WHAT’S A SKI AREA WORTH TODAY?
Ski Morin-Heights, third largest-volume area in Quebec’s Laurentians with 200,000 skier-visits annually, just sold for $5 million. It had been in bankruptcy. Purchase was engineered by Jacques Hebert of publicly traded Ski St. Sauveur, which owns Jay Peak.
Hebert says his formula for evaluating a ski area is that sales volume equal the (depreciated) cost of fixed assets. The purchase price for Morin Heights, he says, was equal to revenues for one year. Revenues of Killington, which Hebert regards as the industry leader, have historically matched its fixed asset value number, he says.
The bad news is that a ski area had to fail financially before Hebert’s price formula could apply. What does this say about the value of ski areas generally?
HOW SKI, BOOT, BINDING VOLUME PLUNGED
In the last four years, national skier-days have moved up and down, but wholesale shipments of equipment went only one way. . . down, and steeply. Consider this: for the 1988-89 ski season, (SIA) suppliers shipped about 1.35 million units each of skis, boots and bindings to U.S. retailers. Last season, according to USIA’s annual Sales Survey done by Bill Lawliss, shipments fell to a level of 774-782,000, a drop of about 42 percent. In the resort business, that would have been the equivalent of national skier-days falling from 50 million to 30 million.
Dollar volume of equipment sales fell somewhat less steeply, because importers and manufacturers raised their prices by a modest 13 percent over four years.
As I reported in the last issue of SAM, the good news is that inventories of unsold product are relatively slim. For example, as of March 31, 1992, the inventory of non-current ski models (skis made to be sold prior to the coming 1992-93 retail season) held by suppliers was 51,700 pairs, or 6.7 percent of 1991-92 suppliers’ sales to retailers.
But here’s a curious thing. Despite the severity of the ski equipment sales slump, membership of product suppliers in USIA has fallen only 8.4 percent below SIA enrolment five years ago. Ski area membership in USIA, on the other hand, has dropped 34 percent in the same period — from 425 areas in 1986-87 (NSAA) to 280 in 1991-92.
OVERDUE PAYMENTS FROM SHOPS DROP SHARPLY
Meanwhile, the wholesale credit picture is improving. We know, because when ski shops can’t pay suppliers of boots, apparel and other ski products in relation to a specified invoice date, an organization called the National Ski Credit Association adds up the indebtedness. In May of 1991, that indebtedness reached a record $71.4 million. By May of this year, however, the deadbeat total had been slashed in half, dropping to $34.8 million.
A buoyant recovery of the ski business, I regret to say, did not cause all of this miraculous decline. Part of the debt reduction was achieved by retailers paying their bills (some under the threat of not having goods shipped to them for the 1992-93 selling season). But an uncalculated amount was erased from the NSCA’s accounts either because suppliers totally wrote off the debts (particularly in the case of unrecoverable store bankruptcies) or because they redated invoices as a means of allowing retailers more time to pay.
Who owes the most? Shops in California and Colorado account for about 36 percent of overdue payments. Five New England states, doing as great a volume of business, account for only 15 percent.
SKI INJURY RATE FALLS, BUT. . .
USIA staged a June convention in Orlando, in a first-class hotel, that was as slickly run a ski area operator meeting as has been held. Trouble is when a team is in a batting slump, like USIA’s McLean, Va. office is, nothing can go right. So its well-planned, well-executed Orlando program drew low attendance. Also at the meeting, USIA managed again to put a wrong spin on research, issuing news releases about ski injuries that were partly erroneous, even though figures provided by USIA counsel David Cleary were excellent.
- USIA reported that the national injury rate “has remained virtually unchanged over the last decade,” when, in fact, it has declined 11.4 percent since 1980.
- It said the number and rate of serious ski injuries (including fatalities, paralyzing accidents, etc.) “rose slightly,” when the number actually jumped by 36 percent and fatalities in 1991-92 were the second highest on record.
