The scope of services offered by The Doré Group has recently expanded. Along with valuable market overviews of some of our nation’s unique specialty industries (i.e., power plants, infrastructure, municipal ports, and conservation lands), we are consulting with major players in the ski industry. We would like to share some insight into this industry.
- New York is the state with the highest number of ski resorts…52 to be precise.
- There are only three ski areas in the nation that do not allow snowboarders: Alta (Utah), Deer Valley (Utah), and Mad River Glen (Vermont).
- There are six “makeshift” shrines dedicated to dead musicians on Aspen Mountain.
- Every day of the ski season, 400,000 warm chocolate chip cookies are handed out at the base of Beaver Creek Resort in Colorado.
- Squaw Valley, California is home to the only ski-in/ski-out Starbucks in North America.
Ski and snowboard resorts run the gamut from basic facilities catering to day-use skiers to high-end resorts enticing destination visitors from all over the world. According to IBISWorld, the U.S. ski and snowboard industry is “mature”, highly competitive and is impacted by major barriers to entry and mid-levels of capital intensity and revenue volatility. Heavily regulated, but with low governmental assistance, the industry is faced with significant technology changes and increasing globalization. The industry was hit especially hard by the national economic downturn due to its recreational status. Revenue declined significantly in 2009, and although increases occurred in 2010, they were not enough for the industry to fully recover. In 2011, total revenue is expected to be $2.6 billion, with net profit estimated at $182.6 million.
Resorts earn 85%–100% of their income between November and April. The average season length, which was 131 days in the 2010/11 season, is weather-related, varies by region, and can be boosted by a resort’s snowmaking capabilities. Global warming is blamed for the low snowfall in the 2011/12 season, the lowest since 1992 and the second lowest in 21 years of data. Due to subpar snow, about half of resorts opened late and closed early. Snowmaking machinery is beginning to be considered an indispensable aspect of operations. Resorts are also diversifying into summer activities, such as mini or regular golf, zip lining courses, guided or self-guided hiking trails, mountain biking courses, etc., in order to stabilize income. This trend presently caters primarily to the 15-to 25 year old crowd allowing for significant opportunities with the active baby-boomer market.
Typical services offered by U.S. ski and snowboard resorts, and their corresponding contribution to total gross income in 2011, include:
- Equipment rental (5.6%)
- Food and beverage sales (12.3%)
- Lift tickets (50.5%)
- Season passes (7.3%)
- Snow sports instruction (8.9%)
- Merchandise sales (5.9%)
- Miscellaneous (9.5%)
As of 2010/11, there were 486 ski and snowboard resorts in the U.S. More than two-thirds are located in the Rocky Mountain, New England, Mid-Atlantic, and the Great Lakes regions. Those resorts in close proximity to population centers and transportation hubs have a competitive advantage over those that are more remote. In the Rocky Mountain region, Colorado and Utah are the strongest competitors; in the Mid-Atlantic region, New York, New Jersey and Pennsylvania are the top three markets; and in the Western U.S., California, Washington and Oregon are the primary competitors.
The following are the primary factors affecting competition between ski resorts:
- Skiing quality (terrain, snow quality and coverage, effectiveness of snowmaking, grooming, etc.)
- Resort facilities (lifts, dining, lodging, retail, etc.)
- Range of services offered
- Weather conditions
- Proximity to transportation and population centers
- Customer service (by employees and the use of technology)
- Loyalty programs
The three largest companies in the industry – Vail Resorts Inc. (29.2%), Fortress Investment Group LLC (14.7%), and Boyne Resorts (8.7%) – account for nearly 53% of the market share. In 1985, a trend of resort consolidation began as evidenced by a decline in the number of businesses in the industry by an average of 1.4% per year (from 735 in 1983 to 486 in 2011). This is expected to continue as the need for expensive technological advances and infrastructure costs will force out the smaller regional resorts; larger companies benefit from greater efficiency as a result of operating multiple resorts, have more available capital, and are able to offer skiers multi-resort passes.
The following strategies are particularly important to the profitable operation of a resort:
- Effective revenue and cost control
- Maximization of economies of scale
- Proximity to population centers
- Quality snowmaking facilities
- Effective marketing program
According to preliminary figures from the National Ski Areas Association (NSAA), the U.S. ski and snowboard industry posted an estimated 51 million visits in the 2011/12 ski season, a decrease from the previous season and the most challenging since 1991/92. On the positive side, volatility is fairly typical in the industry, lesson participation increased indicating potential for future growth, guest satisfaction was at an all-time high, and season pass sales for the 2012/13 season are encouraging. Key drivers of demand include average annual rainfall, per capita disposable income, time spent on leisure and sports, the amount of domestic trips taken by U.S. residents, and the amount of inbound trips by non-U.S. residents. Snowboarders have dramatically increased in the past decade, from 1 million in the early 1990s to 4 million in 2001, and now account for 31% of visitors; traditional skiers decreased from 12 to 9 million.
There are two primary categories of skiers – in-state and destination visitors. In-state skiers, which account for about one-third of resort visitors, are more sensitive to weather conditions and pricing levels. Destination visitors account for two-thirds of resort visitors and are less sensitive to weather and more affected by economic conditions as they spend significantly more on lift tickets, instruction, food/ beverage, retail goods, equipment rentals, and lodging. Most U.S. resident visitors come from California (11.3% of the total destination market segment), followed by Colorado (10.4%) and New York (7.4%). Due to the weak U.S. dollar, the amount of destination skiers coming from outside the U.S. has been increasing and accounted for about 6.5% of visitors in 2011 (7.1% of industry revenue). Skiers can also be segmented by age as follows: Under 17 (14% of total visitors), 18-24 years (20%), 25-34 (16%), 35-44 (18%), 45-54 (19%), and 55+ (13%).
The first hint of the existence of skis is in a rock drawing in Norway estimated to be about 5,000 years old. It wasn’t until almost four thousand years later that someone had the bright idea to hitch a piece of plywood to their feet with horse reins and snowboard down the slopes. Today both forms of sliding on snow are well-engrained recreational pastimes for millions of people all over the world. While the industry may experience fluctuations and gyrations, it’s here to stay. Resorts, however, can’t settle into complacency in these challenging economic and climactic times. In order to thrive, they must stay on top of marketing, consider diversification, blaze the technological trail, and maintain harmony with the environment in lieu of worldwide global warming concerns.
- IBISWorld Industry Report 71392 – “Ski and Snowboard Resorts in the U.S.” (December 2011)
- National Ski Area Association Economic Analysis (2010/11 Season)
“Ski Trivia”, Cindy Herschfeld, New York Times, December 9, 2011.