BOULDER, Colorado—Although memories of this past winter are fading quickly in the summer heat, the ski industry’s performance provides an interesting case study of travel behavior in a recession – an experience likely paralleled to varying degrees in other recreation and travel sectors.
The ski industry was a victim of particularly unfortunate economic timing. The Dow plunged almost 2,400 points between 1 October and 10 October, just as the ski industry’s traditional booking season and preseason promotional efforts were ramping up. Bad news continued to accumulate throughout the winter, with the Dow hitting an intraday low of 6,440 on 9 March, and the Consumer Confidence Index descending to an all-time low (since its inception in 1967) in February 2009. The resulting impacts on the travel-and-tourism industry have been well documented.
However, with an affluent and passionate visitor base, many experts still predicted as the season got under way that the ski industry would prove to be resilient. Active skiers/riders represent only about 3.0 percent of the U.S. population, and their relatively educated and upscale profile traditionally has helped insulate them from the vagaries of the larger economy. Indeed, a common mantra in the industry is that “snow trumps the economy.” This season tested that axiom like few others. In many respects the rule still proved true, because resorts located in regions that received ample snowfall (particularly in the early season) generally performed well in spite of the economy. Nevertheless, the recession still left unmistakable marks on the ski season, particularly in the form of more conservative spending patterns on the part of those who visited. Industry revenues, therefore, are projected to be down substantially more than actual visits.
Among the results of interest were the following, as excerpted from end-of-season research conducted for the National Ski Areas Association by RRC Associates.
• Overall skier visits down 5.5 percent, but still relatively resilient: The nation’s 473 ski resorts hosted a preliminary estimate of 57.1 million skier/snowboarder visits in the 2008/09 season, down from the previous season’s record of 60.5 million visits. However, the 2008/09 ski season still was the fifth busiest on record, and was down just a modest 0.9 percent from the previous five-season average. So why weren’t visits more impacted? Probably most importantly, good snow, sufficiently early in the season, in most resort areas – a reminder that snow captures skiers’ attention in a uniquely compelling way. Regions that experienced the greatest increases in snowfall this season, including portions of the mid-Atlantic, Southeast, and southern California/Nevada, even enjoyed gains in visits this season, as illustrated in the map below.
Percent Change in Skier Visits by Resort Location (State / State Grouping)
Preliminary Results: 2008/09 vs. 2007/08
Click on chart to view full size
Source: National Ski Areas Association; RRC Associates.
Note: States with less than three ski resorts are reported in combination with other states to protect resort confidentiality.
• Overnight visitation weaker than day visitation. Day visitation slipped about 2 percent in real terms this season, while overnight visitation dropped a more substantial 9 percent, in keeping with the nationwide falloff in lodging demand for all types of travel destinations and regions this season. In addition, among those traveling overnight, a shift to closer destinations, lower expense, and (in some cases) shorter durations were apparent, likely a result of economic uncertainty and/or economic hardship. By the same token, day trips were seen by many skiers as an affordable and economically conservative alternative, and the availability of good snow at areas close to home further encouraged day trips.
• Among overnight guests, commercial lodging stays hit harder than second home and friends & family visits. Of the about 25 million skier visits taken as part of overnight trips this season, about 16 million (63 percent) were associated with stays in commercial lodging (hotels, rental condominiums, etc.), while the remainder were associated with stays with friends or family or in owned vacation homes. As might be expected, stays in commercial lodging were down significantly more (-11 percent) than stays in unpaid accommodations (-6 percent), a likely reflection of the cost differences of each trip type, as well as the passion for skiing and financial circumstances of the associated trip participants.
• International visitation drops from last season’s record levels. After soaring last season (buoyed by a weak dollar), international visitation fell this season, mirroring trends experienced nationally. Total international visitation declined to 5.4 percent of total visits this season, down from 6.6 percent last season, in all probability due to the global recession and a stronger dollar. These fluctuations primarily impacted resorts in the Rocky Mountain region, which benefited the most last season, and saw the greatest corrections in international visitation this season.
• Season pass sales and visits hold firm. Providing a degree of stability in a down year for the industry, season pass sales edged up 0.2 percent in units, and visits on season passes rose in excess of 3 percent in volume. Season passholders were thus a clear buffer against the negative economic climate this winter, a testament to passholders’ passion for skiing. Additionally, many passholders purchased their pass before the economic downturn intensified in October 2008, or were attracted by favorable pricing, both mitigating the effect of economic concerns. With a pass in hand, cost considerations likely were relatively unimportant in the decision to ski an incremental additional day.
• Ticket yields reflecting discounting. Average full-priced (retail) single-day lift ticket prices jumped 6.1 percent this year, reflecting preseason pricing decisions. By contrast, the average lift ticket revenue realized per skier visit (i.e. ticket yield) grew by a much more modest 1.8 percent. This reflects a proportionate shift to season pass visits and other discounted ticket products this season, and is an indicator that resort operator profitability (for which industrywide data is not yet available) is likely to be more heavily impacted than the decline in overall skier visits alone would suggest.
• Lessons drop more than visits. Lesson volume dropped 4.7 percent more than skier visit volume, indicating a likely combination of more conservative skier spending patterns and a proportionate increase in skilled participants (who are less likely to take lessons and are more passionate about snowsports than beginners).
• Economic woes favor convenient, low-cost, day ski areas. Ancillary spending down broadly. The impact of the economy varied somewhat depending on resort location and resort type. Anecdotally, many resorts catering to day skiers, resorts close to major cities and lower-cost resorts throughout the country commented that the economy affected them favorably in terms of visitation and often revenues by encouraging skiers to stay closer to home and to take day trips in lieu of overnight trips to other regional resorts or western “destination” resorts. Conversely, many resorts of all types and locations experienced ancillary revenues (ski school, food-and-beverage, retail, lodging, etc.) that were negatively impacted because of more conservative skier spending patterns, and lower lift ticket revenues, which were impacted by fewer full-price tickets. Destination resorts often reported fewer overnight visits and shorter stays, with overnight drive markets holding up better than overnight fly markets. Many resorts also commented that snow and weather conditions (either favorable or unfavorable) had a more powerful effect on their fortunes than the economy.
• Capital expenditures projected to fall sharply in 2009/10. In a clear reflection of the economy and/or resort financial circumstances, total capital expenditures by resorts declined an estimated 17 percent from 2007/08 to 2008/09, and are projected to plunge 43 percent between 2008/09 and 2009/10.
The list of economic reverberations experienced by the ski industry this past season continues extensively, from depressed mountain real estate markets, to shorter booking lead times, to widespread staffing and pay cuts. Looking ahead to next season, early evidence indicates resorts generally are being conservative in their pricing of season passes, lift tickets and lodging. Advance bookings at this very early date are slow as potential visitors defer commitments at this time to better determine what future conditions will be like during the coming winter.
Yet, as the industry showed in managing through the 2008/09 season and previous recessions, skiers and snowboarders generally find a way to enjoy a sport they are passionate about, even if it means that many dimensions of their trip experience change. This is reflected in a generally resilient industry that often performs more consistently than many related counterparts in challenging economic times (albeit exhibiting more sensitivity to the weather). While concerns about the approaching 2009/10 season are rampant, there also is a cautious expectation that the recession will be moderating and hopefully reversing later in 2009 or early 2010, and that a more positive outlook might become warranted.