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May 2012

The Wake-Up Call

The 2011/12 season may go down in history as one of the worst for ski resorts. But there were some lessons to be learned that can help in the future.

Written by Skip King | 0 comment

Well now… that pretty much sucked, didn’t it?

In normal winters, one or two of the nation’s major skiing regions generally have disappointing weather and lackluster results.

But to have it that lousy, for that long, and that widespread? Nearly everywhere in the nation, this was a winter in which cost control was king. Aggressive social media programs went from smart to essential; snowmaking systems with instant startup proved their value; and tactical marketing upstaged branding.

Note to newer members of the skibiz: while this winter was undoubtedly an eye-opener for you, the industry’s graybeards have seen it before, and you’ll probably see it again before you retire. Assuming you stick around. But as has happened before, this winter forces ski areas nationwide to take a hard look at staffing needs going forward, and it leaves the industry with a question as yet unanswered: Will guests recognize this as a one-off, or do we already have a real problem for next year?

From December onward, it was hard to find news reports that didn’t highlight the atypical weather, and many of those reports dwelled on snowsports impact. What happened? Veteran meteorologist Joe D’Aleo (the first chief meteorologist for The Weather Channel, and currently co-founder and chief forecaster for long-range forecasting firm WeatherBell Analytics) blames the worst of the winter on a complex and unfortunate phasing of normal circulatory oscillations in the Indian and Pacific Oceans.

The result: “Alaska got very cold and very snowy, very early,” D’Aleo says. “When it’s unusually cold in Alaska, it produces a strong Pacific jet stream going across the continental United States, so precipitation was below normal almost everywhere. And with little to no snowpack to keep the atmospheric column cooler, what precipitation we did get tended to be rain.”

Global circulation patterns kept the cold air bottled up way to the north in the first part of the season. “We correctly forecast when that would change,” D’Aleo says. “What we had trouble with was where it changed. Europe. The Mideast. Asia. They even had significant snowfall in Africa. By the time all the numbers are crunched, this will most likely prove to be a fairly normal year in terms of temperature and precipitation averages—globally. But not for the U.S.”

Odds are we won’t see another winter like this one anytime soon; D’Aleo believes current patterns are promising for next winter. Still, what can we learn from this past season about operating in very lean years? In early and mid-March, we asked that question of resorts around the country. Here’s what we heard.


CALIFORNIA: EPICENTER OF MISERY
2010-2011 was also a La Niña season (colder than average Pacific Ocean temperatures), but an atypical one; north to south, it produced near-record snowpack along the Pacific Crest, and at least passable weather in most other regions. But this year it was clear by mid-December that a more typical La Niña pattern—warm and dry—was setting up, and that forced California resorts to cut budgets deep and hard.

“Peak employment for us in the past has been around 1,200,” says Mountain High president Karl Kapuscinski. “We peaked at just over 800 this year. We never filled a lot of part-time and full-time seasonal positions. We reduced hours. We eliminated positions, including 10 of 40 key seasonal slots. From late December onwards, it was cost control on steroids around here.” (See SAM September 2011 for more on Mountain High’s hiring process.)

Kapuscinski projects that expenses for the season will be down about 30 percent, year over year. He says that Mountain High never really suffered poor snow conditions, but news and social media reports from elsewhere overwhelmed that fact. “It used to be that when Tahoe didn’t have much, we’d have decent years,” he says. “This year, the saturation of national and regional media took as much as half of the traditional market right off the table,” he says.

Mountain High did everything it could think of to drive business by promotions, such as offering discounted lift tickets to passholders from the snow-starved Sierra. “Nothing we tried moved the needle,” Kapuscinski says.

Having cut back on staff, Mountain High cut back on media, first gently, then sharply. And, facing higher snowmaking temperatures and rising energy costs, it also curtailed snowmaking.

“We concentrated those efforts and costs where we knew there would be returns: the parks and the learning terrain,” Kapuscinski says. “Our parks were probably the best they’ve ever been, and that helped.”

Mountain High markets aggressively to Asians and Hispanics, and learn-to programs are a big part of that. These efforts succeeded. “The core market wasn’t listening, didn’t care, and didn’t want to come out,” Kapuscinski says. “But these markets aren’t as conditioned to the idea of snow in the mountains as the traditional market.”

If what happened at Mountain High sounds painful, things were downright agonizing at Mammoth. The area averages 400 inches of snow. By mid-March, less than 100 inches had fallen—nearly all of it after New Year’s, and more than half of it in one late-January storm.

“We started by cutting hours for year-round hourly staff in December,” CEO Rusty Gregory says. “When business didn’t pick up after the January storm, salaried staff took a 10 percent pay cut. Mine was 15 percent. We held on, hoping that things would pick up toward President’s Week.”

