Well, based on new data uncovered, I have to revise my analysis, and consider another alternative pass senario. As discussed above, Killington's revenue yields per skier visits are rather terrible compared to the industry as a whole....about 83% of the national average compared to resorts of it's size, and more compareable medium-small resorts (which is who they have been squeezing out of the market over the last few years). Expect more aggressive yield management out of the new owners, in ticket and pass prices, and distribution of skier visits.....expect pass pricing to charge a premium for any available weekend days.
On the costs side of it, there are some very large factors that are not easily mitigated and combined they put even more pressure on the operation. I won't publish all the numbers and factors here, but they are out there......and if I can add them up and see something very clearly, I'm sure POWDR can too. If you read some of my posts here and at k-zone over the past few days, you can put them together too. It's not good.
On top of that, the last few years, Killington has proven that it has a very durable market....no matter how crappy they run the resort, and how bad the weather is, they are still going to get 900,000+ people to visit as measured by historical means. The 795,000 figure quoted for '05-'06 is false. In bad weather, people come to Killington regardless. At the high end, they really can't get more than 1,050,000 or so skier visits a year at K/P, even if they run the resort well in it's current configuration. So, that's a maximum variation of around +/-75,000 visits with an average of 975,000. So, you can assume a variation of about 5-7% max, realisticly...no matter what they do unless it's completely insane......and given their overall situation, alot more things start to become "sane".
If you look at the pass market, it breaks down into a few groups:
- Premium pass customers: people who own real estate or rent at a higher end ski house in the area (@$2000+ per season), and ski anywhere from 20 to 70+ days. These people are either not very price sensitive, or are tied to the mountain by real estate or other factors like location or the ski house scene, etc. I personally fall into this group. These people may spend some money at the mountain, but their non-ticket revenue yield isn't that great. If you are giving them very cheap passes, or "free" lifetime passes, you aren't any making money on them....you're actually losing money on them. Most of this market will withstand a doubling
of the price of each pass product, if it brings an improvement in operations. Some people may shift to a lower product, but will still buy an expensive pass. If they don't ski enough or at the right times to justify the cheapest pass product, they will simply get discounted tickets at ~$40-$50 per day (which also improves yields).
- Serious weekenders. This group probably rents full/half shares at moderately priced ski houses, for around $800-$1500, or is spending money on lodging in the area every weekend (but not at Killington itself). The bronze pass is a boon for these people, who may ski 20-30 days on average, or maybe up to 50. At 20 days, that's $20 per visit, with maybe $5-10 more tacked per day in occasional spending....that still puts them below 50% of the current per visit yield (which is already too low), and these people are not directly profitable, either. Someone who is spending 20-30 days at Killington and who really wants to be there, can probably withstand a 50-100% increase in the low end pass product, and it may cause some people to drop from a higher tier product to a lower. There aren't that many other good ski house options, Killington is really the best....that will retain people. Per visit renters who balk at a pass price will now consider Killington's rental package options more carefully, which will still have competive pricing when combined with a lift ticket. I think this market group can withstand a doubling of prices of all pass products (but will buy the low end, mostly), with maybe a 20% decrease in skier visits of this segment, or a 50-75% price increase, with little impact to the market.
- Day Trippers or very casual weekenders. These are the people who live in the region and take day trips, or come up and rent for the night occasionally, typically skiing 6-20+ days on a bronze pass, and some of whom are highly cost sensitive. If you are at the very bottom of this group and skiing 6-7 days on a bronze pass, Killington likes you alot because you are paying ~$50 per visit which is an acceptable yield. They would get the same from you if you bought with a Me ticket or some other discount program. But once you start skiing 10+ days, ticket yields drop into the $20-$40 range, with little extra non-ticket revenue, like <$5 per visit. At below $30 per visit across 15 days......I'll bet that Killington doesn't want your business.
They would much rather see you paying at least $50 per ticket, or going somewhere else entirely.....which is what half these people will do if you raise prices....for better or worse.
- Casual Skiers or Single Day vistors or Vacationers. These people are new to the sport and don't buy passes (but do get lessons and rentals), or just come for the day and buy a full price ticket, or are spending big bucks on a trip. The yields for these people are above average, and will probably stay similar. Not relevant to this analsysis.
- Locals. A only a small percentage of locals ski on the weekends. Increasing pass prices overall while adding a weekday only pass at moderate prices will cause fence sitters to go for a weekday only pass, and drive weekday utilization.THUS:
There is a distinct need for Killington to increase yields per visit inorder to increase revenue overall....ticket yield seems to be the clearest weakness in their business stucture, and they can probably increase it among pass holders without too much of a fall off in skier visits.....in fact, it might even marginally drive skier visits by encouraging pass holders to ski more to get their money's worth (but they will still be paying more per visit). The bottom of the pass market will be lost, but will be made up with more tightly controlled discount tickets. It's less likely they will try to increase visits strongly, IMHO, even though they have fundimentals they are working against. The biggest single thing they can do is to increase the efficiency of their snowmaking system, and fold part of their increased revenue into blowing more snow....by about 50%, or ~$5 Million dollars....that will keep passholders satisfied, and bring in more non-pass visitors.Based on the above here is something I would consider something that is actually feasable for them to unleash:Full Pass: $1300Christmas Week Blackout Pass: $1100Bronze/Silver equv. Blackout Pass: $900Total Darkness (HA!) Pass: $700 (~20-25 blackouts - all holiday weekends and several busy mid season saturdays)Weekday Pass: $500.So.............all I'm saying is to expect something coming out of an analysis of the resorts fundamentals, that may not take into account who they are competing with for pass holders.........should be interesting.
Interestingly enough, there seems to be more info popping up to support this, after I just finished writing the above:http://www.killingtonzone.com/forums...ic.php?t=17298
The fundamentals very clearly predict the actions....these guys have a very standard resort management playbook and are following it closely.