All For One: Effect on the Northeast ski industry?

[JimG.]

This proves to be true in many businesses. I've personally seen this in the ski industry, lodging industry, office supply industry, and mini-golfing industry (hah). The business makes an effort to discount the price of entry in hopes of making that money back via the purchase of additional goods or services. Sometimes it works - many times it doesn't. A bargain hunter is a bargain hunter - very few hunt a bargain then splurge what they saved and more (you need them to spend more than they would have at regular price, in theory, to make it worthwhile to you, the businessman).

I believe Geoff addressed this point well in his post...the resort didn't get this money, the access road businesses did. This makes for a tough set-up for POWDR/SP. First they alienated those business owners who had lifetime passes, then they got rid of the cheap passes for strike two.

That's some bad mojo. But I don't think it's their fault and I would have made the same decisions in their position. They won't make any money selling those cheap passes.

 

[eastcoastpowderhound]

What I've heard from a former ASC VP:

The cheap passes were jammed down the throat of management by the board of directors (Oak Hill Ventures who now own The Canyons). Nobody wanted it. It produced lousy skier yields of something like mid-$30's per day. The day ticket business dropped off substantially. Plain & simple... it didn't work. What it did do was create enough cash in the summer so ASC could make payments on some of their loans.

At Killington, the big winners were the businesses on the Access Road. The bronze pass people may not have spent much money in the cafeteria or at the base lodge bar but they certainly bought a lot of ski equipment and ate & drank in the private establishments on the access road. I've been hearing that shops on the access road are cutting back significantly on inventory for the 07-08 season.

Your last part back up my statements...maybe not at Killington, but at Sugarloaf there pretty much aren't any other places to go...once you're there, you don't have as many options...similar for Sunday River and Mount Snow...those other resorts don't have the development around them like Killington...so the mother ship gets to keep more of the spillover revenue.

 

[JimG.]

I'm sure some of the bargain hunters brown bagged everything...and I'm sure others didn't. If you just shelled out $60 for a lift ticket, how likely are you to drop $20 on lunch? What if you shelled out $379 back in May...its now Jan...you'd be much more likely to spend some $$ on lunch or a $2.50 hot chocolate. If you're sitting at home in Ma or Ct or wherever, debating going to the hill, unsure of the conditions, how likely are you to get in your car and drive a couple of hours to spend $60 on a day ticket? Same scenario, but now you've got a pass...are you more likely to go?

Over the years of the A41 passes, ASC sold over 4 times the number of passes compared to the 1K+ days. Do the math, we'll keep it simple 10 people buy a $1000 pass, resort gets $10,000. Now 40 people buy a $400 pass, you've got $16,000...and 4 times the number of folks commited to your resort instead of floating all over NE.

You missed my last point...its debt service and cost of capital that sunk the ship...each year over the last 4 they exceeded the prior year's revenue, EBITDA was growing annually (check the financial reports on their site) but it couldn't catch up to the debt...essentially it was doomed from the start...lower costs of capital from the beginning and we might not be having this conversation.

I'm not sure where you get your figures from so I won't debate you on this...but it flies in the face of what Geoff who has been a Killington regular for decades wrote. According to that post, it was a financial disaster. I don't think it added up as easily in reality as it does in your post.

And I did understand your last point...they were driven to the cheap pass plan because they borrowed at too high a rate and couldn't service the debt no matter what they did. Whatever the case, ASC was doomed to failure. Poorly run.

POWDR/SP should try to duplicate that and offer the cheap passes when they need to raise capital? Answer honestly because this is the crux of my argument for allowing them a year or two to show what they can do if anything.

 

[eastcoastpowderhound]

I don't think we're arguing here. ASC couldn't pay for their property or operational costs with their pricing system. They were able to leverage their debt and try a last ditch effort to get people on their slopes. This money came out of the pockets of their investors and creditors. In other words, these passes were subsidized. One could go as far as to call it skiing welfare. The prices weren't reasonable - hence why you don't see them elsewhere for the amount of skiing offered.

