Five years ago, ski resorts were in the latter stages of a wave of capital investments that were meant to enhance the customer experience, entice additional customers (primarily existing skier and riders, not newcomers), and to differentiate them from competitors. As the upsurge of capital spending abated, discounted season passes took their place at many resorts.
These passes were first introduced at a few Midwestern ski areas and at Bogus Basin, which serve primarily local markets. These resorts aimed to motivate additional days skied or boarded among existing customers and to bring lapsed skiers and riders back to the slopes. However, several larger Colorado resorts then picked up the concept, marketing them as “Buddy Passes,” and designed them to compete for local market share.
The discount trend grew quickly and is now firmly in place nationwide, as statistics from the Kottke End of Season Report show. Season pass sales are up, visits attributable to season pass usage are up, and ticket yield is down—within all regions of the country, and among all resort size classifications.
Good News/Bad News
The difficulty with discounting passes to steal market share is that it creates only a very short-term advantage, as competitors match or beat the price. The cycle continues, and customers are taught to shop around for the best bargain. This also devalues the worth of the pass from the customer’s perspective.
Still, there are many benefits to the discounted passes (or the more recent discounted multi-day packs of tickets). Falling pass prices have made skiing more affordable, particularly for families, and families are the future of the sport. In addition, passes are sold during the pre-season, providing a stream of cash flow and insulating resorts somewhat against poor or inconsistent snow conditions during the season.
But that is not the whole story. For the industry to flourish, it must increase revenue per skier visit, not just overall participation in skiing and snowboarding. At present, discounted passes seem to be aiding the latter, but hindering the former. Indeed, the average revenue collected per skier visit has been flat for the past two seasons. And if the retail-paying destination visitor begins to resist paying higher-margin day or multi-day ticket prices (as a result of overcrowding or outrage over pricing disparity) this will tip the good news/bad news scale to the negative.
For discounted pass programs to be truly successful from an industry-wide perspective, they must meet one of two criteria: considerably increasing the volume of new skiers and boarders, thereby increasing the total market for all resorts; or serving as a loss leader to bring to the resort skiers and riders who would not have come otherwise, and who spend money on food, lodging, lessons and bring friends who do the same.
One of the primary questions surrounding discounted season passes is whether such strategies are sustainable in the long term. Given that the trend is entering its fifth season, it appears that for ski resorts in the right circumstances, particularly those with predominantly local markets, such passes can be very successful. However, continued low pricing (especially pricing below marginal cost) may make profitability very difficult to achieve for many resorts, and could put some resorts out of business.
The best approach may be to find the appropriate middle ground, where value is measured by quality received, pricing returns to levels at which reasonable margins can be maintained, and resorts can compete and differentiate on the basis of service and quality. In a largely service-based activity such as the snow sports industry, commodity pricing and marketing is a risky proposition.
