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November 2022

What to Expect When Expecting a Recession

We look to SAM's archives and today's brightest minds to forecast the possible impacts of inflation and a potential recession on the upcoming season.

Written by Olivia Rowan | 0 comment

During a panel at the 2022 National Ski Areas Association (NSAA) Convention, former Peak Resorts CEO and 2020 NSAA Lifetime Achievement Award recipient Tim Boyd declared that “recession and inflation” were his biggest concerns for the industry’s immediate future. Others appeared more optimistic about our ability to weather the current period of global economic instability. 

History suggests the optimists could be justified, so long as the weather cooperates. In the six decades that SAM has covered the ski business, there have been several marked periods of recession—including the mid ’70s, the early ’90s, and The Great Recession (2007-09). And in most cases, a good snow year helped resorts overcome whatever economic headwinds existed.

What are the similarities or differences between past economic downturns and the current situation, which is marked by global inflation but has not yet been declared a recession? Can the past show how inflation and/or recession will impact future visitation, capital expenditures, and pricing? 

Here, we take a quick tour of that past,  followed by some current thinking about the upcoming season.  

1973-75 RECESSION 

The winter of 1975 was one for the books, even as national headlines were full of layoffs, recession/depression talk, and discouraging economic indicators. Most operators recorded a banner year for visitation. Inflation, though, put a bit of a damper on profits, as expenses rose.

Increased visitation. In a report from the Spring 1975 issue of SAM, Mt. Bachelor, Ore., president Bill Healy summed up winter 1975 thusly: "If this is a recession, what would good times be like?" 

“This ski season has been one of the few bright spots in the Colorado economy,” as people sought to “escape their troubles,” observed Tod Martin, then the executive director of Colorado Ski Country USA.

Staying close to home. Business for most Midwest ski areas was up 10 to 30 percent during the 1974-75 season. Fred Cimino, general manager of Wisconsin’s Alpine Valley, attributed the upturn “to a number of factors, including early November snows, good snowmaking conditions and fewer than normal sub-zero days to discourage skiers, strong promotional efforts ("Take a Friend Skiing"), and the fact that tight money situations prompted Midwesterners to ski closer to home and perhaps give up other luxuries, just not skiing.” 

The cost of inflation. In the same report, though, Timberline's then-president Dick Kohnstamm noted, "This year was one, not of depression or recession, but of inflation. Our sales were up 12 to 15 percent, but these improved sales were eaten up by higher operating costs, leaving little extra profit." Other operators echoed that observation.  


The worse the economy, the better the ski business, was a common sentiment among operators SAM spoke with for the January 1993 story, “Impacts of a Recession? It depends!”

For example, few states were hurting as much as Michigan during the early ’90s recession. Yet, at Boyne Highlands and its sister resort Boyne Mountain, “Each year has been better than the one before,” Boyne Highlands general manager John McGregor told SAM in ’93. “I have to read the newspaper every day to know that we are in a recession.” 

Of course, it wasn't great for everyone. Poor snow seasons led to lower visitation on much of the West Coast. In Utah, where the economy was faring much better than, say, California and Michigan, Snowbasin had "back-to-back record-wrecking seasons," said Kent Matthews, mountain manager of Snowbasin. The state was in its fifth consecutive year of drought, and saw its average annual snowfall cut almost in half. 

A similar story held true in the Northwest. With uncooperative weather and a lack of capital improvements to the ski area, Mission Ridge, Wash., reported that "the last five years have dropped close to 50 percent."  


 "The conventional wisdom in the ski industry is that snow trumps all other sins. But what if all those other sins unite?” asked longtime SAM contributor Linda Goodspeed in the November 2008 story, “Business Forecast: Mixed.”

The 2008-09 season was perhaps stronger than expected, given the economic turmoil, rising unemployment, record energy prices, and less than stellar snowfall. But the snowsports industry reacted ahead of the season to improve the value proposition, and that blunted the economic and weather impacts.