ASC tried running with the traditional biz model for pass pricing in the beginning...first 3 or 4 years...$1000 passes...and that wasn't working either so they changed the paradigm. You do see it elsewhere...just head to Colorado and look at the pass programs out there...Winter Park was the first to do it with any group of 4 people joining together to buy 4 passes for $800...I think it was 1997 when Winter Park started that...and now Vail Resorts offers discount pass options and has been for the last 4 or 5 years anyway..the discount pass program wasn't invented by ASC, just brought to New England by them.

 

[Edd]

I'm sure some of the bargain hunters brown bagged everything...and I'm sure others didn't. If you just shelled out $60 for a lift ticket, how likely are you to drop $20 on lunch? What if you shelled out $379 back in May...its now Jan...you'd be much more likely to spend some $$ on lunch or a $2.50 hot chocolate. If you're sitting at home in Ma or Ct or wherever, debating going to the hill, unsure of the conditions, how likely are you to get in your car and drive a couple of hours to spend $60 on a day ticket? Same scenario, but now you've got a pass...are you more likely to go?

QUOTE]

Dude, I fully agree. Of course people in the industry will diss a cheap pass because they want to charge as much as humanly possible. I spent HUGE amounts of money in the bars and lodging at Sunday River, I know others that did too, and there's got to be thousands of people I don't know about that did the same thing.

 

[threecy]

ASC tried running with the traditional biz model for pass pricing in the beginning...first 3 or 4 years...$1000 passes...and that wasn't working either so they changed the paradigm. You do see it elsewhere...just head to Colorado and look at the pass programs out there...Winter Park was the first to do it with any group of 4 people joining together to buy 4 passes for $800...I think it was 1997 when Winter Park started that...and now Vail Resorts offers discount pass options and has been for the last 4 or 5 years anyway..the discount pass program wasn't invented by ASC, just brought to New England by them.

Colorado ski industry costs are a lot different than East coast. They spent too much and then cheapened their product. Fortunately not everyone in New England followed this trend.

 

[threecy]

Dude, I fully agree. Of course people in the industry will diss a cheap pass because they want to charge as much as humanly possible. I spent HUGE amounts of money in the bars and lodging at Sunday River, I know others that did too, and there's got to be thousands of people I don't know about that did the same thing.

The reason they need to charge as much as possible is that they aren't running away with profits. If skiing as we know it were a profitable business, we wouldn't have 500+ NELSAP ski areas, multiple dead mega-corporations, ski area turnover (I think we're approaching a dozen in NE in the past year alone), and rapidly depreciating ski areas.

The ski industry needs to stop shooting itself in the foot with shortsighted ideas.

 

[eastcoastpowderhound]

I'm not sure where you get your figures from so I won't debate you on this...but it flies in the face of what Geoff who has been a Killington regular for decades wrote. According to that post, it was a financial disaster. I don't think it added up as easily in reality as it does in your post.

And I did understand your last point...they were driven to the cheap pass plan because they borrowed at too high a rate and couldn't service the debt no matter what they did. Whatever the case, ASC was doomed to failure. Poorly run.

POWDR/SP should try to duplicate that and offer the cheap passes when they need to raise capital? Answer honestly because this is the crux of my argument for allowing them a year or two to show what they can do if anything.

Go back through the myriad number of posts on this site and others and take a look at the number of people who have picked up the sport or increased their participation level in this sport because of the discounted passes...they are people who have joined this forum, the sunday river fourm, k-zone and others...they are either buying equipment for the first time or upgrading their old stuff...they are becoming as passionate about this sport as those of us who have been at it since early childhood. Will the ski industry in New England be better off if those folks revert back to occasional day ticket purchasers...if we put up a roadblock to the low cost of entry that brought so many of them to the slopes more than ever before? Will the sport grow if we raise pass prices...will it bring in new skier visits? Will the resorts really have more money to invest in infrastructure if we outprice the casual skier/rider? I work in the industry...have for the last 18 years and have skied for over 30...so I'm not going anywhere, but we'll start losing visits and will have a harder time getting new skiers/riders hooked if pass prices go back to $1000. I know dozens of people who will spend more time ice fishing, snowmobiling, or just staying home if they have to shell out a grand for a pass. The whole point of this thread was what was the effect of A41 on the Northeast, I for one think it has been a shot in arm for the NE ski industry.

 

[JimG.]

