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An in-depth review of the “2020-21 NSAA Economic Analysis of United States Ski Areas,” prepared by RRC Associates, is impressively positive on almost all levels and speaks to the resiliency of the industry in the most challenging of times. The 2020-21 season represented a strong recovery from the Covid-shortened 2019-20 ski season and generated results consistent with the pre-Covid 2018-19 ski season, which had the highest visitation and best economic performance of any ski season in the past decade.

The annual economic analysis historically compares and contrasts industry health over a 10-year period, which can influence comparisons depending on the results of the previous 10-year base season. The following examination of the report uses the 2018-19 pre-Covid season as a benchmark and baseline for comparison, offering a clearer view of the current state of the industry.

To reflect a better numeric balance between the four ski area size groupings—small, medium, large, and extra-large—the analysis adjusted the vertical transport feet per hour (VTFH) definitions of the groups this year. Each size group now represents roughly one quartile of survey respondents, and historical data have been retroactively adjusted to reflect this new ski area size delineation. 

The Highlights

The sacred trinity: visits, revenue, and expenses. Visits in 2020-21 reached 59 million, just short of the 59.3 million achieved in 2018-19, the 10-year benchmark for skier visitation. Average 2020-21 gross revenues were $35 million, down 9 percent from the 2018-19 season. On the positive side, operating expenses were also down 9 percent, and operating profit, EBITDA, and pre-tax profits were down less than 3 percent from the 2018-19 peak economic results (Fig. 1).

Consequences of Covid. Given the Covid capacity restrictions that many ski areas created and implemented on peak days/periods in the 2020-21 season, peak-day visitation was down 17 percent. That decline was offset by increased skier visitation during non-peak periods.

On average, staffing levels were down 17 percent due to reduced operations in certain ancillary businesses (food and beverage, lessons, and accommodations) and employee recruiting challenges during Covid-19, generating much of the operating expense savings.

Looking at the 10-year average, operating expenses are up on a per-skier-visit basis, but down as a percentage of revenue—a positive trend that increases overall profitability.

Ticket/pass revenue continues to be the driver of industry profitability, with season pass revenue as a percentage of overall ticket revenue approaching the 50 percent threshold. Growing season pass volume and revenue, limiting peak day capacities, guest demand for outside activities, and a reduction in discounting led to a record ticket/pass yield of $62.19.

Snowplay/tubing delivered the highest percentage revenue growth of any ancillary department (85 percent) in 2020-21 with a seven-figure revenue contribution, surpassing rental shop revenues for the first time.

Revenue per visit. Revenue of $110 per skier visit was consistent with 2018-19, but it was 6 percent lower than the high-water mark ($120) for the 51.1 million visit 2019-20 season (Fig. 2).

As skier visitation increases, revenue per skier visit moderates, due to ancillary revenue capacity limitations. Nonetheless, revenue per skier visit has increased 35 percent over the 10-year report period.

Smaller areas shine. Ski area economic leaders in terms of revenue, EBITDA, and profitability have historically been the large and extra-large ski areas, particularly those in the Rocky Mountains. The 2020-21 season bucked that trend. While the large and extra-large ski areas continue to enjoy robust business metrics, pandemic-driven interest in outdoor recreation has benefited smaller local ski areas (Fig. 3). Small- and medium-size ski areas were up 20 percent in revenues and 26 percent in pretax profitability compared to 2018-19, achieving new levels of economic success.

Profit margins up. Nationally, the 2020-21 ski industry operating profit margin of 36 percent, the EBITDA margin of 35 percent, and pre-tax profit margin of 20.5 percent are all new historical benchmarks. These strong results were driven in part by the Covid environment, which required a refined and finely tuned approach to every aspect of operations.

Those operational adjustments will continue to be beneficial to the industry in the post-Covid landscape. Meanwhile, impacted hospitality revenues—food and beverage, lodging, ski school—will likely recover over the next year or two as the pandemic transitions to endemic status.

The 2020-21 profit and loss data categories in the analysis may be the most relevant comparisons for a ski area management team looking to improve upon revenue growth and expense management. Season pass strategies, presented as the best value for customers, appear to be driving revenue growth and visitation, and the move away from online or ticket window discounts is increasing yields.

There also seems to be a tremendous opportunity for small- and medium-size ski areas to broaden their customer base by emphasizing ease of access and the variety of their outdoor activities.  

Observations

Summer operations continue to be integrated into business models, with 82 percent of ski areas now generating revenue from summer operations (Fig. 4). Average summer revenues have grown approximately 16 percent over the past 10 years to $3.7 million in 2020, but were down 26 percent from the 2019 pre-Covid summer period.

Over the past 10 years, large and extra-large ski areas have enjoyed significant summer revenue growth ($10 million annual average), while small- and medium-size ski areas have seen summer revenue plateau. The largest generators of summer revenue are food and beverage, lodging, retail, downhill mountain biking, and lift sightseeing rides. 

Transitioning from variable-cost businesses to fixed-cost businesses. Historically, a ski area was primarily a variable cost business that was weather dependent. Costs fluctuated with seasonality and visitation. The improvements in snowmaking technology have neutralized much of the historical winter weather seasonality that challenged the industry. Over the past 20 years, ski area operations have become more reliable. The industry consistently averages 120 operating days, nationally, and extra-large ski areas averaged 152 operating days in 2020-21.

