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Increased Lift Ticket Prices: Inflation or Other Factors?

post #1 of 26
Thread Starter 

I got the idea to post this from another post by Jimski in the latest gaper thread:

 

 

Quote:
Originally Posted by Jimski View Post

Finally, are tickets prices -- adjusted for inflation -- actually higher than in the "good old days"? 
 


Inflation Breakdown:

 

     •  In 1967, according to Skiing Heritage Journal, the highest price for a lift ticket in that season was $8

     •  What cost $8 in 1967 would cost $50.84 in 2009

     •  Today the most expensive lift ticket in the U.S. as of last season is Vail's $97 lift ticket: 90% greater than

         inflation alone.

 

So inflation is only part of the increase, and apparently we have the most expensive lift tickets in the world as of 2008 (original report is now offline but this source seems to be copied verbatim from the original).

 

A good blog post on the topic that cites sources: http://www.thesnowjunkies.com/2009/12/09/what-recession-10-most-expensive-lift-tickets-in-the-us/

 

So what are your theories on this huge increase in ticket prices?

post #2 of 26

very easy answer imo.   Resorts like Vail are now owned by publicly traded corporations.   They have to meet Wall Street bankers and analysts forecasts in order to keep their stock prices suitable for investors.   Now when the analyst forecasts the earnings to be 14 cents a share or whatever, if VR doesn't meet or beat that number the stock usually falls.   Its a joke.   Ski areas should be run as family or small business operations on a for profit basis and not this other fake form of capitalism.

 

post #3 of 26
Thread Starter 
Quote:
Originally Posted by Locim View Post

very easy answer imo.   Resorts like Vail are now owned by publicly traded corporations.   They have to meet Wall Street bankers and analysts forecasts in order to keep their stock prices suitable for investors.   Now when the analyst forecasts the earnings to be 14 cents a share or whatever, if VR doesn't meet or beat that number the stock usually falls.   Its a joke.   Ski areas should be run as family or small business operations on a for profit basis and not this other fake form of capitalism.

 

 

This exactly what I think the main problem is:

 

"This is where a private company (Alta) is the best. The few people who own it are often satisfied with their profits that they make; whereas a publicly traded company (Intrawest) has voracious investors who are intent on increasing revenue, usually sacrificing customer service. These investors may ski, but it isn't part of their soul like me. Private ownership also usually goes hand in hand with the owner's personal investment in the business. An New York investment banker (Fortress Investment Group, owner of Intrawest) probably never had the dream of opening a ski resort or the necessary drive. All he cares about is his net worth, not my blue bird powder fantasies -- made easy via a modern lift system ;)."
 

post #4 of 26

I'd say there is also an operational cost effect. First off, modern lift systems cost a lot more than the old T-Bars from back in '67. Not only that, but you have to factor in the size of a resort. Not only does a resort have to cover the cost of putting in a new lift, they have to pay maintenance on all the existing lifts. You didn't see resorts with 30 lifts like Breck has now back in the 60s. Hence the lower ticket cost. Another reason is the excessive costs of running a resort. The same reason that we don't see new resorts is the cause of high lift tickets. The insurance premiums a resort has to foot the bill for today are exponentially higher than in decades past. It's not just the "evil bankers" driving the costs up. It is also our desire for bigger and better resorts that are bringing the cost up.

post #5 of 26
Thread Starter 
Quote:
Originally Posted by tylrwnzl View Post

I'd say there is also an operational cost effect. First off, modern lift systems cost a lot more than the old T-Bars from back in '67. Not only that, but you have to factor in the size of a resort. Not only does a resort have to cover the cost of putting in a new lift, they have to pay maintenance on all the existing lifts. You didn't see resorts with 30 lifts like Breck has now back in the 60s. Hence the lower ticket cost. Another reason is the excessive costs of running a resort. The same reason that we don't see new resorts is the cause of high lift tickets. The insurance premiums a resort has to foot the bill for today are exponentially higher than in decades past. It's not just the "evil bankers" driving the costs up. It is also our desire for bigger and better resorts that are bringing the cost up.

 

But bigger and better is only done to increase the capacity of the resorts and thus increase revenue. I can see that it contributes to the increase in price but also part of the increase in size is to accommodate more customers. Resorts that are not part of larger corporations have lower ticket prices: it's a fact.
 

post #6 of 26

 

Yes, but the capacity does not increase at the same rate as the revenue. If you have one lift you are going to be able to have a certain uphill capacity per hour. Adding a second lift doubles the uphill capacity but does not necessarily double the revenue. Resorts are rarely running at peak capacity, and in pure terms of capacity many resorts could eliminate some lifts to increase cost efficiency. However, they choose to have more lifts so there is more terrain for the skiers, but this comes at the cost of higher lift tickets. I did not say that being publicly held was not a cause of higher costs, but it is not as significant a cause as some people were claiming.