Go back through the myriad number of posts on this site and others and take a look at the number of people who have picked up the sport or increased their participation level in this sport because of the discounted passes...they are people who have joined this forum, the sunday river fourm, k-zone and others...they are either buying equipment for the first time or upgrading their old stuff...they are becoming as passionate about this sport as those of us who have been at it since early childhood. Will the ski industry in New England be better off if those folks revert back to occasional day ticket purchasers...if we put up a roadblock to the low cost of entry that brought so many of them to the slopes more than ever before? Will the sport grow if we raise pass prices...will it bring in new skier visits? Will the resorts really have more money to invest in infrastructure if we outprice the casual skier/rider? I work in the industry...have for the last 18 years and have skied for over 30...so I'm not going anywhere, but we'll start losing visits and will have a harder time getting new skiers/riders hooked if pass prices go back to $1000. I know dozens of people who will spend more time ice fishing, snowmobiling, or just staying home if they have to shell out a grand for a pass. The whole point of this thread was what was the effect of A41 on the Northeast, I for one think it has been a shot in arm for the NE ski industry.

Declining skier visits have been an industry problem for at least 15-20 years, and it started long before there were any cheap season passes. And if you look I think you will find that skier visits continued to decline last season. To me, the cheap passes have done nothing to alleviate this problem. You can't now say that getting riid of the cheap passes will cause a decline in skier visits. Chicken before the egg.

Yes, I agree the A41 was a shot in the arm for skiing FROM THE SKIER'S PERSPECTIVE. Not so much from the ski resort's perspective in my opinion. And that's the problem. Will skier visits increase if resorts continue to go under financially as threecy mentions? Look at the NELSAP list.

Finally, I welcome your perspective as the yin to my yang on this issue. You have brought up a number of excellent points I think we could debate back and forth for a long time. My goal is to surpass the "Guess the ski area" thread post count. We've got a long way to go.

 

[threecy]

It doesn't really matter how many skiers you have if you can't make money off them. It'll take a major restructuring of the industry as we know it to make $400 passes work - and it'll be like shopping with Walmart crowds in an Ames store - crowded and falling apart.

 

[eastcoastpowderhound]

Declining skier visits have been an industry problem for at least 15-20 years, and it started long before there were any cheap season passes. And if you look I think you will find that skier visits continued to decline last season. To me, the cheap passes have done nothing to alleviate this problem. You can't now say that getting riid of the cheap passes will cause a decline in skier visits. Chicken before the egg..

Yes I can...one step forward, two steps back. We probably all know a couple of people who bought passes b/c they were inexpensive...and if they don't have that inexpesive option they won't ski as often. My wife and most of my friends wives are good examples...we've all become parents over the last couple of years...the moms aren't skiing as much and in some cases neither are the dads. If they can get a pass for $400, they will...if they have to pay $1000, they won't. So instead of skiing 8-10 times on that $400 pass, some of these moms or dads may only buy 4 or 5 lift tickets. If the $400 pass is bought in the summer, they won't fret as much over $50 to put jr in daycare for the day at the mtn...but they sure won't shell out $60 for a ticket and another $50 for daycare on top...another example of how getting folks to the resort will lead to spillover revenue.

Yes, I agree the A41 was a shot in the arm for skiing FROM THE SKIER'S PERSPECTIVE. Not so much from the ski resort's perspective in my opinion. And that's the problem. Will skier visits increase if resorts continue to go under financially as threecy mentions? Look at the NELSAP list...

I'd say skier visits are more likely to increase with lower pass pricing than with higher pass pricing. If the skier gets a shot in the arm its got to have an effect on the resort somewhere along the line...after all, we aren't skiing in our driveway...we're going to a resort. Sunday River has added preferred parking and seasonal locker rentals...add on items that folks are more likely to purchase if they aren't paying $1000 per pass.

Finally, I welcome your perspective as the yin to my yang on this issue. You have brought up a number of excellent points I think we could debate back and forth for a long time. My goal is to surpass the "Guess the ski area" thread post count. We've got a long way to go.

Thanks Jim, I'm happy to play devil's advocate...banter keeps our minds working! So...how much more bantering do we have to do to pass that thread? :smile:

 

[JimG.]

