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Friday, January 30, 2015
In Denver, ski industry experts ponder business uncertainties
The state of the ski and snowboard industry in the United States is that it’s changing.
Some of that change is good, some bad, but overall the industry has serious challenges ahead, including climate change, an aging customer base and aging infrastructure, to name a few.
Industry leaders gathered at the Colorado Convention Center on Wednesday for The Assembly, an unofficial kickoff to the annual Snowsports Industries America Snow Show, which features panel discussions and interactive sessions about the ski industry’s place in the larger tourism industry. The Denver mountain resort research firm DestiMetrics hosted the event.
“If you’re nostalgic for the good ol’ days, you weren’t there. There is no comparison to what we’re selling today to what we sold as recently as 20 years ago.”
Michael Berry National Ski Areas Association president
Millennials make much less money on average than the ski industry’s core market — households with $100,000 annual incomes — but that’s not stopping ski-industry leaders from coveting the millennial generation more than ever.
The reason is simple: Baby boomers are dropping out of skiing and snowboarding as they age, and the industry hasn’t yet figured out how to grow the sport with younger generations in order to offset those baby boomer declines.
In morning panel discussions, nearly every presenter uttered the word “millennial” more than a few times.
What was perhaps most interesting in the discussions was what presenters didn’t say. Nate Fristoe, managing director of the market research firm RRC Associates, talked of millennials’ financial hardships as compared with older generations, but he also touted average daily room rates across mountain resorts — currently standing at about $366 — as great news of strength in the industry. He proclaimed a “strong accomplishment for the industry” when he revealed the average gross revenue per skier or snowboarder visit as $59 during the 2001-02 ski season compared with $90 last season.
Yet, as the industry talks of ways to attract younger folks to the sport — millennials were born between the early 1980s and the early 2000s — the elephant in the room is skiing and snowboarding’s lack of affordability to the masses. There was even a brochure for an “affluent marketing network” in the goodie bags passed out to attendees. Its slogan: “Reach the wealthy where they play.”
National Ski Areas Association president Michael Berry talked of the industry’s “trial and conversion issue” — referring to its ability to bring new people to the sport and keep them consistently participating — as a real challenge for the future of the sport. But it’s a challenge that has existed for at least 15 years, he said, adding that it’s only been about three or four years since the industry turned a corner on the issue.
“It just kind of proves that nothing is easy,” he said.
He took a few stereotypical jabs at millennials — they’re more concerned about the hottest food truck in town or living the urban-hipster lifestyle, he said. But joking aside, the industry needs to craft the right products for them in order to capture their business, he said.
THE RISE OF SOME RESORTS AND THE FALL OF OTHERS
The challenge of attracting new participants barely scratches the surface of what the industry faces, though. Bill Jensen, a ski-industry expert with decades of experience in ski-company management across the United States and Canada, including at Vail Resorts and Intrawest, separates the 470 ski resorts in the United States into five tiers: Uber, Alpha, Status Quo, Survivor and Sunset. The 10 Uber resorts and 35 Alpha resorts account for 40 percent of ski business, while 125 Status Quo resorts with flat annual revenues skate by, and another 150 so-called Survivor resorts will do just that — survive — while the remaining 150 so-called Sunset resorts, as Jensen defines them, won’t make it.
New realities for success have to include sufficient hospitality infrastructure — something the Sunset resorts lack — a reinvigoration of winter sports culture, resort alliances and partnerships and continued capital investment into snowmaking and other infrastructure, he said.
When asked how the industry can grow when it’s so unaffordable for so many, Jensen said the Aspens, Vails, Jackson Holes and Park Cities of the industry will be fine. It’s the lower tier resorts — the Status Quo and Survivor resorts — that have the biggest hill to climb.
Harry Frampton, a Vail developer who was president of Vail Associates in the 1980s, said that municipalities, ski companies, developers and communities also have a lot of work to do in order to get new development projects built in the coming years.
He pointed to consumer confidence, declining unemployment and healthy ski business revenue as reasons one might expect to see new mountain-resort development, but the economics are making less and less sense for developers.
“Our company hasn’t started a single real estate project in the mountains since 2007,” Frampton said of East West Partners. “That is just almost impossible to believe.”
Partnerships are how new projects will get built, he said. He used the Park Hyatt in Beaver Creek as an example of a municipality stepping in — selling developers the land for $1 as well as giving them a convention center and parking as part of the deal — stating the project never would have happened without such a partnership.
He then used Vail Resorts’ proposed $1 billion Ever Vail project in Vail as an example of a project that might never happen because of all the conditions required by the town of Vail, including a transit center, inclusionary housing, a 102-room hotel and 250 public parking spaces.
“This project won’t get built anytime soon,” Frampton said.
Perhaps municipalities could build lodging projects, such as the city of Denver’s Hyatt project near the Colorado Convention Center, Frampton said. Jensen also said municipalities could wind up getting into ski-resort ownership, especially when talking about the Survivor and Sunset resorts.
“My sense is that the survivors — they’ll survive because a light will go on and people will realize it’s important for their quality of life,” Jensen said.
One thing that’s less of a challenge these days is the quality of the skiing experience, according to Berry.
“If you’re nostalgic for the good ol’ days, you weren’t there,” he said. “There is no comparison to what we’re selling today to what we sold as recently as 20 years ago.”
And in terms of affordability, Berry contends that skiing has never been more affordable for the core participant, pointing out the value in pass and cluster products.
The best way to grow the industry, he said, is to do it through existing participants.
“There’s no broad-based campaign that will alter our trajectory,” he said. “The existing customer will deliver the new customer. ... I think you’ll see more dynamic ways of rewarding the individuals who delivered the customer.”