at 62 percent.
- The average expenses resorts saw per skier visit increased from $54.86 to $58.01, a climb of 5.8 percent.
- Lift ticket revenue continued its trend of representing less than half of all revenues, though the ratio climbed slightly, going from an average 43.7 percent in 1998-1999 to 45.3 percent in the 1999-2000 season.
- Average vertical transport feet per hour climbed from 13,628,000 to 14,083,000, a hike of 3.3 percent.
| National 1999-00 | National 1998-99 | Change | 0-4,500 VTF/hr | 4,501-10,000 VTF/hr | 10,001-17,000 VTF/hr | 17,001+ VTF/hr | |
|---|---|---|---|---|---|---|---|
| Length of Season (Days) | 128 | 134 | 84 | 125 | 141 | 158 | |
| Gross Fixed Assets (000) | $31,358 | $32,159 | down 2.5% | $6,105 | $13,384 | $22,959 | $75,656 |
| Total Revenue (000) | $17,158 | $18,198 | down 5.7% | $3,772 | $9,281 | $11,663 | $40,012 |
| Operating Expenses (000) | $13,930 | $14,355 | down 3.0% | $3,024 | $7,728 | $9,462 | $32,336 |
| Operating Profit (Loss) (000) | $3,228 | $3,843 | down 16.0% | $747 | $1,553 | $2,201 | $7,676 |
| Operating Profit on Gross Fixed Assets | 10.3% | 12.0% | 12.2% | 11.2% | 9.6% | 10.2% | |
| Depreciation and Amortization (000) | $2,038 | $1,965 | up 3.7% | $307 | $877 | $1,368 | $5,102 |
| Interest (000) | $837 | $654 | up 28.8% | $164 | $287 | $375 | $2,266 |
| Profit (Loss) Before Tax (000) | $134 | $1,051 | down 87.3% | $185 | $322 | $319 | ($222) |
| Number of Respondents | 95 | 95 | 23 | 26 | 19 | 27 |
| National | Northeast | Southeast | Midwest | Rockies | Pacific | |
|---|---|---|---|---|---|---|
| Sample Size (Respondents) | 95 | 19 | 11 | 11 | 34 | 20 |
| Skier Visits | 293,404 | 316,710 | 157,968 | 113,357 | 377,471 | 301,865 |
| VTFH (000) | 14,083 | 16,620 | 5,279 | 2,987 | 19,404 | 13,574 |
| Skier Capacity | 6,607 | 7,441 | 4,164 | 1,859 | 8,541 | 6,483 |
| Average Skiable Acres | 1,008 | 434 | 143 | 98 | 1,690 | 1,369 |
| Length of Season (Days Open) | 128 | 139 | 90 | 87 | 139 | 144 |
| Proportion with Night Skiing | 48% | 47% | 91% | 91% | 24% | 45% |
| Gross Fixed Assets (000) | $31,358 | $34,447 | $12,699 | $7,913 | $45,895 | $26,871 |
| Total Revenue (000) | $17,158 | $18,309 | $9,907 | $4,203 | $24,590 | $14,542 |
| Less Operating Expense (000) | $13,930 | $15,053 | $8,120 | $3,245 | $20,349 | $11,023 |
| Operating Profit (000) | $3,228 | $3,256 | $1,787 | $958 | $4,241 | $3,519 |
| Less Deprec./Amort. (000) | $2,038 | $1,931 | $620 | $358 | $3,126 | $1,994 |
| Less Interest (000) | $837 | $879 | $275 | $211 | $1,649 | $71 |
| Profit Before Tax (000) | $134 | $205 | $844 | $372 | ($911) | $1,321 |
| Before Tax Cash Flow (000) | $2,172 | $2,136 | $1,464 | $730 | $2,215 | $3,315 |
| Critical Ratios — Health (Debt/Cash Flow) | 3.45 | 3.09 | 1.99 | 3.08 | 6.47 | 0.65 |
| Profitability — Operating Profit/Gross Fixed Assets | 10.3% | 9.5% | 14.1% | 12.1% | 9.2% | 13.1% |
| Profitability — Before Tax Profit on Equity | 0.7% | 1.4% | 23.7% | 22.2% | -3.3% | 6.3% |
| Policy and Planning — Capital/Capacity Ratio | $4,746 | $4,629 | $3,050 | $4,256 | $5,374 | $4,145 |
| Revenue/Skier Visit — Total | $58.48 | $57.81 | $62.71 | $37.08 | $65.14 | $48.17 |
| Revenue/Skier Visit — Lift Ticket | $26.51 | $24.94 | $25.61 | $15.13 | $28.80 | $25.80 |
| Expense/Skier Visit | $58.02 | $57.16 | $57.37 | $33.79 | $67.56 | $43.80 |
| Discounting — Average Ticket Price | $42.48 | $46.32 | $41.36 | $33.82 | $45.35 | $39.35 |