- It compared 2.95 injuries per 1,000 skier-days with bicycling’s “nine injuries per 1,000 participants,” which is not only like comparing apples and gravel, but aroused an official at the National Safety Council, whom I called, to describe the USIA statement as “totally inaccurate.”
In any event, let me tell you that studies by Jasper Shealy, at New York’s Rochester Institute of Technology, found 23,011 injuries in a sample of 7.8 million skier-days at 15 resorts in 1989 and 1990. That’s equal to an injury rate of 2.95 per 1,000 skiing experiences, a drop of 11.4 percent from a rate of 3.33 found in a comparable study by Shealy in 1980.
Next, while the general injury rate for skiers can’t be compared to other athletes, fatalities can. For example, skiing’s 35 deaths last winter are less than underwater diving’s 114 in 1989 and boating’s 865 fatalities in 1990.
Finally, serious (other than fatal) injuries to skiers —like paralyzing falls and head accidents — have tripled since 1985. More than half of these serious injuries last winter happened to males aged 15 to 29. And of the 35 skiers who died last winter, 31 were male. No snowboarders were killed. Cleary, we need to beam an even stronger safety message specifically at young men who ski fast and negligently.
AGNELLI BUYS 1997 WORLD SKI CHAMPIONSHIPS
If Vail hopes to win the 1999 FIS World Alpine Ski Championships — the mega-event it successfully hosted in 1989 — it faces a financial challenge. Up to and including the recent FIS Congress in Budapest, Hungary, the Swiss resort of Laax, which was favored to win the 1997 Championships, had spent $1.3 million over several years promoting its candidacy. Yet Laax lost a lopsided vote to Sestriere, Italy, which only decided a few months ago to bid. Why?
Sestriere simply outspent Laax. According to newspaper reports and a well-fed rumor mill, votes of smaller nations were virtually bought with lavish travel expenses, entertainment, promises of cars and more. Sestriere is owned by the deep-pocket Agnelli family which controls the huge industrial empire, Fiat.
For 1999, Vail is hoping the FIS will place some restraints on candidates’ promotional expenses and it’s counting on delegates to vote for the Colorado resort because of its outstanding job in running the 1989 Championships. How much will it spend? Including expenses already incurred and looking ahead to the voting at the ‘94 FIS Congress in Rio de Janeiro, about $400,000, a Vail spokesman told me.
THE 1992-93 RACE SEASON
A record 1,100 people showed up in the Hungarian capital for the FIS Congress, including more than 40 Americans. The U.S. lost a seat on the important Alpine Executive Committee and will host only one men’s World Cup meet next winter, at Aspen. The women, however, will spend almost a month — the entire pre-Christmas phase of the World Cup — in North America.
Also at the FIS Congress, the U.S. won approval for an increase in the size of commercial logos racers wear. And there was little resistance to increasing prize money for racers. But when I asked about the total amount of money racers won last winter, the FIS said it didn’t know … which doesn’t indicate a high level of interest.
What’s certain is that next winter World Cup prize money will be dwarfed by the U.S. Pro Tour which claims its sponsors, like Chrysler, Coors and Myers Rum, will be writing checks for more than $3 million in prizes. Aspen, Vail/Beaver Creek, Sugarloaf, Heavenly and Loon are scheduled to host Pro races next winter.
HOW OTHERS CASH IN ON SKIING
Here’s further evidence of how realtors and merchants in ski resorts profit from the ski industry without contributing much to marketing the sport. At Breckenridge, where skier-visits rose and fell over the last five years and ski company revenues are up perhaps 65 percent, local businesses benefited as indicated by the following: Property transfers up 85 percent; new construction value up 107 percent; sales tax collections up 58 percent; accommodation tax collections up 75 percent. I thank Dave Peri in Breckenridge for the numbers.
At Aspen, where skier-visits have been flat for years (though up last season from a year ago), Ken Moore estimates 24 homes worth more than $2 million each have been sold in the past year. (Figure the commissions on that!) “Real estate is an industry that employs many people,” notes Aspen gadfly Moore. “In addition, it provides a major portion of advertising profits for local resort media.”
