In an effort to focus on this complex issue, Ski Area Management polled their ski area subscribers for price and cost data to create a set of indexes. A total of 69 areas across North America responded to a short post card inquiry on prices and wages for 1976-77 and 1977-78. The objective is to develop two specific ski industry indexes. One index of the price of skiing, a skier-consumer cost index. The second is an index of the cost to provide skiing, a ski area-producer cost index. While this initial attempt lacks some sophistication, the concept is sound and may offer the industry a new tool to combat consumer perceptions.
We all somehow relate to the Consumer Price Index. Even the non-technical “average” consumer understands that it measures the current buying power of the dollar. A skier price index, constructed along the same lines might well illustrate the cost of skiing in terms the skier could relate to.
Indexes
Our index is a weighted average of prices or costs related to a base year. Thus the Consumer Price Index is a composite of basic goods and services where the weighted average of the various prices in 1967 are pegged at 100.0. The Consumer Price Index in April, 1977 was 179.6 meaning the composite price level in the ten years since the base year, 1967, has increased 79.6 per cent. Or conversely, the purchasing power of a dollar in 1967 prices is only 55.7¢. The Consumer Price Index is considered a major measure of inflation.
A Skier Price Index
A skier price index ideally should include a weighted average of all the typical skier purchases of goods and services. It should include the typical ski area purchases of a lift ticket, lessons, rentals, food and beverage, accessories, lockers, etc., plus the costs of clothing and equipment owned, and the cost of transportation from home. A second list of goods and services is required to develop a vacation or overnight skier price index where typical purchases include added costs for accommodations, entertainment, laundry, gifts, reading material, etc.
Our initial attempt is based on but three variables. We collected data on ski lift, equipment rental and food prices — only some 25 to 30 per cent of skier expenditures. This first skier price index thus looks like this:
| Items | Weight | Prices 1976-77 | Prices 1977-78 | Weighted Average 1976-77 | Weighted Average 1977-78 |
|---|---|---|---|---|---|
| Ski Lift Ticket | .770 | $8.35 | $9.00 | $6.43 | $6.93 |
| Equip. Rental | .063 | $7.48 | $7.84 | $ .47 | $ .49 |
| Food | .167 | $1.79 | $1.93 | $ .30 | $ .32 |
| Composite | 1.000 | $7.20 | $7.75 | ||
| Index | 100.0 | 107.6 |
The conclusion is that it will cost 7.6 per cent more to ski this coming winter than last season.
A Ski Area Cost Index
The other side of the price coin is the cost of providing skiing opportunities. A ski area cost index ideally should include a weighted average of all the typical costs of ski area goods and services. It should include wages and salaries, power and fuel, supplies, materials, advertising and promotion, insurance and taxes, interest and land use fees, etc. Since the skier price index is expressed in price per skier the cost index should be expressed in cost per capacity skier-visit. Analysis shows that costs increase with an increase in utilization, thus a cost index must adjust for such a typical occurrence.
Our current attempt at a cost index considered only selected hourly wage increases. These three wage categories represent only some 10 to 15 per cent of ski area costs. This wage index looks like this:
| Item | Weight | Wage Rates 1976-77 | Wage Rates 1977-78 | Weighted Wage Rates 1976-77 | Weighted Wage Rates 1977-78 |
|---|---|---|---|---|---|
| Snowmaker | .067 | $3.35 | $3.60 | .22 | .24 |
| Lift Operator | .724 | $2.99 | $3.21 | 2.17 | 2.32 |
| Vehicle Operator | .210 | $3.79 | $3.99 | .80 | .84 |
| Composite | 1.000 | 3.19 | 3.40 | ||
| Index | 100. | 106.8 |
The conclusion is that it will cost ski areas 6.8 per cent more to provide skiing opportunities this coming winter.
Current Findings
Tables A, B & C, summarize the specific findings of this initial survey of intentions by specific category, ski area size and geographic region. These tables were constructed from data supplied by 69 ski area respondents to a special post card questionnaire returned to Ski Area Management in August. (See next page for Tables A, B & C)
Of special interest is the range of prices offered the skiing public. Price-conscious skiers can shop areas offering various skiing experiences for from $16.50 per skier per day to $3. Food varies from $1.30 to $3.15 for a hamburger, coffee and pie.