| Discounting — Percent Realized | 62% | 54% | 62% | 45% | 63% | 66% |
Profitability of Resorts
The study reports profitability at resorts several ways. It provides figures on operating profit before amortization and depreciation, interest and taxes and shows profits earned before tax. These measures are averaged for the total sample and are also broken down by resort size as shown in Table 1 and by region in Table 2. The larger resorts (17,001+ VTFH) recorded an average loss before taxes of $222,000, while the smallest resorts (under 4,501 VTFH) recorded the highest operating profit on gross fixed assets of 12.2 percent.
When considered by region, the Southeast once again recorded the best operating profit on gross fixed assets with 14.1 percent. That was followed by the Pacific with 13.1 percent. In dollar profits, the Pacific led with a profit before tax average of $1,321,000. The weakest performance in that category were the Rockies, which reported a loss of $911,000, down 210 percent from an average profit of $824,000 in the previous season. In fact, it was the only region to report an average loss in profit before taxes for the season.
Regional Numbers
The average data by region found in Table 2 removes the dominance and impact that combining the number and average size of the Rocky Mountain areas has on the nationwide data. All regions recorded an operating profit in 1999-2000 and all regions except the Rockies recorded a profit before tax.
The yield on tickets sold, which shows the average amount that ski areas actually collect on lift tickets when compared to the full ticket-window price, was highest in the Pacific at 66 percent followed by the Rockies at 63 percent, Southeast at 62 percent, Northeast at 54 percent and the Midwest at 45 percent.
The Rockies enjoyed the highest revenue per skier visit at $65.14, followed by the Southeast at $62.71, Northeast at $57.81, Pacific at $48.17 and the Midwest at $37.08.
Summary of the Data
The one constant in the industry seems to be the annual increase in VTFH. The 1999-2000 season saw VTFH increase in each region of the country and among resorts in each of the size categories, making it one of the few measures in the study showing growth across the board. However, this was at a slightly slower pace than the 10-year average.
Clearly, the combination of abnormal weather and a short season for the second consecutive year meant the industry again faced weak financial performances. The 1999-2000 season drop in profit levels tends to serve as a reminder that the ski industry remains a high fixed-cost business largely affected by weather patterns and their effect on the length of the operating season. It continues to make the task of generating adequate revenue to cover the costs a challenging and complicated one. It will be interesting to see how these figures compare to the ones yet to be tallied from the current season, which has generally been viewed favorably for its cold weather and generous snowfall through March.
Find All the Results
The 1999-2000 Economic Analysis of United States Ski Areas is the 32nd such report. Copies may be obtained from the National Ski Areas Association, 133 South Van Gordon Street, Suite 300, Lakewood, CO 80228; (303) 987-1111. The price for NSAA members is $200; for nonmembers, $400.
In addition to his duties as a marketing professor, C.R. Goeldner also lectures on business research topics for various groups.