Quote:
Originally Posted by SeanVA View Post



 

But bigger and better is only done to increase the capacity of the resorts and thus increase revenue. I can see that it contributes to the increase in price but also part of the increase in size is to accommodate more customers. Resorts that are not part of larger corporations have lower ticket prices: it's a fact.
 

post #7 of 26

Hmmm.....I went to Stowe last year and lift tickets were $98.00............. I can't believe they charge more than Vail!!!!
 

post #8 of 26

I sure wouldn't invest in a ski resort if a return on (or of) my money was paramount. Finance costs for infrastructure expansion are 12 months of the year yet the ski season at most resorts is 5 months out of the year and the business is weather dependent. I'm not sure about the US but in western Canada, 30% of a resort's income comes during the Xmas holidays and to be viable the bigger resorts need at least 300,000 skier visits/season.

 

AFAIK Whistler gets 1.5 million skier visits, Fernie thanks to Calgary weekend skiers get about 350k, Big White, Silver Star, and Sun Peaks (SP took 10 years to start to break even), get more than 300k but less than 350k. Revelstoke gets 90k and will never make $ and Panarama which was recently sold by Intrawest to local business people gets 200k skier visits. I don't know Kicking Horse's #, but they have never made money and real estate sales are way below expectations.

 

Although ski areas can make big $ selling real estate, that $ pays for infrastructure and as the condo market get satisfied eventually they need lift tickets to pay operating expenses and provide a profit.

 

When I pay $70 to $75CDN for a lift ticket for 7 hours use of facilities and free parking, I don't think I am being over charged. I pay similar $ for a 3 hour concert, pro sport event or round of golf.

post #9 of 26

Elasticity of demand.  Companies try to charge AMAFP (As Much As F'n Possible) for their products to reap the largest revenues based on what they believe their target market will pay.

 

post #10 of 26

Two big expenses not yet mentioned that are factored into today's tickets which did not exist in the 60s are snow making and grooming.  It's hard to find a ski area that doesn't have at least one of these (Are there any?) nowadays.  Mt. Baker doesn't have snow making and has limited grooming and lo and behold, its ticket prices are some of the lowest in the country.  It also is locally owned and makes a good profit for its owners.

 

Are people ready to go without snow making and grooming in the big resorts?  I think not.

post #11 of 26

 

Quote:
Originally Posted by Posaune View Post

Two big expenses not yet mentioned that are factored into today's tickets which did not exist in the 60s are snow making and grooming.  It's hard to find a ski area that doesn't have at least one of these (Are there any?) nowadays.  


Silverton has no grooming or snowmaking and $49 lift tickets.  And is pretty much my favorite ski area ever.  

 

It is, however, not without its issues.  

post #12 of 26
Quote:
Originally Posted by Bob Lee View Post

 


Silverton has no grooming or snowmaking and $49 lift tickets.  And is pretty much my favorite ski area ever.  

 

It is, however, not without its issues.  

Silverton is a great model in my opinion.  Only one 1973 2 chair Yan runs about 2200 vertical feet.  You get off and hike it.   But the quality of the snow (deep when I've been there) makes it all worth it.  

 

And someone spoke of vail.  I worked there about 5 years ago and they had 22-23,000 people on the mountain on any given Saturday.   You can do the math less the Pass holders.  Its pretty big money.   But, in addition, Vail would do $75,000,000 in ski school revenue annually.  Yep, that's right $75mmm over all their mountain properties.   The roll up consolidators have made it a factory process catering to those that want every thing fast fast.   VR claimed it could handle 45K people on the mountain , I don't believe it.   The log jammin lift lines were out of control at 23K.   Vail Resorts is like Waste Management or Blockbuster.    Its all about money.   Buy up everything with publicly raised capital create your monopoly, raise prices on lift tickets, sell of your restricted stock once you're in the clear, retire or repeat (for the really greedy).   The corporate boys mantra.
 

post #13 of 26

The problem is that model has worked for them, but a lot of other resorts that tried the same thing have gone under. The percentage of the consumer base that would choose to go to a mountain with a single, slow lift that would require hiking is quite small. It's like a comparison between having a brand new Lambo and a vintage car. The older car has character and soul, but most people are going to choose the flashy sports car. The big resort is the sports car. There are still a few areas left that have people who appreciate character, but most would prefer the big areas with modern amenities.
 

Quote:
Originally Posted by Locim View Post

Silverton is a great model in my opinion.  Only one 1973 2 chair Yan runs about 2200 vertical feet.  You get off and hike it.   But the quality of the snow (deep when I've been there) makes it all worth it.  

 

post #14 of 26

Everything I have ever heard locally indicates that Silverton is not working financially.  If you think it is a great model you can buy it.  It has been for sale for the last few years.  Between all the environmental impact studies, permit fees, installing the used lift, insurance, and costs of running the place, I doubt if they can ever pay off the debt selling lift tickets.  They have no grooming, but they drop bombs from a helicopter to control the avalanche danger, so their overhead is not as low as you might think.  I love skiing there, but they are only open 4 days a week at their peak, and 2 or 3 days a week early and late season.  I have been there on more than one occasion when they had less than 50 skiers.

post #15 of 26

Mad River Glen, $39 weekday ticket $62 weekends.

