Fast November Start Fuels Optimism
With a sluggish economy and concern over war with Iraq making most businessmen glum, why is optimism running so high in the resort biz? It’s the euphoria of early snow and cold weather in many parts of the country. Even the slow-starting West Coast got jumpstarted in mid-December with a series of major storms. Areas from New England to Colorado and Utah reported strong and near-record numbers in November, sparking crossed fingers for the season and hushed whispers of 55 million-plus visits nationwide.
While it’s premature to talk about visit totals, the winter weather forecast is promising—and so far, the long-range forecasters have been remarkably accurate, unlike last winter. There’s also good news for winter resorts in the very-longterm forecast: decades-long weather-producing cycles from sunspots to ocean temperatures could moderate the warming trend of the past 15-20 years, and we could see a return to the weather patterns that held during the 1960s and 1970s.
In fact, the weather this winter may be more predictable, and less a concern, than the economy and the fallout of war with Iraq.
When MSAA Talks, Suppliers Listen
Midwestern areas often feel neglected. But when it comes to rental skis, they have made themselves heard worldwide. The new durable rental skis that are being introduced across North America for next season (see the Rental Equipment Handbook) are the product of the MSAA’s buying group.
A year ago, MSAA hired former ski company exec Tim Kohl to help it persuade manufacturers to return to the durable constructions of the pre-cap ski days (circa 1990). That, along with an inseason test at several member areas, led to an order of approximately 15,000 pairs for Rossignol’s specially-made shaped skis with old-time durability. This season, several ski manufacturers are producing bombproof rental models.
Once again, MSAA plans to evaluate these new models inseason. It has invited suppliers to send sample rental units to the four areas that are serving as guinea pigs: Shanty Creek and Apple Mountain, Mich., Wild Mountain, Minn., and Ski Snow Star, Ind. The areas evaluate the gear and report to the membership on Mar. 1, in time to make decisions for the 2003-04 season. When MSAA issues its report, you can bet that its members will listen—and so will the suppliers.
With Friends Like These…
It’s not easy to be Vail. Just when the resort seemed to be off to a strong early start—about 10,000 showed up for opening day Nov. 16—resort execs were appalled to find a burning Two Elk lodge featured prominently in Newsweek. The famous fire four years ago, one of the most expensive acts of eco-terrorism ever in the U.S., has become the poster child for eco-terrorism. In this recent instance, it was the centerpiece for an anti-PETA ad (People for the Ethical Treatment of Animals) sponsored by the Center for Consumer Freedom. The ad accused PETA of funding the Earth Liberation Front (ELF), which claimed credit for the Vail fire.
The fire might be a fine symbol with which to batter PETA, but it could whack Vail and other winter resorts, too: the mountains have been seen as a haven from terrorism, and the fire photo might change that perception. In addition to the appearance in Newsweek, the ad may run in future issues of U.S. News & World Report and Time.
Exclusionary Pricing/Loyalty Program?
First, Aspen announced a $69 lift ticket. Then Vail and Beaver Creek raised the ante to $71. But Stratton beat ’em all in mid-December by declaring a $72 Saturday walkup price (the Sunday tariff is $69). That’s roughly a 10 percent increase from last year’s top Saturday rate.
As with top rates at other areas, Stratton doesn’t really want its guests to pay that price. It would rather have visitors purchase any of its multi-day options, from a simple two-day ticket to the resort’s Express Card. Even the purchase of a Direct-to-Lift card earns a $5 discount. Stratton is all about loyalty, and it rewards loyalty with discounts. The two-day ticket price is within a few dollars of competitors’ prices, for example.
At the same time, Stratton is consciously making a bold value statement: that a great day of Saturday skiing is worth $72. And if some skiers disagree, that’s okay. With 60 percent of visits on weekends coming from holders of season passes and Express Cards, the area wants to avoid overcrowding and spoiling the regulars’ experience on weekends.
Are ski areas comparable to, say, hotels, and able to support a price spread similar to the one between the Hyatt and Motel 6? Stratton, which positions itself at the Hyatt end of the scale, believes they are, and is determined to find out.
The Southwest Airlines of the Ski Biz
While Stratton is modeling its pricing on the hotel business, Peak Resorts looks to the airlines. To be precise, it aims to become the Southwest Airlines of the ski business, and it’s well on the way to achieving that goal. With the acquisition of Boston Mills and Brandywine, Ohio, on Dec. 13, Peak now has about 650,000 visits annually at its six diminutive Midwestern areas in Missouri, Indiana, and Ohio. And it’s aiming for more.
Like Southwest, Peak has a different business plan, one that positions it as a low-cost, high-profit provider. “We know how to run small areas near major-metro areas,” says Peak president Tim Boyd. “We focus on beginners. And a beginner is a lot more willing to spend $30 to $40 at our resort than to spend $3,000 to $4,000 at a destination resort just to see if they like the sport.”
So Peak goes where the beginners are. “We like to get areas in really good markets,” he says. “You’re less affected by the economy that way.” And, as Boyd notes, small areas tend to be the most profitable (on a percentage basis) in the entire ski resort world, a fact highlighted in the most recent Kottke report.
While the business plan is Southwest, the operating hours are more Seven-Eleven. Peak areas offer “midnight skiing” on Friday and Saturday nights (midnight to six a.m.), and Boyd says that Peak resorts do 20 percent of their business during these periods. “It’s a very social thing. And that’s one of the things that will ultimately bring more skiers into the sport,” Boyd says.
Peak is still looking to expand. Next season it will reopen Crotched Mountain, N.H., which has been shuttered for 14 years. Crotched might seem a poor fit for the Peak model, but Boyd says it will fly just fine. “It’s out of our area, but otherwise similar: it’s a day area close to a lot of people [the greater Boston metro area], so it’s not really as far out of the ordinary as you might think.”
The Insurance Crisis That Wasn’t
A few months ago, the rise in insurance rates and the collapse of K&K’s resort program seemed to augur an insurance crisis for the first time in more than a decade. But the crisis never really materialized. By most accounts, resorts are paying higher rates, but there was plenty of capacity to provide coverage for all. And most areas recognized that increases were overdue after a decade of falling rates.
Just What Is Our Retention Rate?
When NSAA introduced the Growth Model and launched its Growth Initiative two years ago, the figure that caught everyone’s attention was the 15 percent retention rate for first-timers. Well, the most recent Kottke report says that the percentage of first-timers who return during their first year is 36 percent. At small areas, which were often accused of doing a poor job, the return figure is a whopping 68 percent. So what’s up with that 15 percent figure?
The differences are mostly the result of packaging. The 15 percent figure refers to those newbies who come back during the second and third years, not just that first season. Regardless of how you measure the retention rate, the problem is the same: how can resorts maintain the newbies’ excitement and involvement from one season to the next?
Reading the SIA Tea Leaves
Early-season retail sales provide more evidence that this will be a strong year for resorts. According to the SIA Retail Audit, sales at specialty ski and snowboard shops were up 1.4 percent in dollars (though off .4 percent in units) in the August-October period compared to 2001. The bright spots: junior gear, snowboards, midfat skis, soft and recreational boots, and apparel. With these unit sales up and average prices down, the trends are positive for resorts—the hot categories suggest that families and newcomers are committing to winter sports.