Value products. Many resorts saw trouble looming in the spring of 2008 and started bolstering their value products. Vail Resorts’ new $579 Epic Pass was one of several products launched to try and get out in front of the economy.

At Snowbird, Utah, in summer 2008, “We looked at the economic situation and made a conscious decision to create value products,” said Dave Fields, the resort’s then communications manager, now GM. Snowbird cut prices on several new and existing pass options and heavily promoted its most economical pass—any 10 days for $399. That helped keep visits relatively strong. Still, Snowbird’s hotel reservations were off considerably that season.

Drive-market strength. Bookings were off during the early season in 2008 for Snowshoe, W.Va., so the resort launched its “your trunk is free” campaign, highlighting the savings of driving vs. flying. And, according to “Resort Economics 101” (SAM, May 2010), the drive market ruled the season, with the NSAA 2008-09 Economic Analysis showing the relative success of smaller, less expensive, more convenient areas. Some of these areas posted increases in visits and revenues.

Reflecting economic and snow conditions, though, the analysis reported an overall decline in revenues (down 7.3 percent) and profits for the first time since the 2001-02 season (another recession season). Skier visits hit 57.4 million—the fourth highest on record at the time, but a 5.2 percent decline from 2007-08. Additionally, resorts of all types and locations reported declines in ancillary revenues (ski school, food & beverage, retail, etc.)  


Let's turn to the present, where we face both new and old challenges.

Will skiers and riders continue to visit during recession and inflationary times, as in the past? Have we made our sports too expensive and difficult for beginners? Will we continue to face staffing shortages? How will significant base pay rate increases impact resorts? Will employees be able to live in expensive communities amid climbing inflation? Are resorts positioned to absorb all the related impacts? 

For answers, we turned to industry researchers Dave Belin of RRC Associates and Tom Foley of Inntopia, both members of travel economy think tank the Insights Collective, as well as resort executive Win Smith of Sugarbush, Vt., and Melissa Roberts, chief financial officer and GM of Berkshire East, Mass.

nov22 recesssion

Will recession and inflation become concerns in 2022-23?

Roberts: Our industry, historically, has fared well through rough economic times. I’d like to think that will happen again, but we need to be prepared for a softer market this year. My guess is that we will still have solid visitation, but the ancillary spending will be down. We need to look at what we can do to provide value in those areas this season—and in general.

Foley: I think conditions this year are wholly unique from other economic events in that, for the most part, the underlying fundamentals of the economy, including consumerism, are sound. This is vastly different from the trillions in toxic debt that caused the near collapse of the banking market in 2008-09.

Conditions at ski resort companies are dramatically different than they were 12 years ago. Pre-sales have locked in revenue irrespective of visitation, and the big operators (and those that are on partner pass programs) are considerably more insulated than they were during the Great Recession.

One downside: Inbound international markets are going to be very difficult for the foreseeable future. ... Our international markets are experiencing the same recession/inflation issues as we are. But there is one significant difference: the strength of the U.S. dollar versus other major global currencies. … Those same barriers to inbound international travel are threats to our domestic market, as consumers anxious to get back out are enticed abroad by 10 to 30 percent savings on their currency conversion. 

Have we priced too many people out?

Roberts: Pricing people out is a risk we’ve faced as an industry for a while. It’s important to continue to offer affordable options for the new skier and rider to get them into the sport. We need to go beyond the first-timer packages and offer programs and pricing that keeps them coming back.

Smith: The demand is going be there. There are nine million skiers in a country of 350 million people, and they tend to be more affluent. I don't think most skiers are putting their ski vacation on hold because of the economy. 

Foley: Tough economic times will hit Main Street much harder than the mountains. That said, lodging partners, who have raised rates so high that they’re making revenue gains even while sold nights are down 10 percent, may find themselves in the awkward balancing act of pulling down rates to keep even depressed occupancy stable, while not turning current three-year revenue wins to the negative.

