On the Clicking of Worry Beads
How to sort them out? Which to worry about first? Or most? Frankly, we think the ski area industry has most to fear from inflation.
The energy thing is with us, it’s not going to go away and our industry is adapting. We can wring our hands only so much. Sure, summer tourism took a hosing from the gasoline shortage, real and perceived, but we think there is a world of difference between the attitudes of the summer and winter tourist. Painted in broad strokes, the summer vacationer will get in his car with the family, get on a tourist route through New England, the Adirondaks, the 1,000 islands, the Tetons or the California Redwood country and go. There is a lot of impulse decision-making as the family group meanders for a given number of days. Faced with uncertain gas supplies, this sort of vacationer stayed closer to home this summer, and the more remote of the summer tourist attractions, which normally feed off this vacationer, suffered.
But in winter, the ski travel is directed. The skier knows exactly where he wants to go. With reasonable supplies of gasoline in ski country this skier, hopefully with his friends and/or family, will drive, where his wandering summer counterpart was scared off.
With forced weekend closings unlikely, we see minimal impact from energy shortages on the ski area industry. Some impact, yes, and probably selectively felt by the more remote ski areas that are reached only after the skier passes by closer-in and equivalent skiing.
Certainly, all the awareness that NSAA, ASF and others are preaching is called for. But, from a marketing point of view, we think the key is communication. Facing no information about gas supplies, the skier may hesitate. But reassured by reliable information from authoritative sources, the skier will drive to ski. It will be just as important to inform the skiing public about gas as it will to assure the gas supply itself.
One final point on the gas shortage and marketing: We sincerely hope that the instinct for self-preservation will not induce some areas to knock their competition on the basis of traveling distance. There was more of this sort of thing in 1974 than there should have been, and we like to think our industry has matured since then.
With regard to that old standby, “deepening recession,” we continue to stick by that old standby answer, borne out by the statistics, that the ski industry is “counter-cyclical” and “recession-proof.” Of course, it isn’t totally immune, but as much as any industry can be, ours is.
The first and most visible impact of a recession is rising unemployment, and, let’s face it, the folks who go skiing are generally not the ones who get laid off. Perhaps if a whole industry were hit hard—say the aero-space industry in California—there might be a regional impact on the ski area industry, but this would be the exception. Futhermore, although it might not say much for the values of our skiing customers, we suspect that a laid-off skier might well use his unemployment check to pay for a ski trip and let the mortgage payment slip.
To the extent that the money market is affected by government “remedies” for recession, certainly there is impact on our industry in terms of area expansion and new area construction. And undeniably there is a negative psychological reaction by the consuming public to the mere awareness of a recession, and this can put a damper on expensive and discretionary expenditures, such as ski trips.
But, as we said above, our worry beads do not click much when we think about recession. Indeed, to the extent that recession is viewed in the big picture as contributing to unemployment, it can actually benefit the ski area industry in its struggle to assure gasoline supplies. It has been estimated that weekend closings of gasoline stations would trade off a one percent reduction in gasoline consumption against a cut in travel industry employment of over 475,000 jobs. This is a powerful argument, especially in times of a recession. It is especially so since the travel industry is, in the words of Discover America Travel Organization (DATO), “An Engine of Employment,” which has produced significantly increased employment even in the 1973-75 recession when total payroll employment decreased by 2.2 million jobs. As expressed by DATO president, William D. Tohey, “This job creation continues through economic downturns as well as prosperity, making travel an important anti-recessionary force in our economy.”
When we come to inflation, though, the clicking of our worry beads sounds like a Geiger counter at ground zero. We think there are a lot of upper middle class skiers who are losing ground in their battle to maintain their desired spending power in a world of double-digit inflation. We can see some belt-tightening among our skiing customers, just as we have to practice it ourselves, and we see it having a measurable impact on our industry. We foresee the need to raise prices at ski areas in order to meet rising wages and costs, and we see the danger of a price resistance level being reached where skiers may opt out of the market—at least temporarily.
We suspect that more skiers will be more cost-conscious, and this factor may become the key to appealing to a ski family for its business. An “inflation-proof” pre-sold ski package may look especially good this year! And maybe these are the times to promote “no frills” skiing.
We’re exhausted by the work of solving our industry’s problems, and we must get back to our worry beads. Let’s see, there’s always “crisis in public confidence,” or “moral apathy among the young,” or “growing numbers of the aged.”
Click. Click. Click.
A Sam Editorial
The Great Numbers Game (Postcript)
What would an issue of SAM be without some more speculation on the number of skiers? Those of you who are bored with the subject, please move on…with our blessing.