These results compare favorably to more sophisticated historical measures. The 1975-76 NSAA Economic study reports average weekend day adult lift prices for the past three seasons; thus a rough index of lift ticket prices since 1974 would be as follows:
| 1973-74 | 1974-75 | 1975-76 | 1976-77 | 1977-78 | |
|---|---|---|---|---|---|
| Average Adult Lift Ticket Price | $7.29 | $7.94 | $8.28 | $8.35 | $9.00 |
| Lift Ticket Index | 91.8 | 100.0 | 104.3 | 105.2 | 113.4 |
| Annual Change | +8.9% | +4.3% | +0.8% | +7.8% |
The hourly wage findings were compared to those summarized in the NSAA 1977 Wage & Salary Survey resulting in the following rough index of labor costs:
| 1974-75 | 1975-76 | 1976-77 | 1977-78 | |
|---|---|---|---|---|
| Hourly Employee Average Wage Increase | +6.5% | +7.0% | ||
| SAM Survey findings | +6.8% | |||
| Wage Index | 100.0 | 106.5 | 114.0 | 121.7 |
The conclusion based on these simple indexes is that costs are outdistancing revenues. Our final index comparison is with the Consumer Price Index adjusted to equate 1974-75 to 100.0.
| 1974-75 | 1975-76 | 1976-77 | 1977-78 | |
|---|---|---|---|---|
| April Consumer Price Index | 158.6 | 168.2 | 179.6 | – |
| Adjusted | 100.0 | 106.1 | 113.2 | – |
| Lift Ticket Index | 100.0 | 104.3 | 105.2 | 113.4 |
| Wage Index | 100.0 | 106.5 | 114.0 | 121.7 |
It thus appears from this very preliminary and methodologically unsophisticated evaluation that lift prices are not keeping pace with inflation. At the very least these index tools appear a useful adjunct to other economic measures and the development of more sophisticated indexes appears warranted, especially as a device for educating the skiing public as to the realities of pricing.
| Respondents | Proposed 1977-78 Lift Ticket Prices, Adult-Weekend day — High | Proposed 1977-78 Lift Ticket Prices, Adult-Weekend day — Low | Proposed 1977-78 Lift Ticket Prices, Adult-Weekend day — Average | Percent Increase 1976-77 to 1977-78 — Weekend | Percent Increase 1976-77 to 1977-78 — Midweek | Percent Increase 1976-77 to 1977-78 — Season |
|---|---|---|---|---|---|---|
| Major Ski Areas (11) | $14.00 | $ 7.00 | $11.00 | + 4.3% | + 5.4% | + 5.2% |
| Intermediate Areas (20) | $16.50 | $ 8.00 | $10.84 | +10.2% | + 8.6% | +18.1% |
| Smaller Ski Areas (38) | $13.00 | $ 3.00 | $ 7.37 | + 7.0% | + 7.3% | + 0.9% |
| Eastern Ski Areas (29) | $16.50 | $ 3.00 | $ 9.12 | + 7.6% | + 6.9% | + 8.0% |
| Mid-America Ski Area (12) | $11.00 | $ 8.00 | $ 9.08 | +10.1% | + 9.2% | + 6.0% |
| Rockies Ski Areas (11) | $13.00 | $ 7.00 | $ 9.52 | +10.5% | +10.3% | +10.4% |
| Western Ski Areas (11) | $12.00 | $ 4.00 | $ 8.27 | + 4.0% | + 4.3% | + 9.4% |
| TOTAL Respondents (69) | $16.50 | $ 3.00 | $ 9.00 | + 7.8% | + 7.3% | + 7.9% |
| Respondents | Proposed 1977-78 Prices — High | Proposed 1977-78 Prices — Low | Proposed 1977-78 Prices — Average | Percent Increase 1976-77 to 1977-78 |
|---|---|---|---|---|
| Major Ski Areas | $2.45 | $1.50 | $2.02 | + 8.0% |
| Intermediate Areas | $4.15* | $1.35 | $2.02 | + 8.0% |
| Smaller Ski Areas | $3.15 | $1.30 | $1.76 | + 8.0% |
| Eastern Ski Areas | $2.40 | $1.35 | $1.79 | + 7.2% |
| Mid-America Ski Areas | $2.35 | $1.35 | $1.79 | + 7.5% |
| Rockies Ski Areas | $3.15 | $1.35 | $2.12 | + 6.7% |
| Western Ski Areas | $2.45 | $1.80 | $2.12 | + 7.6% |
| TOTAL Respondents | $4.15* | $1.30 | $1.93 | + 7.9% |
| Respondents | Weighted Average 1977-78 | Percent Increase from 1976-77 — Snowmaker | Percent Increase from 1976-77 — Lift Operator | Percent Increase from 1976-77 — Vehicle Operator |
|---|---|---|---|---|
| Major Ski Areas (11) | $3.64 | +12.0% | + 3.6% | + 2.5% |
| Intermediate Areas (20) | $3.44 | + 7.9% | + 7.1% | + 6.6% |
| Smaller Ski Areas (38) | $3.31 | + 5.9% | + 9.0% | + 5.9% |
| Eastern Ski Areas (28) | $3.33 | + 5.8% | + 6.3% | + 5.8% |
| Mid-America Ski Area (11) | $3.19 | + 7.1% | + 7.3% | + 5.4% |
| Rockies Ski Areas (11) | $3.41 | +14.8% | + 5.4% | + 5.8% |
| Western Ski Areas (10) | $3.60 | + 6.7% | + 5.2% | + 3.0% |
| TOTAL Respondents (69) | $3.40 | + 7.3% | + 7.5% | + 5.4% |
| 1977-78 Average | $3.40 | $3.60 | $3.21 | $3.99 |