Also, the pressures consumers are feeling (the stock market’s 22 percent decline, and credit card interest rates now averaging 23.8 percent) are real, and that represents a significant threat.

Can we predict how the current economic landscape will impact future visitation, capital expenditures, and pricing based on what has happened in the past?

Smith: My guess is that we will go into a recession. No recession is exactly the same as another, but there are going to be a lot of similarities, just because history tends to repeat itself. The wild card out there is what the Fed is going to do and how it is going to tighten. How is inflation going to be nipped?

Our business is cyclical, so you have to have a business model that can survive in a down cycle. If business slows, you have to pare back expenses where you can, but you may have to accept a lower margin, which means lower cap ex in a year or two.

The balance sheet is critical—most businesses that have failed have failed because of a really bad balance sheet. Your debt has to be manageable. You have to have the right type of leverage structure to be sustainable in a down economy.

How might staffing shortages and significant base pay rate increases impact operations as we (potentially) move into recession and as employees try to live in expensive communities amidst climbing inflation?

Belin: Currently, labor expense represents about 24 percent of revenue in the ski industry overall, and the potential for that percentage to increase certainly exists (unless ski areas can realize revenue growth that exceeds payroll expense growth).

While the potential increase in staffing costs at ski areas represents a threat to profitability, the impact [of insufficient staffing] on the customer experience should not be discounted. The industry saw a significant decline in the Net Promoter Score in 2021-22, with understaffing and the resultant longer lines, less service, and fewer options for food and beverage or ski school offerings all potentially contributing to the decline in customer satisfaction. If the industry as a whole wants to increase the number of skiers and snowboarders, then providing an experience commensurate with customers’ expectations is of paramount importance.

Roberts: I don’t see how the wage increases and related costs will not have an impact on the bottom line. That’s where Covid may have helped us. It caused us to think creatively on how to provide guest service with less interaction and did provide us with technology (pickup boxes, better online booking, for example) to assist in that. However, employees will always be a critical piece of our business, and we need to remain competitive with wages and benefits to attract and retain them.

Smith: Wages are always about supply and demand. [In the past,] we’ve had an over supply of labor. That has reversed in recent years. The challenge is, even with rising wages, is that going to be enough to counteract the inflation in ski towns? If you don’t have affordability, you are going to continue to see a shortage of labor. And that will hold down revenues.

If there’s a shortage of labor, it not only increases costs, but also affects how services are delivered. If guests can't get a reservation at a restaurant, can't get a rental because either there's no supply or technicians, or if they can't get a ski lesson because there's a shortage of ski instructors, that has an impact on immediate revenue and on the customer experience.

My guess is that most resorts won’t be belt tightening, because they're really more concerned about how they will deliver services. The larger impact is going to be on some of the smaller vendors in ski towns, not necessarily on the ski resorts.

Foley: Inflation is driving people back to the job search market. The need for more income is enticing the newly retired out of retirement and driving lower-paid workers to take second jobs. This may actually help alleviate staffing shortages.

Smith: Retirees could fill some jobs, but they aren’t taking those hard-to-fill jobs (ski patrol, ski instructors, snowmakers, and hard ops jobs).

With increased fuel and materials costs, and all those capital projects along with climbing interest rates on borrowed money, are resorts about to spend themselves into a hole?

Foley: I think resorts are well capitalized after last season, have done an excellent job of front-loading revenue, and are positioned to make investments in such a way as to be insulated from many of the effects of inflation and interest. That’s a layman’s view.

Roberts: Utility costs, always a significant cost to ski areas, are anticipated to have enormous growth this winter. Given our industry, it may be too late to make significant changes to counteract it now for this winter. That’s when forward thinking is critical. I’m fortunate to work with the Schaefers [owners of Berkshire East], who have made capital investments with efficiency and reducing our energy dependence in mind.

Smith: There was a lot of capital improvement that happened at many resorts this summer. How do you get a return on that? It’s not by cutting costs. You get a return by driving revenue. For that, you really have to have lodging, retail, F&B, ski lessons.