Now, for the rest of you, our fellow publisher, Hugh Hefner, has come up with some interesting figures—numerical figures, those are. In a survey conducted for Playboy Enterprises by Louis Harris and Assoc., entitled (a tad pompously, we think) “The Playboy Report on American Men,” we find that ten percent of American men skied regularly in 1977.
A couple of definitions: the poll was conducted among men “in their prime years,” which Hef and Harris decided was between 18 and 49—with good reason, we suppose, though we take it with ill grace. There were about 46 million men in the U.S. at that time, and all the numbers are based on that universe.
That means that 4.6 million American males between 18 and 49 were regular skiers in the 1976-77 season, according to the Playboy report. This is stunningly close to the 4.9 million found by the Skiing Magazine study of the same year.
We also want to pass on to you some generalizations Playboy made on skiers, based on the statistics.
“What might be called experiential sports, such as skiing or scuba diving, and motorcycling or car racing, also generate a number of male enthusiasts. In such sports, the quality of the experience, sometimes centering on risk, is the dominant motivation.”…”In some sports preferences, social class does have an effect…The patterns of men 23 years of age and over show certain class differences. Upper-middle-class men are much more likely than lower-class men to participate in golf, skiing and tennis, while lower-and working-class men are more inclined than men in the middle classes to pursue weight lifting and motorcycling… “Certain sports attract the single and post-married fairly equally. These include motorcycling and skiing, both of which are expensive, risk-laden sports. Married men, on the other hand, are less willing to devote the time and money necessary for participation in such activities and they are also unwilling to accept the risk involved.”
One final and encouraging statistic from Playboy: unlike virtually every other sport studied, there was no decrease in participation in skiing between the ages of 30 and 49. The age bracket includes the World War II baby boom skiers, and it is encouraging to see they are hanging right in there.
David Rowan
(a non-prime years American Male)
Credit Association
First reaction by areas to the news item in this issue about the formation of Ski Area Suppliers Credit Association (SASCA) may be one bordering on outrage of the whothehelldotheythinktheyare variety. It shouldn’t be, though.
If anything, it is a sign of the growing maturity of our industry. Most suppliers to ski areas require cash, or ship COD, so it is a positive sign that there is enough credit being given out there to justify the formation of a credit association. Ski areas maintaining good payment practices can expect more credit to be extended, and that is positive. Also, it should be remembered that the cost of doing business with the relatively few ski areas with poor payment records is ultimately borne by all ski areas in the form of supplier costs that are passed on in the price of goods and services sold. So, in that sense too, a credit association can be viewed as beneficial to most ski areas.
Customers are not likely to stand up and cheer about the formation of a credit association of their suppliers. But we urge areas to react to the formation of SASCA in the positive light we have put it in.
A SAM Editorial
Sweet Mystery
Addressing the annual meeting of Colorado Ski Country USA on the emerging women’s market, Rena Bartos, Senior VP and director of communications for J. Walter Thompson, said:
“Industry would be better off aiming at where woman is going, rather than where she’s been”.
Come on, Ms Bartos! You’re right, of course, but man has been trying to find out where woman is going since the world began. In song it is called “The Sweet Mystery of Life,” and we’ll drink to it, not aim at it.
MCP (anon)
New Forest Service Chief
R. Max Peterson became the 11th Chief of the Forest Service on July 1, 1979. With 174 ski areas either wholly or partially on National Forest land, the ski industry has a vital interest in the person who heads this agency, and what his philosophy is. From all reports, we are fortunate.
We provide three Peterson quotes to help our readership get a measure of the man:
“The Forest Service has always supported a strong partnership of the public and private sector in the skiing industry. We are anxious to see carefully located and developed ski areas on National Forest lands provide sufficient high quality skiing opportunities to meet the demand and also to provide a reasonable return for the investor. Of the more than 400 ski areas in the U.S., 174 are wholly or partially on National Forests.”
“A Federal Agency such as the Forest Service cannot commit the use of public property to land disturbing activities without having done certain required studies. The capacity of the ski slopes, lifts parking areas, access, lodging and other support facilities require careful planning and must be considered prior to decisionmaking. This process is time consuming, but involving the public results in decisions that are mutually beneficial.”
“There were approximately 150 potential ski area sites for downhill skiing identified in all the RARE II areas. About 15 potential ski areas, varying from outstanding to marginal in quality, were affected by RARE II wilderness recommendation. All of the rest were either in the non-wilderness or the further planning categories. We believe these numbers demonstrate the Forest Service commitment, both to high quality wilderness areas and downhill skiing on the National Forest.”