Mammoth made snow around the clock, an expense it doesn’t usually face, and, thanks to a new RFID card-based database approach to marketing day tickets, was able to communicate that news directly with both passholders and more than 80 percent of its day ticket purchasers. The resort offered a wide variety of special offers and deals.

Even so, customers didn’t come in the numbers needed, ultimately forcing Gregory to one of the most difficult decisions of his career. Mammoth laid off 75 members of its full-time year-round staff. The announcement sent shock waves through the community, and the industry.

“It was incredibly painful,” Gregory says. “This is a town of 7,000. These people are our friends and they count on us for jobs. You see them in the supermarket. As hard as it was for me, it was a thousand times worse for them.”

Who got cut? Those who weren’t essential for day-to-day operations—people from accounting, IT, building maintenance, marketing and sales. “The average length of service by these people was 10 years,” Gregory says. “Two had been here more than 40 years. Two were VPs in the senior management group.”

But the annualized cost of those employees, including benefits and wage burdens, was roughly $6 million—and that was money Mammoth needed to save in order to keep the front lines at full strength and pay for the sharply higher operating costs created by the snow drought.

The sacrifice of veteran depth in favor of the front line was the direct result of a decision to keep all facilities and assets operating. “We felt it was false economy to close things that might bring people here,” Gregory says. “We ran every lift, as long as there was snow connecting top and bottom. All the restaurants and services stayed open.”

The driver of this decision was customer loyalty—specifically, from season passholders. “Passes bring in $25 million a year against a gross of $150 million,” he says. “We felt that shorting those people would have immediate financial implications when renewal time rolled around.”

When business returns to normal, Gregory hopes to rehire many of those who were laid off. “We laid off 150 full timers during the 1990-91 snow drought,” he says. “We had 80 percent of them back within a year.”











Two of the big lessons learned this past season were: 1) Terrain parks rule. Appalachian (left) devoted valuable snowmaking to its parks and was rewarded with enthusiastic visitors and great word of mouth. And, 2) Beginners are not powder hounds. Learn-to lessons held steady, as seen at Mountain Creek. N.J. (right).





COLORADO: MESSAGE WAS THE PROBLEM
Colorado had some decided advantages over California. Although snow didn’t come until late, many resorts there have reasonably large snowmaking systems, and the elevation and temperatures to use them.

Even so, conditions across Colorado were at best mediocre until well into January, a fact that was discussed regularly on conventional and social media channels. Those trails with snowmaking coverage—assuming water supplies held out—were decent enough, but others were often marred by rocks and dirt. And Colorado resorts don’t put much snowmaking emphasis on steeper terrain.

So the news coverage of the weather impacted Colorado, too, although the worst of the problem was more than 700 miles west. Copper Mountain president and GM Gary Rodgers observes that “there isn’t much crossover in our respective markets, but when CNN is showcasing brown slopes at Squaw Valley it paints a bad picture of skiing in the West. That was a key takeaway—we didn’t initially understand how impactful and far-reaching that would be, and how the negativity would continue to build.”

We spoke with Rodgers and Crested Butte Marketing VP Scott Clarkson. Both say they approached the holiday season in decent, if unspectacular, shape, thanks to recent snowmaking investments. Crested Butte had nearly half of its terrain open. Christmas is high season, mostly pre-booked, so destination visitors were reasonably satisfied under the circumstances. As for Copper, “eighty percent of our holiday guests are looking for groomed corduroy,” Rodgers says. “The remaining 20 percent are powderhounds, and they’ll always be weather dependent.”

Once Christmas was over, things got more challenging. The snow finally came, but when patrol tried to open double-black Spellbound Bowl, Clarkson says, “they threw a couple of hand charges in there and the whole thing slid down to rock. We gave up after that. The avalanche potential was just too scary.” It never opened, forcing Crested Butte to cancel its annual extreme ski event.

Clarkson faced another problem: the resort lost more than half its seats from Houston, a key destination market. That got Clarkson thinking: could Crested Butte, so reliant on destination visits, develop a drive market? Grand Junction and Colorado Springs are only three hours away, well within the window Clarkson believed skiers would drive, based on his decades of experience in New England. So he created a new ticket product: a prepaid four-day card, which did well enough that he launched a three-day card product in March that carries over to Dec. 20 of next season.

This kind of basic tactical marketing—Clarkson calls it “blocking and tackling”—is fairly common in the East, but was a new concept for a resort that has long relied on close-in locals and destination visitors. And it helped.