It doesn't really matter how many skiers you have if you can't make money off them. It'll take a major restructuring of the industry as we know it to make $400 passes work - and it'll be like shopping with Walmart crowds in an Ames store - crowded and falling apart.

A fitting if very ugly metaphor.

 

[threecy]

I'd say skier visits are more likely to increase with lower pass pricing than with higher pass pricing.

Of course, that's a basic economical rule. That said, it doesn't fix the issue of this being an expensive product to provide.

$400 passes mean more expensive day passes - the ski areas need to get their cash somewhere - and they certainly aren't getting it at $400 per season. Sure, some people will shell out the $400 that wouldn't otherwise buy a season pass. In a bad year, such as last year, that's not a bad thing for the ski areas. In a good year though? Forget it - they'd rather have the $60 a pop (or nowadays, more like $70/80) each snowstorm.

$400 season passes themselves don't bring many new people into the sport. Sure, they provide a quick solution to the issue of *keeping* people in the sport. You don't bring many new people in when the cost of entry (not including equipment) is $80 or $400.

Mt. Tom, yes that tiny ski area in Massachusetts, was charging nearly $400 for a season pass - almost 20 years ago! Was this an outrageous price? No. Have expenses remained level in the ski industry? No. Why, then, should a 6 mountain pass be offered for $400 almost two decades later? Not a healthy thing for the ski industry. Again, these passes were subsized by other people's money - they were not reality for New England skiing. Until someone can crack the code, they won't be.

 

[JimG.]

Yes I can...one step forward, two steps back. We probably all know a couple of people who bought passes b/c they were inexpensive...and if they don't have that inexpesive option they won't ski as often. My wife and most of my friends wives are good examples...we've all become parents over the last couple of years...the moms aren't skiing as much and in some cases neither are the dads. If they can get a pass for $400, they will...if they have to pay $1000, they won't. So instead of skiing 8-10 times on that $400 pass, some of these moms or dads may only buy 4 or 5 lift tickets. If the $400 pass is bought in the summer, they won't fret as much over $50 to put jr in daycare for the day at the mtn...but they sure won't shell out $60 for a ticket and another $50 for daycare on top...another example of how getting folks to the resort will lead to spillover revenue.

These life issues were the reason I was a part-time ski instructor/coach from 1989-2003. The commitment "forced" me to ski and my wife was a good egg and came along for the ride. I had one, then two kids who forced me to think about the expenses and free family ski passes and deeply discounted ski instruction for the kids when they were ready made the whole deal work.

I certainly understand the issues from the skier's perspective here. In the end, if it's not a win-win deal for all it will not work long term.

Hey, any golfers here? Just for kicks, how much do you estimate you shell out each year for equipment, greens fees/country club membership, or golf vacation property?

 

[bigbog]

..I edited that part out of my entry!...darn....

.....There are a lot of Season Passes out there under $400 to mid-sized mountains and some of the smaller mountains offering season passes for even less....

Not in Maine!...excluding the 300' hills and/or a 100mi drive to a 500' driveway.... Sugarloaf is all there is & is the closest. That's why one of ASC's big mistakes imho was to carpet bomb their prices.....the areas have diverse economic levels. A lot of skiers would kill;-) for some of VT's "smaller" mountains nearby!... The loaf is ~103mi from my driveway....the closest lift-served, big mountain.

 

[eastcoastpowderhound]

Of course, that's a basic economical rule. That said, it doesn't fix the issue of this being an expensive product to provide.

$400 passes mean more expensive day passes - the ski areas need to get their cash somewhere - and they certainly aren't getting it at $400 per season. Sure, some people will shell out the $400 that wouldn't otherwise buy a season pass. In a bad year, such as last year, that's not a bad thing for the ski areas. In a good year though? Forget it - they'd rather have the $60 a pop (or nowadays, more like $70/80) each snowstorm.

$400 season passes themselves don't bring many new people into the sport. Sure, they provide a quick solution to the issue of *keeping* people in the sport. You don't bring many new people in when the cost of entry (not including equipment) is $80 or $400.

Mt. Tom, yes that tiny ski area in Massachusetts, was charging nearly $400 for a season pass - almost 20 years ago! Was this an outrageous price? No. Have expenses remained level in the ski industry? No. Why, then, should a 6 mountain pass be offered for $400 almost two decades later? Not a healthy thing for the ski industry. Again, these passes were subsized by other people's money - they were not reality for New England skiing. Until someone can crack the code, they won't be.