On official specimen bottles
Controversy continues to swirl around the Lake Placid Olympics — allegations of shoddy construction, local profiteering, money shortages and so forth. Which is to say that everything is “normal.”
And so, we were happy to see that the commercialization of these games is right on target, too, with dozens of firms lined up to be “official supplier” of this and that. Among the recent additions is C.F. Mueller, official supplier of macaroni and dry pasta products — 20,000 lbs worth — and the Empire State Bottle Co., who will supply heat-shrink seals and security tubes for medical specimen bottles.
We’ll be happy to get to those few fleeting, beautiful minutes next winter when the Olympics belong to the athletes.
A SAM Editorial
Thoughts on Pricing
by Bradford Moore & Jack Bickart
All ski area operations are faced with the same basic problem; survival in an environment of rapid inflation. New lift installations often exceed one million dollars. Grooming vehicles, made even more essential by today’s insurance problems, can easily exceed sixty thousand dollars — before the addition of the optional equipment that makes them the marvelous machines they are. Even the old “ski bum” has taken on airs and must be offered benefits unheard of only a few years ago. The minimum wage rises with the regularity of the spring thaw, and economists, both governmental and private, predict in unison, more of the same.
The answers to the above, all seem to agree, is to increase revenue and tighten cost control. Cost control is something we have all struggled with for years, and presents only a finite number of opportunities for constructive change. Therefore, area operators seem to be counting on increased revenues to take up the larger part of their profitability slack. Unfortunately, most operators appear to have taken the simplest and most direct route to increased revenues: increased day ticket rates. I say “unfortunately” because this course of action, if carried too far, may not work for the area and certainly will not work for the ski industry as a whole.
The problem is elasticity of demand. E. Jerome McCarthy, in his classic introductory marketing text “Basic Marketing” points out that “with elastic demand, total revenues will decrease as a price is raised, while with inelastic demand, total revenues will increase as a price is raised.” Stated another way, if a ski area having a hundred thousand skier visits raised its rates from $15 to $16 and all other factors remain constant, revenues will increase from $1,500,000 to $1,600,000. From this example we could conclude that the demand for skiing services is inelastic. However, should a percentage of those 100,000 skiers decide to pursue the less expensive pleasure of cross-country skiing, our inelastic demand begins to look elastic. Say 10 percent of our sample group of 100,000 skiers took up cross-country skiing, the total revenue for the area falls to $1,400,000, or $60,000 less than the prior year! Academically speaking this occurrence would be described as “elastic demand.”
The question is, is the demand for ski services “elastic” or “inelastic”? I don’t think anyone really knows.
My personal feeling is that the demand for skiing services might be much more elastic than most of us would wish it to be. Has the whole percentage impact of your rate hikes carried through to increased gross or are you having to increase rates two percentage points to raise gross one percentage point? Although total revenues at resorts that have bullishly raised rates has not generally fallen, how much of this is attributable to other factors such as better snow fall?
You might ask at this point if the annual one dollar (or more recently two dollar) increase in daily ticket rates may be losing its old potency in off-setting inflation, what then can we turn to? Areas, of course, come in different sizes and types, so no one of the remedies can be prescribed as a universal inflationary cure. The following questions should be asked of your key managers as a means of developing alternative inflation countering revenue gains:
- Are you just selling skiing or vending to the broader markets for vacations and entertainment?
- How many market segments (group, five-day family, business conferences, singles, the local high school, etc.) are you appealing to and do you separately plan for each?
- Have you explored the use of packaging as a means of sharing weather risks of skiing?
- Can you afford to let someone else have the headaches and opportunities of running your food, ski school, ski shop and other related concessions?
- Can you afford to market just to the local area, state, region or country?
- Should all weekend, mid-week and holiday periods be sold the same way, or are the opportunities for sales greatly variant from one to the other, necessitating a “calendar marketing approach”?
- Is your rate tied to booking practices of the valley’s independent innkeepers?
- Are you using all the distribution channels appropriate to your situation such as travel agents, indepent agents, tour brokers, sports shops, transportation firms, etc.?
- Would your organization be stronger with additional business interests related (i.e. condominium development) or unrelated to your skiing interests?
- Can you afford to use assets only seasonally and if not, what opportunities are open to you?
- Is your marketing staff of sufficient size and talent to raise revenues without over-reliance on price increases?
In spite of all the options open to the alert ski area operator, the $20 lift ticket is certainly not more than several years away. It should be interesting for all of us to watch and see if the snowsnakes of elasticity trip up those first to cross this ominous threshold.