Meantime, both resorts worked every angle they could to drive destination business. Copper heavied up on conditions- and package-oriented cable buys in key destination markets like Dallas and Houston.

“Our team is focused daily on packaging as a result of market conditions,” Rodgers says. “It’s constantly evolving in any season, but with a greater emphasis this year in trying to get the word out. We did extend some deadlines. I think the most notable thing we saw this year was an unbelievable compression in lead booking times, so the key was making sure we always had competitive products in place.”

“We always checked to see when the airlines were doing a promotion we could support with a package,” Clarkson says. “Our thinking was strategic. We’ve been successful over the years with buydowns, like where the guest buys two airline tickets and gets the third ticket free. It’s a hard cost for us, but these programs tend to work. The air deal drives the decision; the rest comes along. We spent less on branding and more on supporting active sales.”

Staffing cuts at Copper and Crested Butte weren’t as dramatic as those further west, but both were aggressive in cost management. Crested Butte was already in the midst of a streamlining process, having shifted some functions to corporate offices out East, and it simply didn’t take on as many staffers as it would in a normal year. There was no need, particularly with the extreme terrain closed.











Left: When Mother Nature doesn’t deliver, snowmaking can, a lesson Catamount, N.Y., knows all too well after this past season. Right: Another great way to insure against uncooperative weather is to expand the area’s offerings to include non-snow activities, like this Mountain Coaster at Okemo, Vt.






NEW ENGLAND: WHAT WHITE CHRISTMAS?
Autumn in New England was cool, with several early, measurable snow events to psych the market. Then…nothing. November and December brought steady above-freezing temperatures stretching north into Québec. Next, the region entered a maddening cycle of cold weather interrupted by rain, after which it would get cold again, making everything nice and shiny. Mid-March brought record warmth, and much of even northern New England was done by the end of the month.

“We had 14 rain events and a grand total of 29 inches of snow,” says Jeff Crowley, president of Wachusett Mountain in central Massachusetts. “We’d have to look back to 1973 to find a season this challenging.” Okemo general manager Bruce Schmidt looks back to 1982-83 for an analogue.

Even so, both resorts made plenty of snow during the cold cycles, and for Wachusett, that led to a tactical decision. The Crowleys reduced their radio footprint, dumped their pre-produced, brand-oriented spots, and switched to an immediate, time-stamped broadcast television promotion schedule.

“We’d produce at lunchtime and air that night,” Crowley says. “People assumed the pre-produced spots used footage from last year. These spots were immediate. I rode the lift with people who told me the same-day stuff was impactful, and helpful.”

Much of Wachusett’s media budget is trade-based, so the shift didn’t ding the budgets badly. But elsewhere, low-cost promotions ruled the day. Crowley says that marketing director Tom Meyers “pulled out all the stops. We turned our employees into promoters by offering their friends discounts. We did a kids ski free program—we’ve done that in the past, but we rolled it out sooner this year. And as we got into spring, kids in our seasonal programs were able to offer family members discounts.”

Okemo, being more weekend- and destination-oriented, approached things differently. Many of the resort’s marketing and event programs were locked in; Okemo created some additional packaging and trimmed some promotional expenses, but otherwise marketed in a more-or-less normal way.

“We did more packaging that involved a pre-buy, in order to take the weather out of it,” says Schmidt. “It cut yields, but it was worth it. And we put a lot of emphasis on social media video, so people could see the conditions and all the snow being made. We’d have done that anyway, but this year it was especially important.”

Okemo faced another challenge. Heading into Christmas week, snowmaking had to be concentrated on core trails and much of its slopeside lodging was not, in fact, ski in/ski out. So Okemo created a free, on-demand shuttle service and notified arriving guests well in advance. “We kept everyone—guests and staff alike—aware of what was going on,” Schmidt says.

Both resorts committed to keeping all lift and trail pods operating while reducing staff, primarily by not filling positions. “I had to accept that if I saw a ticket line getting long I couldn’t overreact as a manager,” Schmidt says, “because we had cut the staff that would have solved the problem.”


MID-ATLANTIC: THE BACKYARD EFFECT
Kissing Bridge, near Buffalo, N.Y., normally gets 15+ feet of lake-effect snow. The lake effect never fired up this year, creating a double-whammy for the ski area: no snow on the hill, and none in a region that’s accustomed to serious winter.

“My staffing requirements are a bit easier than some resorts,” GM Mark Halter says. “We’re the second job for lots of folks, because we’re primarily nights and weekends. In times like this, the goal is to coach managers—as in, ‘you’re the captain on the Titanic, and you’ve gotta get the band playing.’ That’s when you see if your managers have the right stuff. Fortunately, ours did.”