If the only revenue stream at the mountain was the pass/ticket revenue I'd say you've got a great argument...but ticket revenue is only one peice of the revenue pie.
You keep going back to the "other people's money" bit...so lets talk about the canyons...if ASC wasn't financing the development of the canyons with revenue generated in the east how much more investment could have been made at their NE resorts? It was other peoples money...NE skiers money that helped subsidize the canyons. Add to that the debt service at above average rates and there was a bunch of money being sucked out of NE going to Utah or the banks. Mount Snow and Attitash seem to think they can offer discounted passes and still make it work. We've also had some rough winters weather wise...sure this year ended GREAT but it started off in the crapper and we didnt' have any good snow until Valentines Day, last year started great, but started to suck right after Christmas and never took off...I'd argue that resorts are better off getting the money up front with discounted pass offerings than gambling that mother nature will be nice to us and show us the snowy love. If the season turns out stellar there will still be plenty of people coming up and buying day tickets, along with the pass holders.

 

[JimG.]

If the only revenue stream at the mountain was the pass/ticket revenue I'd say you've got a great argument...but ticket revenue is only one peice of the revenue pie.
You keep going back to the "other people's money" bit...so lets talk about the canyons...if ASC wasn't financing the development of the canyons with revenue generated in the east how much more investment could have been made at their NE resorts? It was other peoples money...NE skiers money that helped subsidize the canyons. Add to that the debt service at above average rates and there was a bunch of money being sucked out of NE going to Utah or the banks. Mount Snow and Attitash seem to think they can offer discounted passes and still make it work. We've also had some rough winters weather wise...sure this year ended GREAT but it started off in the crapper and we didnt' have any good snow until Valentines Day, last year started great, but started to suck right after Christmas and never took off...I'd argue that resorts are better off getting the money up front with discounted pass offerings than gambling that mother nature will be nice to us and show us the snowy love. If the season turns out stellar there will still be plenty of people coming up and buying day tickets, along with the pass holders.

Here's a point...and I'm not talking specifically about anyone here.

One thing about deal hunters is that they will not be burned twice if they wind up on the short end of any deal financially. Since you brought it up, are these "loyal" deal hunters going to come back to a resort that sells them a cheap pass in advance for $400 but then doesn't open enough to make them think they got their money's worth because of a crappy winter? No way and they would complain to anyone who would listen to them about how they got screwed and about how they will never buy a pass up front again.

Do you think that ski areas would view that as the future of their industry? If they did everyone would be NELSAP overnight.

 

[threecy]

If the only revenue stream at the mountain was the pass/ticket revenue I'd say you've got a great argument...but ticket revenue is only one peice of the revenue pie.

Season pass holders are much less likely to rent equipment, buy lessons for themselves (I'm leaving kids out of this statement because often times families will buy the children passes regardless of the parents buying them), and even buy lunch...especially bargain hunters. Bargain hunters are more likely to have outdated equipment, forget about paying $50+ an hour for a lesson, and bring their own lunches.

I don't think the Canyons can be blamed for ASC's east coast woes. They took on way too much debt way too quickly and then cheapened their unmaintained product.

 

[riverc0il]

Not in Maine!...excluding the 300' hills and/or a 100mi drive to a 500' driveway.... Sugarloaf is all there is & is the closest. That's why one of ASC's big mistakes imho was to carpet bomb their prices.....the areas have diverse economic levels. A lot of skiers would kill;-) for some of VT's "smaller" mountains nearby!... The loaf is ~103mi from my driveway....the closest lift-served, big mountain.

Shawnee? And while Wildcat is not in Maine, it certainly services much of Maine. Saddleback for your larger ski area option with a cheap season pass. Those are all respectable mid- to large ski areas with cheaper season passes. Don't like the Loaf prices? Not too much further to Saddleback.

 

[Greg]

A lot of skiers would kill;-) for some of VT's "smaller" mountains nearby!... The loaf is ~103mi from my driveway....the closest lift-served, big mountain.

Yeah? And I bet many more of us would kill to be ~103 miles away from da Loaf!