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A New Ski School "PREMIUM PRODUCT" being developed at Vail/ Beaver Creek.... - Page 4

post #91 of 99
The market will bare what the market will bare. Bob's post a heck of a long way back (geez there's some long posts in here!) I think hits the nail right on the head, would I pay $750 for a lesson at Vail? Nope, but someone will, quite gladly. It's kind of like a Field of Dreams thing..."Charge it and they will pay".

Don't want to name any names but someone back in this thread said that there's no way that they were worth $750 a day for a lesson. Wow, ski school directors dream eh? : How the heck can you go out and teach someone when in your own mind you're delivering a substandard product because by saying that you're not worth the amount charged basically confirms that? Maybe pricing should read this way:

Pro's that think they teach a good lesson - $750
Pro's that don't - $2

Brutal! :
post #92 of 99
Hah! Well said, Cannonball!

What if a resort's whole pricing structure was simply, "Lessons are priced according to what the instructor thinks he's worth. Choose your price."

I'll bet there are people who would pay thousands! (And very few would order that $2 lesson.)

Best regards,
post #93 of 99
Originally Posted by Cannonball View Post
It's kind of like a Field of Dreams thing..."Charge it and they will pay".
A former boss of mine told me (after we had purposefully charged two different customers to implement the same feature): "if they are willing to pay, we are willing to charge them".
post #94 of 99
Originally Posted by vail snopro View Post
The range of pay for a Level 3 at Vail varies greatly. A 1st season L3 might make $15 p/hr. On the other hand, I am in the top 10% of the pay scale, and I make just over $31 p/hr. Part of the difference is due to my examiner status, my coaching qualifications, and the number of years with the Vail org. Any request or referral gets the pro an extra $5-7 p/hr (depending on what part of the season it is). We get paid for 6.5 hrs per day on an all day pvt. Then there are the tips, on top of that.
May I offer a reply that comes from an entirely different perspective, that of a business owner and a business owner who has a lot of friends in different industries that own businesses. This may not be a popular post, but it may give you pause to think from another perspective.

The question is $750 for an all day private a reasonable amount for an employer to charge when an instructor only is paid “X” amount. I listen to accountants, attorneys, physicians, dentists and many other service professions who are employees complain on how much their billing rate per hour is verses how much they get paid per hour. Most employees have no clue on the true and total costs of supporting their wages. Most do not know what has to be billed by the owner of the business to cover all of the costs and to have a profit left over. “Profit” is not a four-letter word, “loss” is. Too much in the “loss” column and you do not have an employer to work for.

This is how you figure what your billing rate must be in order to support your gross wages. Most do not understand your gross wages. They include:
1.Your pre-tax base hourly or daily wage
2.Add your employer’s contribution to social security, state and local taxes, etc. If you were self employed you would have to pay this yourself.
3.Add all medical, dental, pension, uniform, food, free skiing, parking, housing and other perks that you quickly forget, as given per year and divide by the hours you work.
4.Add all paid time off.
5.Add reimbursements for training.
6.Take all of these other things your employers pays to you as a total and divide by the numbers of hours you actually worked to get your true hourly cost of being and employee.
7.That total numbers is then multiplied by 4 or 5 to get your hourly billing rate. Anything less billed and you are creating a loss for your employer.

Let’s figure this out. $31 per hour, is that all inclusive, after all taxes (net) or gross take home? Let’s say it is gross pay. Most other expenses around a 31 per hour employee is $7-$10 per hours. Skiers think they do not get much so let’s say it is $4; this makes a nice number of $35 per hour. I’ll bet it is closer to $41 per hour.

Okay, he is paid for 6.5 hours for an all day private. So $35 x 6.5 = 227.50, his daily gross wages. 227.50 x 4 = 910, times 5 = 1137.50. Geeze, Vail may actually be loosing money if they have to pay vailsnopro to take this lesion. Better not ask for a raise!

Maybe the employee cost is 3 times total wages: 227.50 x 3 = 682.50. Now Vail makes a nice profit.

The $15 per hour Level III wages are probably closer to 20 including all hourly benefits that he doesn’t really see. $20 x 6.5 = $130. Times 4-5 is 520-650. this is what Vail has to charge for their lower cost employee to break even.

Does anyone here know what the total employee compensation is a a percentage of total operating costs? So what ever your total pay is, to find out what has to be billed to support you, multiply you total gross pay with total benefits by 4-5.

David Cook,
Minneapolis, MN
post #95 of 99
Great post, DavidC. Welcome to EpicSki!

However, it is probably worth pointing out that for ski instructors, many of those expenses you refer to do not apply, in most ski schools.

Medical, dental, pension? Hah!--in most instructors' dreams. Large resorts may have a limited program, often available only for long-time instructors, and generally quite expensive. Most ski schools have none.

Uniforms, yes, sometimes. But many smaller schools require instructors to pay for theirs. And don't even think about equipment costs and maintenance.

Food? Rarely (sometimes kids' instructors get to eat a little cold pizza, mac & cheese, or cold chicken fingers). Most instructors just get a discount at the cafeteria. I think the resort still makes out all right on a $9 cheeseburger at 40% off!

Parking? Often limited to the farthest outposts, requiring a bus to shuttle you in to work. I had to pay for a parking permit when I worked at Vail, and I still had to walk almost 10 minutes to my locker room. (You did forget to mention the cost of maintaining a locker room, though.)