With the addition of summer activities, ski areas now have two seasonal revenue generators. That business model has also transitioned ski areas to more of a fixed-cost business. Ski areas now ramp up for the winter season in October, and the summer season ramps up in May. That schedule minimizes the traditional off-season periods.

While seasonal staffing positions remain significant, full-time, year-round staffs have expanded to meet the complexities of operating two seasonal businesses. Both winter and summer revenues are critical to support the additional cost structure. The two-season business model requires a revenue-driven summer strategy to maintain overall profitability.

Capital investment over the last decade has been significant, driving increased customer satisfaction and commitment, as well as updating infrastructure to position ski areas for future growth and success.

Recent capital investment has focused on increased lift capacity, through new and upgraded lift infrastructure, and other improvements to increase comfortable carrying capacity and balance lift wait times, terrain, and skier distribution to enhance the customer experience. Despite these improvements, overcrowding has plagued many ski areas in 2021-22, signaling the need for continued investment to increase capacity in order to deliver a better customer experience.

Ski area terrain expansions over the last 10 years have been limited mostly to the extra-large ski areas, where terrain has expanded 30 percent during that time. The remainder of the small, medium, and large ski areas have grown only slightly.

Ski area leverage, that is, debt to cash flow, has been consistent during the past three years, and ranges from 0.3 to 2.3 times cash flow. Regional ranges are from 1.9 for the Rocky Mountain (large and extra-large areas) to 0.3 for the Pacific Northwest (small and medium areas). The levels of leverage reflect lenders’ perceived risks of the ski industry.

Insurance and property/other taxes, as well as land use fees and maintenance/repair costs, have recently seen dramatic increases and are a heightened expense burden for ski areas.

Energy efficiency gains are real. The industry has achieved a 4 percent reduction in energy costs over the past 10 years—in a rising energy cost market—from investments in energy efficient technology, which is also key in the effort to address climate change.

Season pass sales have become increasingly integral to many resorts’ business models over the past decade in two significant ways. First, pass sales have increased pre-season and winter cash flows. Second—and equally as important—they have created customer commitment to the sport. The season pass, in many cases, has morphed from a single-area offering to a multi-area product that offers the customer more variety and choice. It is a strong contributor to the industry’s ability to maintain strong annual visitation. The economic analysis supports this dynamic.

Ticket window pricing. Of the reporting 123 ski areas in the analysis, 40 percent have a window ticket price in excess of $100, and a dozen or more of those areas have a window ticket price above $200. The balance of the 60 percent of reporting ski areas offer a window ticket price of less than $100, although the actual number of ski areas with sub-$100 window ticket prices is likely higher, given that 300-plus U.S. ski areas, overwhelmingly small- and medium-sized, did not participate in the economic analysis.

Of the ski areas with higher ticket pricing, a preponderance use it as a strategy to drive season pass volume and revenue. The season pass/ticket pricing strategies appear to benefit these areas, as they realize a majority of annual industry lift ticket revenue and skier visitation. 

In Summary

The 2020-21 season, while incredibly challenging, was a positive economic milestone for the ski industry. Historically, it was the third-best revenue year for ski areas, and one of the most profitable on record. Given the realities of the Covid-19 pandemic that began in early 2020 and continues to challenge globally, the 2020-21 season was a remarkable one for U.S. ski areas.

The data in the economic analysis demonstrate the industry’s ability to adapt to change—an immensely valuable skill set. The ability of the industry to react to weather, environment, government, demographic, and infrastructure challenges—plus an unimaginable and unforeseen pandemic—are continued confirmation of the resiliency that has been one of its core traits for 70 years.

Bill Jensen has led several of North America’s top resorts during his career, including Northstar, Calif., Breckenridge, Vail, and Telluride, Colo., and Whistler, B.C. He was inducted into the U.S. Ski and Snowboard Hall of Fame in 2018.

PARTICIPATION IS PARAMOUNT

The “NSAA Economic Analysis of United States Ski Areas” is an analytical business tool that may be unique to the ski industry. The willingness of 123 ski areas to share anonymously, in detail, the financial metrics and results of their businesses is unprecedented. And that information is shared not just with the survey participants, but the entire industry. The 160-page annual report provides a platform to measure and analyze industry business activity. It is a must read for any ski area manager.

The modification in the 2021 report to present a 10-year history of results is valuable, but it’s no longer a “same store” two-year comparison of the same responding resorts. While many of the same resorts fill it out fairly consistently, this shift revealed that “very few ski areas submit a survey in all 10 years consecutively.”

Having participated in the annual survey for many years, I know that completing it requires time, accounting expertise, and a level of detail beyond just profit and loss. NSAA appropriately acknowledges and thanks the survey participants each year for their time and effort.

Increased participation in the survey would strengthen the results and create more value for the industry. That may well require some changes to the survey itself, aimed at easing the burden of completing it.

Small- and medium-sized ski areas across all regions have historically been underrepresented in the report given the volume of U.S. ski areas that fit in these categories. NSAA and RRC should consider an optional scaled-down economic survey specific to small- and medium-sized ski areas, asking for information that can be compiled into many of the existing data sets, but which can be more readily completed. Ideally, expanded survey participation would provide even more valuable insights for managers of small- and medium-sized ski areas.