Ski Resorts Experiment With Dynamic PricingEsmé E. Deprez
On a January Saturday in Utah’s Wasatch mountains, a chairlift whisked Stephen Percassi, an engineer from upstate New York, toward the top of Alta Ski Area. In his pocket was his lift ticket, which would’ve cost $84 that day. Instead, weeks earlier, he’d scored it online for $69.
Percassi’s discount was enabled by the $11 billion ski-and-snowboard industry’s shift toward what economists call dynamic or variable pricing, which makes the cost of a day on the hill less static and more like the moving target of an airplane seat, hotel room or rental car.
Behind the change is Liftopia Inc., a venture-capital-backed San Francisco data and e-commerce company that says it’ll sell 5 percent of paid daily lift tickets this year. Resorts across the U.S. have also gone this route on their own, including Alta in Utah, Intrawest Resorts Holdings Inc. with its six ski areas including Mont Tremblant in Quebec, and Wachusett Mountain Ski Area in Massachusetts.
“The past 30 years has been a chunk of time when the industry grew based off improvements in physical infrastructure” such as snowmaking and chairlifts, said Evan Reece, a lifelong skier from New England who co-founded Liftopia a decade ago. “The future is going to come with efficiency in bringing people here.”
The 54-person company has raised $7.9 million, including from Industry Ventures in San Francisco; Marc Benioff, chief executive officer of cloud-computing company Salesforce.com Inc.; Spencer Rascoff, chief executive of real-estate site Zillow Inc.; and Jeremy Stoppelman, chief executive of online review website Yelp Inc. Reece declined to disclose revenue but said Liftopia is on track to be profitable within two years.
“The key investment has been in the technical team, putting in the hard hours to bring both transactional e-commerce and hotel-style yield management,” said Erik Blachford, an investor who serves on Liftopia’s board and is former chief executive of online travel company Expedia Inc. “That’s much harder than it appears.”
Customers are rewarded with discounts for committing early, resorts hedge against cancellations if the weather turns and skiers come who otherwise might be deterred by ever-rising advertised prices. The average adult weekend rate rose 6 percent last season to $92, according to the National Ski Areas Association, a trade group. At Vail Mountain Resort in Colorado, a same-day ticket this winter costs $159.
“The lift ticket is still the deciding factor in getting people to come,” said Michael Berry, president of the National Ski Areas Association. Once the people are packed in, resorts can sell more products such as food and $5 bumper stickers that are increasingly important to their bottom lines.
Liftopia.com dominates the online alpine marketplace, selling tickets for more than 250 resorts in the U.S. and Canada this season, up from the seven it began with in 2005. Almost 100 also use the company’s e-commerce software embedded in their own sites, a more than 10-fold increase since that product’s debut in 2011.
Annual visits to the roughly 470 U.S. ski resorts have remained steady for years at about 57.5 million, according to the National Ski Areas Association. Two things threaten growth. One is weather, such as the high temperatures and low precipitation plaguing California, where drought has closed ski areas mid-winter. The other is demographics: The sport must attract younger adherents as Baby Boomers age out.
The idea behind Liftopia, said Reece, 36, grew from the theory that it’s inefficient to have people pay at a physical ticket window and to pony up the same amount for a rainy day early in the season as for a sunny powder day later. Liftopia charges 12 percent commission for tickets sold through its website and as much as 5 percent on those dispensed using its software.
Dynamic pricing isn’t new. Deregulation of the airline industry led to powerful yield-management software that took hold in the 1980s to help balance supply and demand. Hospitality and rental car companies soon followed.
The rise of e-commerce and more sophisticated data collection have propelled the concept into new arenas. National Football League teams began deploying it last year, following those in the National Basketball Association and Major League Baseball. Golf courses use it to price tee times.
Mammoth Mountain Ski Area in California changed to dynamic pricing using Liftopia’s e-commerce platform this year. Chief Marketing Officer Erik Forsell credits the move with helping drive advance sales 15 percent higher than last season. It’s also boosted revenue by enabling early communication with consumers, he said, giving the company more time to push ancillary sales like equipment rentals and lodging.
A 3.5-hour drive north in the shadow of the Sierra Nevada mountain range is Homewood Mountain Resort, on the California side of Lake Tahoe. Its shift to dynamic prices has helped it better allocate workers and spread out skier traffic to reduce crowding, said general manager Kevin Mitchell. The timing was fortuitous: Mitchell had to stop the lifts for 16 days this season due to lack of snow.
Liftopia’s prices only rise as the ticket’s date approaches. Its competitor, Denver-based GetSkiTickets.com, which launched in 2008 with about 10 resorts and now has 45, lets resorts drop prices at the last minute to lure more people.
That approach is the most economically efficient, said Andrew Sweeting, an economist at the University of Maryland and the National Bureau of Economic Research. It can also make the market feel unfair.
“I recently bought a plane ticket home to England, and a few days later, it’d dropped by $500,” he said. “I study dynamic pricing, so I know the theory behind it, but it still made me angry.”
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