The North American ski industry has seen a downturn that has mirrored the decline in the economy since 2008. The ski area real estate market has especially been affected, which is a great source of revenue for many ski area developers. As a result, many ski areas have put their ambitious expansion plans on hold until a time when it is more feasible. In addition to the decline in the real estate market, skier visits have been on a declining trend in the past couple of years. The declining numbers have been attributed to numerous causes including, but not limited too: the economy, aging of the traditional skiing market, and climate change. If these trends continue, they will create a multi-faceted problem for the future of the ski industry, ultimately being a shortage of revenue from fewer skier visits and real estate sales. The solution to this problem that the ski areas have already started to implement is asset utilization.
Asset utilization is simply using what the ski areas already possess in order to attract more people and increase revenue by efficiently investing capital into assets they already possess. It has been said that the greatest asset ski areas already possess is the natural mountain environment and that skiing and snowboarding is just one of many recreational activities available in that environment. As well, for many ski areas the revenue generated by ticket sales only makes up roughly half of the total revenue, leaving the rest to other on-hill revenue centers. Publicizing aspects of the mountain environment can lead to increased revenue as long as it brings people to the ski areas. Therefore, effective asset utilization in a four-season manner that is not reliant on the climate, and that is conscious of changing demographics, will lead to a prosperous future for the ski industry in Canada.
The traditional skiing market, that composes the core skier visits for ski areas in Canada, is a very small portion of the total consumer population and has been steadily decreasing. The traditional skiing market is decreasing as a percentage of the total population and decreasing in skier visits because of the aging of baby-boomers that compose a large part of that group. There are two ways to increase visits at ski areas: first by appealing to the traditional market to increase their visiting days, and second, to look to the changing demographic trends to supply additional guest visits.
Traditional Skiing Market
A significant contribution to the drop in skier visits from the traditional skiing market is the growing competition with other recreational activities taking time and money away from skiing. In today’s business world, companies need to provide value to the customer, while improving and diversifying their products and services. This has proven to be a challenge in the recent economic struggle, which has hindered large-scale expansion. As well, it is making it difficult to justify increased ticket prices, and this is why asset utilization is the solution. By using their investments wisely, ski area operators can draw guests in by improving on current amenities and by offering other activities. In doing so, they create an added value or additional area of revenue out of things they already possessed, but in a way that attracts customers.
Many ski areas have begun to do this already. Some areas have implemented a form of asset utilization within the skiing and snowboarding operations to create added value by glading tree areas, improving backcountry access and awareness, and investing in terrain parks. An example being Silver Star Mountain Resort, which has added value to its skiing and snowboarding operation with the all-inclusive pass, that allows guests to partake in other winter recreations as part of their lift ticket. Asset utilization to create added value has proven to be successful for both Vail and Whistler Blackcomb, resorts that have seen revenue increase due to their vertical integration existing on the hill. As long as people come to the resorts, no matter if they ski or not, they are still eating in their restaurants, sleeping in their hotels, and shopping in their stores.
While winning back the traditional skiing market through added value will increase skier visits, it cannot be the only focus of asset utilization. In order to be profitable in the future, ski area operators need to diversify their product, being the mountain experience, in a way that appeals to 100% of the population not just the traditional 4%. This is particularly the case in Canada, where a growing part of the population comes from cultural demographics that do not traditionally ski. Therefore, ski areas need to use the mountain environment in a way that will attract nonskiers by either drawing them to skiing or snowboarding or through other recreations, to draw them up to the ski areas, because once they are there, they will likely spend money.
One way of doing this is by promoting skiing and snowboarding as a family activity. The Canada West Ski Area Association emphasized this in their policy on the BC Family Day, which they advocated to move to a day which is not a holiday for neighbouring provinces and states, and by offering half price lift tickets for residents of BC. However this will only draw in people who are interested in skiing and snowboarding, still leaving a large part of the population that for the time being is not interested in those activities. It will also fail to attract those whose interests in skiing and snowboarding have faded away. This can be overcome by utilizing the assets of the mountain environment to tailor a mountain experience product that is more universal in the market. A excellent example of this is Grouse Mountain, which generated over $50 million in revenue in 2011 with less then 3% of the skiable acres of Whistler Blackcomb, by adding non-skiing attractions like a year-round zip-line and wind turbine with an observation deck that over looks Vancouver.
