During the 1972-73 ski season, ski schools in the United States produced an estimated $28 million in revenue. After expenses, they showed a gross profit of around $4 million. These estimates are based on responses to the second annual ski school survey conducted by the Professional Ski Instructors of America (PSIA). It is clear from these figures that ski school is an important part of the skiing industry.
There are, however, some discouraging figures about the ski school business. While the industry as a whole was generating some impressive ski school revenues and profits, one-fourth of the schools surveyed in the PSIA study did not show a profit. Perhaps the time has come to investigate what factors influence success (or failure) of the ski school.
Along with its status as an industry carrying significant economic impact, ski instruction is expected to show fiscal responsibility and efficiency. This means that a major objective of management, despite all that has been said about other aims, must be to make a profit.
Studies by large corporations and by management consultant firms have identified factors such as location, type of ownership, quality of management, and volume of operations among the influences on revenue and profitability of a business. Such studies invariably conclude, with a cautionary note, however, that each industry has its own peculiar factors which affect it to a greater or lesser degree.
The effects of factors that influence ski school revenue and profit have not been studied in a manner that befits a potential $30 million industry. This has been due in part to a lack of industry-wide data. Such information, although lacking detailed operational data, is now available in the PSIA survey. The PSIA study was conducted primarily to gain information for ski instructors but, in the process, revenue and profitability data also were gathered.
PSIA sent a questionnaire to the director of every known ski school in the United States. Questions were asked concerning the 1972-73 skiing season only. Forty seven percent of the questionnaires were completed and returned. Those 300 responses form the basis for what follows.
FACTORS STUDIED
Seven factors were identified for study as to their effects upon revenue and profit. They are
- Location (by region of the country)
- Classification of ski area (day, weekend, vacation)
- Length of ski season (days of operation)
- Average class size
- Type of ownership (concession, area-owned)
- Type of management (proprietorship, partnership, corporation)
- Type of director compensation (salary only, commission only, salary plus commission)
The accompanying table shows the breakdown of revenue and profit figures for the 300 ski schools. Revenue is defined as total gross receipts of the school. Profit is gross profit expressed as a per cent of total revenue. The behavior of revenue and profit with the categories tabulated is apparent. However, several factors work together—sometimes in unique ways—to influence revenue and profit-ability, so further discussion of their influence is warranted.
Location: There are major differences in ski school revenue and profit with location. The larger Rocky Mountain revenues are due partly to the predominance of vacation ski areas and the longer ski season (median length in the Rockies was 137 days). Ski schools in the West are predominantly concessions and such operations are usually smaller than area-owned ski schools. A relationship meriting further study is that the lowest profit percentages are found in the East where instructor starting salaries are also the lowest.
| Revenue — Median (1) | Revenue — Mean (2) | Profit (as % of Revenue) — Median (1) | Profit (as % of Revenue) — Mean (2) | |
|---|---|---|---|---|
| Region of Country | ||||
| East | $16,900 | $38,700 | 6.0 | 11.6 |
| Midwest | 15,000 | 25,600 | 11.5 | 16.1 |
| Rockies | 25,000 | 103,900 | 9.5 | 15.5 |
| West | 11,700 | 27,600 | 7.5 | 12.5 |
| Classification of Ski Area | ||||
| Day | 17,200 | 29,600 | 6.8 | 11.5 |
| Weekend | 8,900 | 18,700 | 7.6 | 15.7 |
| Vacation | 19,200 | 78,600 | 8.5 | 14.3 |
| Operating Days of Ski Area | ||||
| Under 80 | 8,200 | 15,100 | 4.3 | 10.1 |
| 80-119 | 19,600 | 51,600 | 10.0 | 16.5 |
| 120 & Over | 25,800 | 65,600 | 8.1 | 12.6 |
| Average Class Size | ||||
| 1-6 | 9,900 | 24,800 | 5.0 | 11.4 |
| 7-8 | 20,900 | 60,400 | 10.8 | 15.6 |
| 9 or More | 15,900 | 43,200 | 6.6 | 12.0 |
| Type of Ownership | ||||
| Concession | 13,600 | 33,800 | 6.8 | 12.9 |
| Area-owned | 19,300 | 55,200 | 9.3 | 14.2 |
| Type of Management | ||||
| Proprietorship | 10,300 | 32,200 | 7.3 | 14.2 |
| Partnership | 10,800 | 17,000 | 6.9 | 14.1 |
| Corporation | 19,700 | 61,300 | 8.2 | 12.6 |
| Director Compensation | ||||
| Fixed only | 16,900 | 41,600 | 5.9 | 10.2 |
| Variable Only | 10,800 | 18,600 | 8.8 | 15.3 |
| Fixed Plus Variable | 21,800 | 68,100 | 8.7 | 14.9 |
| All Categories Combined | $16,300 | $44,400 | 7.6 | 13.2 |
(1) Median figures are typical in the sense that half the schools operate above that figure, half operate below.
(2) The mean is the familiar “average” obtained by adding all values and dividing by the number of respondents. In an industry with a few giants — a few ski schools gross over $1 million yearly — the mean is inflated and is atypical. Its inclusion here is for the purpose of delineating total economic impact of the ski school induustry.
Conversely, the largest profit percentages, as well as the highest instructor salaries, are in the Midwest. It is premature to cite cause and effect, however.
Classification: As expected, ski school revenues are generally higher at vacation ski areas, at least partly because of the longer ski season (median length was 125 days whereas day and weekend areas had a median season of under 90 days). Higher lesson prices at vacation areas also help boost the revenue. Vacation skiers who stay at a destination ski area for days or weeks are perhaps more likely to take ski lessons than are persons out for a one or two day ski trip. The profitability variations with classification of ski area are not significant because of the large variations within each category.
Length of Season: Ski school revenue generally increases as length of the ski season increases. The profit percentage is lowest for schools at ski areas which are open fewer than 80 days. The profit percentage also shows a marked decline for those schools at ski areas open 120 days or more, even though the revenues are higher. The reasons for this are unclear.
Class Size: The ideal average class size, from both revenue and profit considerations, is 7 to 8 students. Over 40 per cent of the schools reported an average class size of 7 to 8 students for group lessons. Classes that are too small are understandably less profitable. Many of the larger classes are of the mass, pre-enrolled, learn-to-ski type where the profit motive is often secondary or non-existent.
Ownership: Area-owned schools are more profitable and have larger revenues than concession schools. But when the effect of ski area classification is considered (68 per cent of vacation area ski schools—with their higher revenues—are owned by the ski area), the influence of type of ownership becomes non-significant.
Management: Ski schools managed by corporations have higher revenues than schools run as proprietorships or partnerships. This is partly due to the prevalence of corporation management at the larger vacation ski areas where the ski season is generally longer. The profit percentage variations with type of management are not appreciable.
Compensation: The directors of ski schools are generally compensated in one of three ways: salary only, commission only, or salary plus commission. Directors paid a salary plus some form of profit sharing produce the largest revenues and this method of compensation is gaining in usage. However, at most concession-owned ski schools, directors are still compensated on a purely variable basis with no fixed income. Further analysis reveals that, for schools at day areas, revenues are highest when the director is paid a fixed salary only. But for weekend and vacation areas, salary plus profit sharing has proven most effective in generating larger ski school revenues. One of the most useful conclusions is that a straight salary with no incentive to increase profitability resulted in the lowest profits.
The factors discussed here should not lead one to immediately conclude a cause and effect relationship. But they should be helpful to management in more fully understanding what possibly affects revenue and profitability of ski schools. As the ski industry grows, we should expect and get better data on ski school operations. No self-respecting $30 million industry would do otherwise.
