Data from a record response of 115 ski areas shows that the ski industry continues to gain in its battle for profitability. The 1975-76 edition of Economic Analysis of North American Ski Areas shows a record 84 percent of respondent areas recorded operating profits, although average profitability was slightly down. Again snow is shown to be the critical ingredient as return on investment dropped mainly in the west where California areas suffered an early winter drought. Operating profit as a percent return on Gross Fixed Assets averaged 10.5 percent, down slightly from the 11.3 percent recorded in 1974-75. Rockies ski areas were the 1975-76 leaders with a 14.2 percent rate of return, up 34 percent from the 10.6 percent registered in 1974-75.
Table 1 again relates the ski industry to the leisure time indices reported in “Forbes” 28th Annual Report on American Industry (January, 1976).
Table I
| Five Year Return On: Total Capital | Five Year Return On: Equity | 12 Month Return On: Total Capital | 12 Month Return On: Equity | |
|---|---|---|---|---|
| Leisure Industry | 10.1% | 13.5% | 8.1% | 11.6% |
| Recreation Sub-group | 10.4% | 14.1% | 5.3% | 6.6% |
| Ski Area Industry | 6.4% | 8.7% | 7.7% | 10.5% |
Table 2 illustrates the changes in ski area profitability over the past five years.
Table II
| Basic Measures of Profitability | 1975-76 | 1974-75 | 1973-74 | 1972-73 | 1971-72 |
|---|---|---|---|---|---|
| Operating Profit on G.F.A. | 10.5% | 11.3% | 7.5% | 5.6% | 11.6% |
| After-tax Profit on Equity | 10.5% | 11.4% | 6.1% | 3.4% | 12.0% |
| Percent of Ski Areas Reporting Profits | 84% | 73% | 46% | 52% | 71% |
While average returns are still sub-standard, the latest 12 months data again compares favorably to the leisure industry and exceeds the recreation sub-group. The five year averages both increased slightly.
This, the eighth annual report, again represents ski areas with 47 percent of the skier capacity in the nation. The 115 respondents is a gain of 15 percent in numbers over 1974-75, although only a 6.2 percent gain in representive capacity. The report has for the third time been produced by the University of Colorado, Business Research Division in cooperation with the NSAA Economic Studies Committee. The survey format is identical to the 1974-75 study for easier interpretation. The large detailed report features an executive summary and chapters covering ski area characteristics, average income statement and balance sheet data, the eight critical economic ratios, profitability, data on supporting services and employment, and various similarities and differences by geographic location, size, type, and average equivalent days of operation.
Table 3 summarizes the eight critical variables. These economic ratios are shown here by geographic locations to illustrate the divergence.
Table III
| All North America | New England | East | Midwest | Rockies | West | |
|---|---|---|---|---|---|---|
| Health | ||||||
| 1) Debt to cash flow | 3.3x | 5.2x | 3.2x | 4.3x | 3.6x | 1.9x |
| Profitability | ||||||
| 2) Operating Profit/GFA | 10.5% | 6.7% | 8.1% | 6.0% | 14.2% | 9.3% |
| 3) Profit (BT)/Equity | 18.7% | 10.9% | 17.4% | 5.8% | 26.3% | 17.4% |
| Performance | ||||||
| 4) Avg. Utilization | 46.0% | 44.0% | 60.0% | 44.2% | 55.3% | 35.9% |
| 5) Days of Operation | 106 | 84 | 70 | 97 | 130 | 122 |
| 6) Rev./Skier-visit | $7.82 | $8.12 | $7.13 | $6.82 | $8.11 | $7.72 |
| Policy & Planning | ||||||
| 7) Capital Cost/capacity | $998 | $991 | $910 | $684 | $1,341 | $803 |
| 8) Oper. Cost/capacity | $2.38 | $2.61 | $2.85 | $2.35 | $2.75 | $1.86 |
| Base No. Ski Areas | (115) | (21) | (18) | (15) | (33) | (28) |
The 1975-76 study contains a revision to the calculation of capacity. The figure shown for average days of operation is a weighted average of days when all facilities were open and skiable, when more than half but less than full were open, and when more than half of the mountain was open. Thus the 106 equivalent days represents 127 actual days when some part of the mountain was open and skiable. This revision more accurately reflects reality and thus provides a better statement of utilization and a more useful daily-cash-operating-cost to skier-capacity ratio. For example, the equivalent days of operation for western ski areas were 84 percent of actual while Rockies areas were 94 percent and Midwest, Eastern and New England areas show 80 percent, an obvious reflection of snow cover.
The disastrous snow drought in California affected utilization and revenue per skier-visit as well as profitability. Operating profit to G.F.A. was down 45 percent.
One interesting analysis is to compare ski lift ticket actual revenue per skier-visit to the average adult ski lift ticket price to evaluate the extent of discounting and its possible results. The total sample shows average lift ticket revenue of $6.62, or 78 percent of the $8.52 average adult lift ticket weekend price. This basic measure of discounting compares with 81 percent in 1974-75. Those 48 ski areas in the top half profit category show 78 percent, while bottom half profit areas are 72 percent. The loss areas realized a huge 85 percent, but suffered from a low 30 percent utilization. A geographic analysis is even more revealing. Eastern ski areas show 65 percent and Midwestern but 61 percent. Rockies and Western ski areas achieve 84 percent, a major reason for their superior performance. Discounting does not appear to be correlated with utilization when compared geographically as average utilization was highest in the East and Rockies and lowest in the Midwest where discounting appears at its highest.
The 1975-76 study contains an accurate measure of growth for the first time. This 47 percent of the ski area capacity in the nation shows absolute growth in skier-visits over the past five seasons at an annual rate of 7.8 percent. Total skier-visits grew from 1.2 million in 1971-72 to 1.6 million in 1975-76, an increase of 32 percent in five seasons. As we might expect, growth was highest (11.3 percent annually) among the top half of the profitable ski areas, and non-existent (-0.8 percent annually) among those recording losses. Geographically the Rockies again lead with an average annual growth of 12.6 percent, while New England areas recorded peaks and valleys averaging only 1.2 percent annual growth.
Copies of the 1975-76 Economic Study of North American Ski Areas may be obtained from the Business Research Division, University of Colorado, Boulder, Colorado. The cost is $25.00.