 

Oh yeah they're profitable too.

 

If it's not broke don't fix it.

post #16 of 26

The cooperate world gets it pretty much right some times too.  I must doff my helmet to Boyne and what they have been doing with Crystal Mountain.  The lift tickets are $60, high of course, but it is reasonable for an area of this scale.  They have built a resort that works for a very wide range of skiers.  Their last lift serviced acreage addition was the Northway lift, it is a very unusual addition in the modern resort scene for a cooperate player to do.

 

When was the last time you saw a resort add a 2000' vertical fixed double chair?  It is all advanced terrain or better with a lot of traversing to get to wide variety  of aspects.  Groomers don't go there, perhaps they should; there is no way to get back to the lift without rocking the bumps on your fatties (a bit tedious after a few hours).  With that one under used lift they added over 1000 acres of really good skiing.  And this thing is a sister lift to their old Upper Campbell advanced terrain only chair.

 

Good job Boyne.  Thank you.  

post #17 of 26

49 Degrees North in Washington, and Lookout Pass have both added fixed grip lifts and awesome new terrain over the past few years.

 

Seems to me the Grizzly chair at Bear Valley California is a fixed grip triple that replaced a fixed grip double.  The terrain in that bowl is off the richter!

post #18 of 26

I'd like to know how much of the increase over inflation of lift ticket prices is due to liability insurance premiums?

post #19 of 26
Thread Starter 
Quote:
Originally Posted by quant2325 View Post

I'd like to know how much of the increase over inflation of lift ticket prices is due to liability insurance premiums?

 


 

Quote:


The research is summarized in the recently published Economic Analysis of North American Ski Areas 1976-1993. There, liability insurance costs over 13 ski seasons is summarized. The report states: "[I]f one looks at liability insurance costs compared to either total revenue or gross operating revenues, the increase in insurance costs appears more reasonable. Liability insurance to total revenue increased from 3.1% to 4.3% and liability insurance to gross operating revenue increased from 2.5% to 3.2%."

 

Source: http://www.skilaw.com/jimcases-gravenanalysis.html

 

Different source (from 2000) that I think represents an ideal business model:

 

x2vud5.png

 

Link:

http://books.google.com/books?id=OVBPSkR8nicC&pg=PA306&dq=Economic+Analysis+of+North+American+Ski+Areas&hl=en&ei=Vt9YTKpSypOdB9j8pYgJ&sa=X&oi=book_result&ct=result&resnum=1&ved=0CDUQ6AEwAA#v=onepage&q=insurance&f=false

post #20 of 26

Dang.  Who woulda thunk somebody would have actually had that readily available...

post #21 of 26

SeanVA,

 

Thanks for the 1999 info.  I was under the misconception that insurance costs were much higher, although I suppose they could have jumped a bit in the last 10 years.  I also thought many "resort" areas were slightly better than break even on the mountain and made more $ on the real estate.  Your numbers show real estate only adding 6% of the total revenue of the average ski area (assuming they consist of large and small areas), which I imagine is low by 2007 statistics and high by 2010's busted real estate market.

post #22 of 26

There is one issue I see with that study. They say that the insurance is much higher, but then adjust for the average revenue. There are a lot more resorts raking in big money off of things like real estate and just in general making more money. The insurance premiums are not going to increase at the same exponential rate that gross revenue is. So the large resorts are going to skew the percentage adjustment for the increase in insurance rates. Adjusted the rates increased by 1.2% (and that was only 1999 I would guess its another 1 percent higher today), but when you take out the mega-resorts and only factor in the average sized areas the disparity would be greater.

post #23 of 26

Just got the info on Telluride prices for next season.  Tickets are up to $98 a day for the high season.  I love that place, but even if I buy a 10-day pass, it comes to $65 a day.

 

Unguided at Silverton Mountain for $49 is starting to look like an even better deal. They are holding at last season's price.

post #24 of 26

seems like everyone follows vail's pricing.  Its starting to be a bit of a game however, yes the full price stupid-for-paying-price at the window may be 98 or higher, but they market "reduced" cost tickets for multiple days and of course full and partial season pass's so this is somewhat of a misnomer, I think par tof this is just marketing to make it look like a good deal and they are selling the majority at reduced costs, which is the real price. 

post #25 of 26

With one western resort suddenly reducing season pass prices to much less than half the former  price, it seems to have nothing to do with a formula. They went for selling more passes for a lower price to net the same profit. Some say having more people around is better for the resort as a whole.

post #26 of 26

Which resort is that?

 

Quote:
Originally Posted by davluri View Post

With one western resort suddenly reducing season pass prices to much less than half the former  price, it seems to have nothing to do with a formula. They went for selling more passes for a lower price to net the same profit. Some say having more people around is better for the resort as a whole.

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