While Grouse is lucky in that it has Vancouver’s population at its feet, other ski areas far from major urban centers may not be able to operate in this fashion. However, they may still consider other activities besides skiing and snowboarding to produce a source of revenue. In the recent years, ski area operators have begun to look at summer activities as an alternative draw to their facilities in order to create revenue. Traditionally, most ski areas remain dormant during the summer months, leaving to waste vacant beds and skilled staff. Ski area operators have begun to invest more money into summer and year-round amenities, and the 2012-13 season will see the lowest capital investment by most ski areas in more then a decade.
The idea behind this alternative investment practice is to draw guest visits to the ski areas during the off-season in order to generate revenue in all four seasons. Although for most ski areas there will not be equal profit returns in all season, but still a source of revenue. Whistler Blackcomb’s extensive bike operations have begun to be a viable source of revenue during the summer months, and other resorts like Fernie and Kicking Horse have seen mountain biking as a recreation to increase guest visits during the summer months. Diversifying the product by creating four season recreational opportunities, will not only get people up to the ski area to eat, sleep, and shop during the summer months, but it will also assist in the resort real estate market by creating added value to a ski area home. The additional recreation activities will change it into a four-season mountain home. Sun Peaks has added value to their resort real estate with their golf course and bike operations.
Climate change has always been a sensitive issue for the ski industry, being that it could result in the loss of a skiing and snowboarding’s most important asset; snow. While advancements in snowmaking technologies have assisted in the ski season’s longevity, it can only work to a certain degree. The 2011-2012 ski season was the driest in 30 years for many American resorts, with Vail, Colorado seeing an 80% decline in snowfall, but only a 15% drop in visits. The CEO of Vail Resorts, Robert Katz, claims that the drop in visits was kept minimal by making their “business about much more than snow fall,” due to their diversified products as a result of asset utilization. For large ski resorts, such as Vail and Whistler Blackcomb, tickets are only about 50% of the resort revenue, with the rest coming from other on-hill business. As stated above, all you need to do is to get people to the hill and they will start spending money.
While most of the American ski areas suffered last season, western Canadian ski areas saw a great deal of snow; Sunshine Village broke its record snowfall, receiving more then 10 meters of snow. As result, Canadian ski areas have begun to take advantage of the colder, Canadian climate to market skiing and snowboarding in the United States. Last season, BC destination ski areas drew in more American ski visits as a result of the good snowfall they had, and the bad snowfall at the American ski areas. This season, Tourism BC and BC ski areas will invest an additional $600,000 on top of $1.1 million, in marketing BC skiing to the American market.
Western Canadian ski areas are utilizing the asset of a colder climate, to promote their product as more consistent from year to year than other ski areas. This may lead to question, “why not create more ski areas in Canada in areas that have more reliable skiing weather?” and expand the areas that we already have. While there are sound arguments and ambitious plans to create new Canadian mega-resorts, like Jumbo and a Valemount Glacier Destination, many feel that now is not the time. As mentioned before, the current economy does not favour large-scale expansion, as new ski areas may erode the bottom line for existing ski areas. In an article on resort capacity, Grouse Mountain owner Stuart McLaughlin argues that “we need current resorts to flourish…there’s lots of capacity in the system right now. Once all resorts are successful, that will create the need for more resorts and improve the likelihood of success for anyone who comes later.” Essentially, the Canadian ski industry needs to utilize their assets on the big picture too, and invest in existing ski areas to create a demand for expansion. A step towards that expansion will be promoting Canada as a haven from climate change.
In looking to the future for viable career options in the ski industry the theme of asset utilization continues. A position at a ski area that allows an individual to use their creativity to increase guest visits will render a rewarding future. The area of sales and marketing is one that frequently uses the concept asset utilization on a daily basis to bring people to the hill. In the traditional sense, a marketing department will often use a recent snowfall to market the ski area’s excellent conditions, but this is easy and will only really appeal to the core of the skiing market. A future career in sales and marketing will require an individual to make use of other aspects of the mountain experience to entice guests, even when snow conditions are bad. In addition, with the growing trend of ski area operations becoming year round, recreation businesses, an individual working in sales and marketing will have to be creative in selling people on the mountain experience year round. A substantial knowledge in what assets of the ski area can be utilized at what time of the year and how to market it the population is ideal.
Asset utilization to diversify the mountain experience product is a trend that the ski industry is developing and needs to continually invest in, in order to generate revenue in the coming years. This can be done by offering different mountain recreations in the winter and summer to both the traditional skiing market and to the other demographics of the population. However, skiing and snowboarding will remain to be the bread and butter of the ski industry in Canada. None the less, a shifting focus of investments via asset utilization can result in increased skier visits in the winter, and not doing so will likely result in financial struggle for ski area operators in the future.