Everyone agrees: The ski industry needs to increase skier visits. Everyone is searching for a magic bullet that will make this happen. The bullet of the moment is general discounting, featuring programs such as super-cheap season passes. But, there’s considerable debate about whether this is the way to grow the sport.
I emphatically don’t think it is. We need to create demand for our sport and I believe that we can, but discounting isn’t the way to do it.
Here are seven reasons:
1) This industry requires strong margins; you need the money to make it to next year.
Each year, we’re subject to 10 to 20 percent swings in revenue due to factors totally out of our control, weather being the most obvious. We have short seasons. We have intensive capital and labor needs. These factors alone should make margin the primary focus; and if a resort has any sort of significant debt, margin becomes even more important in order to cover interest payments.
2) You won’t make up margins on volume. If you discount your product by 20 percent you may be lucky enough to increase volume by 10 percent. But probably not. Net result: you’ve lost at least 10 percent of your ticket revenue and, in our industry, that can represent as much as 50 percent of EBITDA.
3) You won’t make margins up in other profit centers. All revenues are not created equal. The Profit Contribution (PC) for a hamburger is a lot less than the PC for a lift ticket. In fact, you need to sell roughly 38 burgers to equal the PC from one lift ticket. So if you’re considering general discounts and hoping to make it up elsewhere, you’d better hope that your guests are really hungry.
4) This isn’t about price; it’s about product. It’s about the marvelous experience we give our guests when things are going right. If you have the snow, people will come whether you discount or not. An example is 1986-87, a great snow year in New England, and the resort where I worked was running a discounting program. The good news was that we did pretty well at getting people in the door. The bad news was that Killington, which wasn’t running a discount, was also packing ’em in. The reverse is also true: if you don’t have the snow, all the discounting in the world won’t help.
5) Discount strategies can easily be covered by your competition. Look what happened in Colorado’s Front Range last winter with “buddy passes”: one resort announced the program and by lunchtime all of its major competitors had either matched it or upped the ante. It all starts looking less like a marketing strategy and more like a mutual suicide pact.
6) Our company’s extensive research clearly showed that no new skiers were brought to market as a result of last winter’s deep discounts. I don’t care what the media says, and I don’t care whose mother-in-law they found to quote saying she’d ski if it were cheaper. Furthermore, beyond a few anecdotal newspaper quotes, there’s no evidence of significant recapture of lapsed skiers either. Our research shows the Colorado buddy passes converted retail customers—people accustomed to paying between $35 and $60 per day—to discount customers who were effectively paying about $10. Furthermore, the programs created a nationwide expectation that it could and should happen at everyone’s favorite resorts, too.
7) The final reason: once you create a discount, you’re stuck with it. Try to take away their sweetheart deal and your customers will hate you for it. Can’t say as I’d blame ’em, either.
Is there a place for pricing strategies? Absolutely. I believe strongly in segmentation pricing. The New York businessman making $600K and paying $18 per hour for parking near his office really doesn’t care what a lift ticket costs. But the college kid skipping dinner to save for this weekend’s lift ticket cares intensely about the price of skiing. So you need targeted programs and targeted pricing.
Packaging is a key segmentation tactic. We can give price-sensitive people a good deal, fill beds, lock them in as customers and bury the price of the lift ticket in the package. It’s important that your lead ticket price maintains its integrity.
Pre-purchase programs, which reward skiers for multiple visits over the course of the season, are a viable option, too.
Despite the sorry history of general discounting in the past, there may be a few rare cases in which it might work. Bogus Basin, Idaho, made a splash as the first resort to offer super-cheap season passes and is often cited as an example of how such programs can be effective. But the glowing reports over-look Bogus Basin’s unusual situation. It’s primarily a day-market (and night skiing) area 16 miles from the largest chunk of Idaho’s population. Its closest competitors are a hundred miles away. Lacking snowmaking costs, destination-marketing costs and a number of other expenses most resorts face, it can afford to operate on a lower margin. In effect, Bogus’s location allowed it to recreate itself as a general entertainment option, affording its clientele the opportunity to say, “Well, what’ll it be today? The movies? The arcade? Or should we go skiing?”
There may, in fact, be a tiny handful of other ski areas at which such a strategy could be useful, but this just isn’t the case for most weekend and destination resorts. For the rest of us, there are three keys to selling lots of lift tickets:
1) You have to offer a great product. You have to have the snow and the market has to believe that you do.
2) You’ve got to offer good value. The skiing has to be good, the staff friendly and the price in line with both. It’s quite okay for a guest to leave your property saying, “Jeez, that cost a bundle. . .” as long as he also says: “. . .but it was worth it!”
3) You need to have targeted pricing to reach different segments of the market.
Media grumbles notwithstanding, the problem is not that we’re wildly overpriced. Research shows that among lapsed skiers, price is well down the list of the reasons they no longer ski. The real problem is that, with the possible exceptions of Mountain Dew and ESPN’s Winter-X Games, no one is really marketing our sport. No one is communicating what this sport does for an individual. No one is showing how exuberant and alive you feel out on a mountain, breathing sharp, cold air and experiencing the rush of speed and control. And no one is communicating the lifestyle of skiing and snowboarding: the sexiness, the glamour, the sharing, the family togetherness.
If our industry is to survive, this needs to change. Financially, individual ski areas cannot afford this type of imaging on a stand-alone basis. Nor can the multi-resort companies. And politically, our industry has shown that it’s not ready to do a joint image campaign.
We all know there are kids out there of a prime age to learn to ski. We all know the economy is good. The stars are aligned for our industry to grow, but it won’t happen by default; and it won’t happen if we send the wrong message to the market and sell our product at a price lower than it costs us to create it, in the process diminishing the amount of profits we can allocate tomorrow toward jointly building our future. Instead of share wars, we need to find a way as a group to grow the market.