Housing? Some larger resorts have dormitory-style housing available, at a cost to employees. Most have none. And few career instructors live in employee housing anywhere.

Reimbursements for training? I doubt it, at best very limited. Bigger schools offer training for free (at a cost to the school, yes, but without reimbursement for those attending). Few schools pay for outside training or certification--PSIA and such.

Paid time off? Since it's seasonal work, most instructors do not get any paid vacation time. The most most can expect is some sort of holiday pay, although those are almost always required work days!

Furthermore, $31/hour is very high pay, attained by only a few top instructors at a few top resorts. Typical instructor pay at most ski schools is far, far below that!

But you did not mention Workers' Compensation, which is a very big expense for ski schools. Many larger resorts are self-insured, so an injured knee can cost $50-100,000, which comes directly out of the school's bottom line. A bad year injury-wise can quickly wipe out the black ink.

Just to keep it in perspective. . . .

Best regards,
Bob Barnes
post #96 of 99
I'd like someone to give me a list of those ski area owners who are getting rich because they are making a huge profit. This does not include successful real estate speculation, or having ins with the local land use authorities which let an insider get away with stuff that you and I can't. I want to know if anyone is getting rich merely off the ski area operations. I hear a lot more about areas closing because they can't make it than areas opening to enrich their owners.

IMO, the ski area owners, and thererfor the ski schools need to be creative about increasing profit. They can either cut costs or increase revenues. Cutting costs is hard to do well, and easy to do in such a fashion that the customers go away. They can increase revenues only by selling more units or by selling higher priced units. I think the best answer at present is to focus on the latter, which is exactly what the premium ski school products do. The issue of how much the instructor gets is going to be determined by the market. If top-notch instructors will work for $30 an hour, and pretty good instructors for $10, then the ski areas will pay that until they need more instructors because quantity demanded exceeds the quantity they have available. Even then, the optimum strategy may be to continue raising the price.
post #97 of 99
DavidC -

About overhead rates - it is true that most workers underestimate indirect costs and have trouble at first accepting the difference between what they are paid and what they are billed at.

However, there is also a certain amount of convenient fiction about overhead rates. Most of the costs are not really a multiplier, but rather additive. Taxes, insurance, pension (if any) are proportional to pay. The locker room, office space, clerical support, advertising, accounting, credit card processing, and supervision costs are not. The way it is treated is just a handy way to get the total amount to come out right.

Multiplying VSP's hourly rate by 4 and then saying they are losing money on him is just silly. Even if Vail's accountants would agree with you.

This is a pet peeve of mine because of all the stupid actions I've seen over the years driven by artificial accounting rules.
post #98 of 99
Most instructors receive ZERO benefits. They don't even qualify for unemployment. Things like workmens comp isurance is a cost carried by the entire ski company not just the ski school. For every VSP there are prob 10 instructors making $7 an hour. Look at a group lesson with 5 people. The resort is making $600.00 Often group lessons are taught by instructors with less seniority at a lower hourly rate. Let's say $10 per hour. So the ski school is making $540.00 on that one lesson. If you factor in fixed costs such as support staff, advertising etc. There is still a huge markup and profit there.

As for the resorts making money. Going back to the 70's resorts realized that the real way to make money was with real estate. Unfortunately, this led to the grooming, lifts and snowmaking arms race that has really boxed them in and is one of the reasons that they squeeze instructors. The ski schools are crack to area operators. They keep sucking on the pipe.
post #99 of 99
Most instructors receive a season pass (nominally $200-$1000) benefit. Many pros also receive spouse/dependent skiing privileges. Granted it's no out of pocket cost to the resort and many pros have effective restrictions on their use of the pass, but it is > 0 benefits.

DavidC has provided a simple method of understanding the pricing of services. mdf has accurately pointed out the multiplier is highly dependent on the industry (i.e. the nature of the business). You have to understand the business if you want to understand the pricing. It can be an interesting exercise to figure out how ski lessons should be priced if pricing was determined by costs. But the bottom line is that cost is not the determining factor for setting the price of lessons. Because, in the ski industry, the price of lessons has very little impact on the demand for lessons. At my resort, we've had early season specials offering either free or $10 lessons. The increase in lessons is < 10%. The price of lessons has been steadily raised every year at a higher percentage rate than ticket prices. The volume of lessons has varied very little as a percentage of ticket sales.

It's interesting to note that people don't complain about lifties being underpaid. They serve thousands of people at $50/head. What's the markup on their services? O wait, that's not fair because you have to figure in the cost of the lifts, snowmaking, grooming and patrol, etc. The same logic applies to ski school. When you consider that most resorts run their resort operation (excluding the real estate) at zero cash profit (i.e. any cash profit at the end of the year gets plowed back into investment), ALL of the cash cows (ticket sales, rentals, food and beverage, ski school, retail) fill one big pool of profit that gets totally drained every year by expenses and reinvestment. The fact that ski school is the only cash cow department staffed by skilled professionals (insert scoff here) has no significant bearing on the pricing or the profitability of the product. Excluding real estate, there is no excess profit in the ski business. Of course, by my logic, you should include real estate, but the bottom line here is that the ski industry is pretty far down the line of profitable businesses to be in even when real estate is included by any measure (e.g. return on sales, return on equity, P/E multiple, total shareholder return).
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