Kissing Bridge lopped its conventional media budget and went hard-core into social networking: “smartphone apps, lots of e-mail, even more on Facebook,” Halter says. Content showcased “dead honesty throughout. When the going gets tough, you have to be completely up front. Screw with your customers in a bad situation and they’ll never come back.”

Halter’s most important marketing goal was staying close to group organizers. “We had them here for dinners and lunches, forging those long-lasting relationships,” he says. “In adverse times, you want to get closer to your friends. You’re going to need them next year.”

Operationally, Halter discovered how essential terrain parks have become. “We got the core areas open first, and then started making the parks,” he says. “If I could play it again, I’d reprioritize. We’re going to intensify efforts in park opening and complexity for next season.”

Halter observes that while the season was disappointing, it would have been crippling 15 years ago. In part because the resort entered this season after two great ones, and because pass and multi-week program sales were strong, Kissing Bridge had booked a significant percentage of annual revenues before it opened. And oddly, it was able to make hay with a previously unscheduled but opportune special event in March: a hill climb for the region’s snow-starved snowmobilers. But the best news is that the resort’s one-day presale for 2012-13 passes, held in March, was up 5 percent year over year.

Ski Liberty, and its sister resorts Whitetail and Roundtop, all in southern Pennsylvania, were dealt one of the toughest hands this winter. None of the resorts opened until January; all closed in early March. Daytime temperatures in their core Washington-Baltimore market were regularly in the ’60s and ’70s. Learn-to programs did well enough, but intermediate and advanced skiers tended to stay away and cherry-pick their days.

The season was salvaged—as much as it could be—by previous heavy investment in snowmaking equipment, including automated gear that helped all three take advantage of every temperature window.

“We were making snow at 29 and 30 degrees, and we were 100 percent open probably for two or three weeks,” Liberty GM Eric Flynn says. “Because it was so mild, we prioritized the trails that could absorb the traffic and let some of the less popular trails go.” One big lesson, Flynn says, is to “make sure you’ve got a snowmaking system that can take you through something like this.”

Liberty didn’t slash its media budgets. “We spent most of what we’d committed to,” Flynn says. “We figured it would hurt us even more if we cut them. Besides, when your two main market areas are that warm, it’s hard to sell them on the idea that they’ll have a real winter experience without showing them.”

Ironically, Liberty’s biggest snowstorm of the year came on Halloween, and that helped push season pass sales to record levels. But utilization was down significantly. So the primary marketing focus this spring was maintaining pass volume. When we spoke, Flynn was still weighing options—including a possible credit to this year’s passholders. “That’s a dangerous road to go down,” he says. “We’re still working on finding the best way to spur retention in a way that will have the least financial impact.”

Summer operations will help in that regard, too: the Snow Time resorts have aggressively expanded their four-season appeal for several years now, with numerous attractions at Roundtop and golf and conference facilities at Whitetail and Liberty.


PNW: ALMOST NORMAL
The one major region that did fairly well this season was the Pacific Northwest. Snow settled in Washington at more or less seasonal norms, gradually stretching down into northern and Central Oregon.

Mount Hood Meadows (MHM) marketing VP Dave Tragethon called it “an average or above average season.” Not that it was easy. MHM battled the same perception problems felt by resorts elsewhere, compounded locally by a mild winter in Portland and a snowline that was considerably higher than normal.

When MHM did get snow, the timing wasn’t great: a 7-day weather pattern produced ghost-town Saturdays and bluebird—spelled “crammed”—Sundays. The area had to turn people away several times, and had periodic issues with icing and winds.

As a result, average usage among passholders and loyalty program participants declined 10 to 15 percent. But the difference was made up by single-ticket purchasers who bought at the ticket window or at in-town discount outlets.

This was a bit of an anomaly, in that the resort places a heavy emphasis on the sale of pre-paid products, in the form of passes, multi-day cards, online sales, gift certificates and seasonal programs. These represent as much as 70 percent of visits in a normal winter. “Locking in that revenue ahead of time has taken a lot of the pressure off,” Tragethon says.

He adds that MHM was tracking improved yields in ticket and pass products, F&B, rentals and ski school. Ski school, in particular was a superstar—and not just in learn-to programs.

“Last year, we realigned the ski school and rentals into a unified Snow­sports division under the leadership of the school,” he says. “People coming into the rental shop get their first impression from a ski professional. There’s a culture of personal improvement within the school, and we’ve done a good job of communicating that with guests: it’s all about performance. As you get better you’ll enjoy the sport more.”

The goal, in part, is to create pass­holders. MHM aggressively cross-sells skills improvement as a means of getting more out of the sport.


