After listening to a dozen speakers at Ski Magazine Week in Vail, Colorado, I have a dominant impression that the ski industry finally will be coming of age in the 1990s. From experts as diverse as economists, enviromentalists, market researchers, business consultants, advertising agency creative heads and a U.S. Senator, we heard of developments that ten years ago would have been characterized as utopian. Virtually every speaker used language implying a “new,” “emerging,” “more stable,” “mature,” “sophisticated,” “intelligent,” “politically savvy,” “concerned” industry. It was not as if problems were ignored. Indeed, many of the enduring concerns of the industry remained center-stage, e.g., overdevelopment, uncertain weather, high cost, competition from beach resorts for the discretionary recreational dollar. But for the first time, industry problems were placed in a more manageable perspective as ‘limitations’ and ‘constraints’ that could be overcome or at least balanced.
All this might be dismissed as early season optimism. But that would be wrong. Enough has changed — or is changing — to support the thesis that the ski industry is coming of age in the 90s. Leading the way are significant changes in 1) Infrastructure; 2) “Thirty-something” demographics; 3) Consolidation; 4) Marketing; 5) Financing; 6) Management; and 7) Political sophistication.
Infrastructure
On one overly simplistic model: first there were mountains and snow and skiers. Then, in the past 20-30 years, there has been a mad rush to build the infrastructure needed to support skiers doing their thing. Interstate highways. Real estate development. Better airports and air service. Mountain snowmaking and new lifts and grooming. Retail development. While infrastructure development will continue, we may finally be entering a period in which infrastructure is more developed than the skier population and will serve to pull additional skiers to the slopes. Such a premise is fortified by last year’s remarkable growth in retail sales in several destination resorts (up 30 percent in the Vail area) — a growth that far outstripped the increase in skier days. In the years ahead, a new Denver airport and direct flights to many destination areas will continue this “infrastructure pull.”
Thirty-something Demographics
The average age of the U.S. skier is moving into the mid-30s and with that maturing comes a broad-based change in lifestyle that should benefit the ski industry. Higher levels of household income. ($70,000 for the average Ski subscriber household.) More are married. More with children. Higher levels of education.
Moreover, this generation has a series of personal values — good fitness and nutrition, outdoor enthusiasts, naturalness — that have been incubating for decades. As this generation and their families increase their disposable income, they should be a key source of more skier days in the 1990s.
Consolidation
We have watched for many years as the number of competing companies has diminished in several skiing product areas. The dominant companies have become even more dominant — e.g., Rossignol, Solomon. The largest destination resorts continue to grow larger — e.g., Vail, Aspen. (Colorado now approaches a 50 percent share of all destination skiers.)
The results of this consolidation are not clear. But if other industries offer a guide, this consolidation is likely to lead to greater profitability and, over time, to higher levels of capital investment in the ski industry.
Short-term, we are already beginning to see the kind of innovative behavior often associated with a market leader that has the resources and desire to innovate. Best examples: the stirring print ads for Aspen and the arresting Tomba ads for Rossignol.
Marketing
During the past ten years, the ski industry has embraced marketing as a real discipline. It’s a much greater effort at market segmentation and targeted marketing.
We can still criticize the overemphasis on skiing as a concept of speed, power, youth and hot-dogging but the very fact of the common criticism tells us that most industry peole are seeking better, more useful and durable segmentations.
Most major areas now have a marketing director — an important position that is typically filled by a person with marketing experience from another industry. Decisions about lift ticket prices or promotional programs are now more informed if not always right.
Yet even with new expertise, many marketing challenges persist. The best companies in the 90s will be able to address some of the more difficult ones, e.g., How to increase mid-week usage? How to encourage “repeat” as well as “trial” use? How to market to families.
Financing
Apparently, there is an adequate supply of capital to finance the industry’s continued expansion. Despite what may be one of the lowest returns on capital of any industry, skiing has attracted considerable new capital in the past few years.
Certainly the new influx of Japanese capital and ownership creates a new reservoir of funding. The successes of Vail and Aspen indicate the strongest areas and companies will have access to plenty of capital.
Management
There is now a class of people in the ski industry that we can legitimately characterize as “management.” Not founders or entrepreneurs, but management. This may sound ominous and vaguely bureaucratic. What it really means is that strong companies have attracted bright people who have grown in business sophistication.
This is not, and probably will never be, an industry of MBA degrees. But it is one in which people increasingly understand and discuss important issues from a “management” perspective that blends strategic, operating, financial and marketing viewpoints. The best areas will be owned and operated by managers with the ability to understand and balance such diverse demands as real estate development, financial aspects of investing in snowmaking and high speed quads, employee motivation, and competition from Caribbean resort vacations.
Political Sophistication
The ski industry has done more than make peace with the politicians. It has virtually incorporated the political process in its development. Senator Wirth spoke for many political leaders when he recognized the centrality of the “attraction” industry — recreational purists, including skiers — to economic growth in many parts of the country. Destination skiers don’t pollute and they spend $145 per visit at retail compared to $30 per visit for day skiers.
Similarly, the adoption by the ski industry of environmental themes turns out to be both good commercial practice and environmentally productive. Concern and conviction are more than just words for the environmentalists; they are part of an effort to assume global leadership that also happens to be bursting with commercial potential.
These are all positive trends for the skiing industry — an industry about to emerge from a “cottage industry” status to a small, but vibrant, global business.
Donald J. Gogel, a principal in the investment firm of Clayton & Dubilier, Inc., has developed a minor avocation of commenting on trends in the ski industry. These remarks are excerpted from his speech to the 19th annual Ski Magazine Week on Dec. 8th, 1989.
