An Uphill Battle on the Slippery Ski Slopes
Let it snow, let it snow, let it snow. Across the country, skiers' prayers have been answered. Resorts from New England to the Rockies opened early and have attracted record crowds. With plenty of white stuff expected this winter, the beleaguered ski industry seems poised for a good run after last year's weak season. "We're about as close to being euphoric as we could possibly be," says Adam M. Aron, chairman and CEO of Vail Resorts Inc. (MTN ), which owns five major ski operations.
But Aron knows that abundant powder alone does not a profitable season make. With the number of skiers averaging about 54 million a year for the past decade, competition for their dollars is as intense as a run down Corbet's Couloir at Jackson Hole in Wyoming. The two biggest operators, Vail Resorts and Intrawest Corp. (IDR ), have invested hundreds of millions of dollars into new facilities and acquisitions in recent years. But they have succeeded largely in stealing skiers from smaller hills, and disappointing earnings have damaged their stock prices. Nolan Rosall, president of RRC Associates Inc., a Boulder (Colo.) tourism consulting firm, sums up the sport's big problem: "We're not replacing skiers with new blood."
The industry is battling various trends. One is that more and more skiers are heading to Canada to take advantage of its cheap dollar. Last year, 1.7 million Americans visited Canadian ski resorts, twice as many as five years before. Perhaps even more disturbing for the industry is the fact that American children increasingly are inclined toward indoor pursuits. The culprit, of course: video games.
As for those youngsters who do take to the slopes, more and more of them are choosing snowboarding over old-fashioned skiing. With nearly one in three thrill seekers on the slopes today riding a snowboard, up from 8% a decade ago, resort operators must cater to them as never before. To harness the growing demand, most ski hills have now built special "terrain parks." And ski resorts are catering to kids in other ways, too: Crested Butte Mountain Resort in Colorado, for example, blasts pop music on youth runs.
Cutting the price of lift tickets is another big part of the push to lure newbies. While resorts have offered a variety of season passes for some time, they are tailoring them to customers more than ever. Resorts now offer a range of ticket combos, including midweek-only attendance and multiday, or multiresort, packages. And resorts are selling many more passes than they once did, boosting revenues. Lake Tahoe's Heavenly Ski Resort cut its pass price by two-thirds this year, to $299, and has sold three times as many as last season.
Resorts also have unleashed a marketing blizzard. This year, Intrawest expects to send out 22 million e-mails alerting skiers to discounts on airfares and accommodations. Many Web sites feature live ski-cams for a taste of local conditions. And more skiers are booking vacations online. For its part, Vail says online reservations have more than doubled this season, helping boost the bookings made through its central reservations service by 13% over 2001.
Even as they try to lure new skiers, resorts have also spent heavily on their efforts to develop new sources of revenue. What the modern faux Alpine village lacks in charm, it more than makes up for in shopping, entertainment, and eating opportunities. Outdoor activities for the nonskier also abound, including sleigh rides, inner-tubing, ice skating, and paragliding. It seems to be paying off. The industry has managed to increase revenues 23%, to $4.2 billion over the past five years. Moreover, the average ski resort now derives more than half its revenues from sources other than lift tickets.
Yet for all that, profits remain weak. Last year, Vail's earnings dropped 42%, to $7.6 million, as revenues grew 13%, to $615 million. Earnings at Intrawest, too, are soft: They fell 8%, to $58 million on sales that rose 7%, to $986 million. While some of the drop in earnings can be attributed to price discounts after September 11, the real problem is that capital spending has soared too high and margins have dropped sharply. Vail and Intrawest had better pray the snow sticks--and the people come.
By Christopher Palmeri in Los Angeles