OTHER REGIONS
Because of space limitations, our sampling has some major omissions: the Southeast and the Northern Rockies (mediocre and fairly good, respectively), and Alaska (insanely great). The big struggle was convincing skiers and riders that the resorts had snow, says West Virginia Ski Areas spokesman Joe Stevens.

The Midwest was a mixed bag, according to Boyne Resorts’ Steven Kircher and Peak’s Jesse Boyd. Boyne’s Midwestern operations were off somewhat, but not horribly, After a slow start, things were actually pretty normal until St. Patrick’s day, which brought a blast of heat that took base depths from an average of five feet to mud in one week.

“We really didn’t change very much,” says Kircher. “A little slow hiring on due to the slow start, and careful control of matching hourly labor to business levels. But midwinter, we operated and marketed pretty normally. We emphasized our core assets—plenty of snowmaking and plenty of other things to do. The water park at Boyne Mountain and the spas and ziplines at both Boyne Mountain and Boyne Highlands saw a lot of guests who didn’t come for the skiing.”

But the southern Midwest, according to Boyd, was more akin to southern Pennsylvania, with post-Christmas openings and early March closures. There, cost control was everything. “When you get to the point that you see the season going south, you have to control costs and condense operations,” he says. “We’ve learned over the years that you can’t market or discount your way out of a bad season.”


Six Lessons From the Season
So what can we learn from this highly unusual year? Obviously, there’s no one-size-fits-all approach, even within a region. The divergent responses of Mountain High and Mammoth testify to that (see main text for details). Their respective decisions reflect each resort’s marketing and physical environments. But there are several broad lessons to be learned nonetheless.

1. Maintaining morale. Perversely, the ski industry works hardest when the opportunity for reward is lowest, and keeping staff morale up was the area in which managers reported the most consistent approaches. Candor was the watchword; senior managers kept subordinates regularly updated as to the revenue situation and margin targets. Employee appreciation programs, in the forms of regular free staff dinners or surprise pizza lunches, did a lot to show front line employees that managers cared (and to fill the bellies of those who were scrambling with reduced paychecks).

2. Lean staffing. Many resorts are now looking hard at their normal staffing levels going forward. “You can get staff creep in some areas,” says Okemo’s Bruce Schmidt. “We saw what we can do with less and learned some things that we might not have seen otherwise.”
Snowtime’s Eric Flynn agrees. “I suspect we’ll become a slightly leaner company,” he says. “You need to go through something like this now and then remember how to stay efficient.”

3. Technology is your friend. Technology, in its myriad forms, made a huge difference. Many resorts, thinking back to difficult years in the past, told us that snowmaking investments, including automated systems, kept the season from being a disaster. Wachusett’s Jeff Crowley notes that his crews were “really impressed with the new one-click hydrants. You can start 40 guns in 20 minutes, so you have nearly the same speed as an automated system for a lot less money.” He plans to install more.

Video and laptop editing systems helped Wachusett and other resorts get nearly real-time imagery into the marketplace via conventional and social media channels. When the market thinks there’s no snow, it needs to be shown otherwise. A decade or two ago, only a handful of ski areas had video production facilities, and when they did cut a spot, they’d drive for hours to deliver tape. Nowadays, it’s fast and digital—and every resort told us that it helped.

4. Programs help. Elsewhere on the marketing front, pre-paid programs—season passes, card programs, group sales and seasonal snowsports offerings—partially insulated many resorts. And perhaps surprisingly, learn-to-ski and -ride programs appear to be among the programs least impacted by the weather.

5. Snow trumps all. But none of that was enough to offset the yield drops related to aggressive discount programs and the loss of the more experienced guests—particularly those in the hard core. “Don’t kid yourself—it’s still about snow,” says Mammoth’s Rusty Gregory. “I knew that, but this season put that idea back in the center of my life.”

6. Cash control is key. Ultimately, strict control of cash is the overwhelming lesson this year. “Start early,” advises Mountain High’s Karl Kapuscinski. “If there’s data supporting certain weather trends, don’t wait. Save while there’s still money to be saved.”

“It really helped that we had pre-paid income; I’m okay,” says Kissing Bridge’s Mark Halter. “But I also have a very conservative board and because of the last few years, we were sitting on a fair amount of cash. They weren’t willing to dilute the equity. I see their wisdom, I’m not scrambling for lines of credit. If we get three in a row like this we’ll all be in trouble, but I’ll be one of the last guys standing.”

“The season made me realize there’s really no such thing as a fixed cost,” Gregory says. “You have to look at things and see if you can make adjustments. People will work with you if you talk with them. And the more difficult things are, the more public your leadership needs to be. You have to be out front."