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« Previous Story | The Industry Report Home Page | Next Story » Ski Industry Leaders Discuss The Lessons of 2008-09By Roger Leo 
The discussion was a highlight of the National Ski Areas Association 2009 Convention and Trade Show May 13-16 in Marco Island, Fla. Rusty Gregory, chairman and CEO of Mammoth Mountain, moderated the panel that included Tim Boyd, president of Peak Resorts; Michael Kaplan, president and CEO of Aspen Skiing Company; Rob Katz, COO of Vail Resorts; Stephen Kircher, president of Boyne Resorts Eastern Operations; and Bill Jensen, CEO of Intrawest. Over the course of an hour and a half, the panelists discussed resort economics, skier/snowboarder resilience, the need to reward customer loyalty, the pitfalls of basing resort economics on real estate, destinations vs. drive-to resorts, and the likelihood and timing of a rebound from current economic distress. “What a year,” Gregory said. “Everything went right in 2008: Consumer confidence was strong, the Dow was above 13,000 – just down from 14,000, it was a record year for skier visits across the industry.” Then came 2009, he said, which saw a respectable 57 million skier visits, but also economic pressure on customers, rising home foreclosures, falling consumer confidence, and banks reluctant to lend. “The world had tremendously changed,” Gregory said. “What kind of lessons did we learn?” Boyd said, “The best thing we learned is we’re glad we’re close to the people. The farther a resort is from markets, the more challenging this winter was. Our resorts are closer to metropolitan areas, and we probably suffered a lot less impact than the destination guys. We’ve gone through these tight times before, and found the economy does not affect our resorts. We’re more weather-driven than economy-driven. It was tough, but not as tough as a bad winter. We’d rather have a bad economy and good weather than a good economy and bad weather.” Katz said, “Unfortunately we were a little different. What we saw this year was … when the time came for the core skiers to prioritize how to spend time and money, skiing was right at the top of their list. Our resorts offer other services, though, and our company saw spending on that side go down. Our guests still love to come, but they’re not going to spend as much money, and we have to find ways to continue to grow our profit.” Kircher said, “Where the snow was good, we performed well. Drive-to resorts performed better than average, and destinations were hurt. We had a 7.5 percent drop in revenue - $16-to-18 million. One thing we learned, we maybe need to react a little quicker.” Jensen said, “The old Intrawest focus had been real estate for 20 years. That went into the toilet, flushed down the sewer and into some ocean, so that business opportunity is truly dead right now. It caused us to focus on where we do generate our revenue, where we were in a battle to survive. Our organization went into a real cost-cutting exercise. We didn’t cut from the guests, we maintained our standards, basically stabilized the business and allowed it to survive by cutting fixed costs. We created a new foundation for the organization going forward. As business comes back we don’t have to add back in those costs.” Kaplan said, “We saw greatly reduced spending, at the ski school and food and drink outlets. Instead of a $100 bottle of wine maybe a $12 dollar bottle. We don’t see that reversing course in the next 12-to-18 months. But our customers are resilient; I would also argue they are spoiled rotten.” Katz said, “I think somebody mentioned to me she felt the world had gone through some kind of moral readjustment, that luxury was some kind of four-letter word. That’s somewhat true, but short-term. The Depression was one of those defining moments, but there was no safety net for people then, and we’re not going to see what happened in the Depression happen today. People have short memories. People will spend in a more appropriate way, but in a few years we’re going to see a lot of this come back.” Kircher said, “Plan for this to be a new baseline. When it does turn around, I think in two years - and I think customers are very resilient, they’re going to come back very quickly – the 12,000-to-24,000 square foot home is a thing of the past.” Jensen said, “Consumers still see unemployment rising, lower wage pressure at the business they work in or how they get their paycheck. One of the mandates we had last winter is that this is a really critical time to stay connected to our existing guests. One of the things that can happen in a down economy which may last two, three years is that if people make the decision not to participate in our sport, it’s very expensive, very difficult for us to bring them back in.” Katz said, “People want something new. We’re cutting down on our capital spending, but that shouldn’t make people believe the guest is going to keep coming back. We’ve got to come up with something new, some new idea, because people want to think they’re getting something fresh.” Jensen referred to “Who Moved My Cheese” by Spencer Johnson and Ken Blanchard, a business management book about four fictional characters, Sniff, Scurry, Hem and Haw, who live in a familiar maze where, one day, somebody moves their cheese. “Real estate,” Jensen said. “That’s where the cheese moved and we have no idea where it went. Our existing inventory will have to be sold at whatever price the market will pay for it. I personally believe discounts will be 30 percent.” Kircher said, “The concept of real estate defining a resort is gone, probably for our lifetime.” In response to a question from Win Smith of Sugarbush Resort in Vermont, the CEOs discussed pricing and discounts. Boyd said, “The death knell of the golf industry was a discounting war. These are times when people tend to panic, and that’s the worst time to be making decisions about pricing. If you get into a discounting situation, you’re going to create a discounting war, and all these people who are coming are going to come anyway and all you’re doing is driving down your yield.” Kaplan said, “Look at cannibalization vs. new business. Our experience with discounts was the experience we feared: maximum cannibalization.” Gregory asked the panelists to opine whether next year would be better, the same, or worse. Boyd said worse. Katz said better, because of the 50 percent of the work force that fears layoffs, only 5 percent will actually lose their jobs, and the rest will relax. Kircher said the answer will depend on snow. Kaplan said flat. Jensen said, “A lot of the steps all of us have taken will improve the bottom line financial position in a challenging environment.” « Previous Story | The Industry Report Home Page | Next Story » Comments
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Posted by: sally bray | May 14, 2009 04:50 PM
