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  • There are few sports as expensive as skiing.

  • A daily lift-ticket alone typically costs more than $100 with top resorts, such as Vail,

  • charging up to $209 for a day's skiing.

  • It'd be easy to call this a rip-off.

  • After all, all those $209 are getting you is access, along with thousands of other people,

  • to one of 32 lifts between the hours of 8:30 am and 3:30 pm.

  • Does it really cost that much for a resort to run a few lifts?

  • Well, the short answer is sort of.

  • Ski lifts are a simple enough concept.

  • With the most common design, chairs, each with a capacity between one and eight, are

  • connected to a continuously rotating cable, pulled by motors at the top or bottom of the

  • lift.

  • Between all the redundancies and safety systems, though, they end up being fairly complex machines,

  • and complex means expensive.

  • While it varies wildly depending on length, capacity, specifications, and location, costs

  • for the construction of a new lift alone regularly reach $10 million, and most large ski resorts

  • have dozens of lifts.

  • In Vail's case, once again, they have 32.

  • That means that, even if they were all the kinds of lifts that cost $10 million, which

  • they're not, that would total to $320 million.

  • Those $320 million are divided by a lift lifespan of a few dozen years, then divided further

  • by the hundreds of thousands of yearly visitors who are each paying up to hundreds of dollars

  • per day, and you can start to see pretty quickly that it is not because of building lifts that

  • skiing is expensive.

  • The paradox of ski resorts is that buying and installing ski lifts, which are their

  • primary physical assets, only represents a small proportion of their costs.

  • Actually running ski lifts is trickier, but for a slightly unexpected reason.

  • Between working the line, scanning tickets, helping riders load, and manning the terminal

  • to stop the lift in case of an accident, a good number of workers are needed to operate

  • each lift.

  • Then, when you add in all the restaurants, ticket sales, rental shops, stores, hotels,

  • activities, and everything else a large resort has, it needs thousands of employees, but

  • getting such huge numbers of workers is quite tough.

  • The nature of the majority of these jobs is that they're low-wage and seasonal.

  • That means that a resort needs to find a subset of people who are willing to move to the mountain

  • for five or six months and work for not much.

  • There are not many people who want to do that and, among those who are, they're typically

  • young people who will only work a season or two before entering a longer-term career.

  • Running a ski resort is an enormous and never-ending recruiting mission and many are unable to

  • fill all their positions, even when touting significantly better benefits than most other

  • entry-level jobs, at least in the US, like healthcare, transit passes, 401k's, and

  • free ski passes.

  • This labor scarcity has pushed wages up for ski jobs, but even with higher wages they

  • run into another issuehousing.

  • The nature of the ski resort economy is that the towns that ski resorts are in need to

  • be able to accommodate a seasonal doubling or tripling or quadrupling of their population.

  • Couple that with the fact that resorts tend to be nestled in the mountains where there

  • is little flat or semi-flat land where one can build cheap housing, and the urban geography

  • of these areas is wacky.

  • Take the example of Aspen.

  • Aspen is home to four ski areas, all operated by the Aspen Skiing Company, and therefore,

  • in the winter, the greater Aspen area is also home to thousands of seasonal workers.

  • Many of these workers are paid the company's base wage of $13.50 an hour, however, Aspen

  • also happens to be one of the world's most expensive real estate markets.

  • The reason for that is, as usual, a byproduct of supply and demand.

  • Housing supply is quite low as the town is nestled at the end of a mountain valley with,

  • in the winter, only one road in or out.

  • Housing supply for small apartments is even lower.

  • The average price per square foot of a home in Aspen is nearly $1,700.

  • In comparison, in Manhattan, New York, it's under $1,400.

  • Of course, no matter how much they pay, Aspen Skiing Company isn't going to get workers

  • unless they have somewhere to live.

  • While prices decrease as one descends down-valley, for the most part, there would be no chance

  • of housing thousands of low-wage workers using the free market, so Aspen Skiing Company's

  • solution is to provide subsidized employee housing at prices that all their workers can

  • afford.

  • So, while a ski resort may be able to pay their employees $13.50 an hour, their employees

  • cost them quite a bit more than that.

  • There is, however, another unique byproduct of the ski-town labor market.

  • The masses of seasonal workers often don't bring cars with them, so they need ways to

  • get around.

  • Now, the US is not known for its public transportation systems, and it's known even less for its

  • rural public transportation systems, but American ski towns are often an exception to this.

  • Many have public-transportation systems that rival those of big cities.

  • Colorado, home to many of the US' most popular ski resorts, leads the nation in terms of

  • ridership on its rural transportation systems.

  • Of these, the system with the highest ridership is Aspen's, with more than 5 million passengers

  • per year.

  • That's remarkable for a town of 7,000, even though the system extends far beyond, and

  • its core routes have busses every 12 minutes or moreagain, rivaling many routes in big

  • cities.

  • This system, much like those of all of Colorado's ski towns, is crucial to get workers in and

  • out of the area and it represents the symbiotic relationship ski resorts and the towns they're

  • located in often have.

  • Ski resorts need their ski towns to set themselves up in a way that's accommodating for their

  • workers and guests, while ski towns need ski resorts in order to stay ski towns.

  • But here's something strange: most big ski resorts, at least in the US, don't actually

  • own the land they operate on.

  • It's government land, and the resorts only hold permits to use the land.

  • This means that the land upon which one skis is public land and so, with some restrictions,

  • anyone can use the land regardless of whether or not they have a lift ticket.

  • At American resorts sitting on US Forest Service land, of which there are 122, people legally

  • can and do hike uphill and then ski down without a pass.

  • Therefore, technically, what the resorts are selling is access to the lifts themselves,

  • not the mountains.

  • Despite this, though, people obviously wouldn't pay to ride those lifts up unless the skiing

  • down was good, so resorts spend huge amounts of money building and maintaining the downhill

  • runs.

  • Some of this only needs to happen once a year, like trimming any trees trying to grow in

  • the middle of runs in summer, while some needs to happen every night.

  • Snow quality can vary a lot and, without attention, can get bad quickly, so therefore, every night

  • snowcats go out to groom the easier and more frequented runs.

  • But sometimes, grooming isn't enough to keep snow quality good.

  • Sometimes, there just isn't enough snow.

  • The one solution to that, aside from waiting, is snowmaking.

  • There are many different designs of snow guns but they all essentially work the same waythey

  • spray out tiny droplets of water that quickly freeze.

  • Of course, that still requires temperatures to be below freezing, but this is common at

  • nighttime in even more temperate areas.

  • Some resorts, especially smaller ones in warmer locations, rely almost fully on artificial

  • snow, while larger resorts use it to extend their season or build up snowpack on high-use

  • areas.

  • There are, though, disadvantages to this.

  • From the ski resort's perspective, the main one is that it's hugely expensive.

  • Constructing a system over a vast mountain area is expensive, sourcing the large quantities

  • of water needed is difficult, and then the process itself is extremely energy intensive.

  • Exact costs vary, given the number of variables involved, but in general, snowmaking enough

  • to cover an acre of terrain costs an average of $5,000.

  • That means that, to fully cover one of the largest resorts, like Whistler-Blackcomb,

  • in snow, it would cost more than $40 million, and of course, all of that can melt in a few

  • warm days.

  • In practice, though, none of the larger resorts rely so heavily on artificial snow, at least

  • right now, but snowmaking still represents a huge cost for resorts large and small.

  • The snowsports business is, understandably, one of the most threatened industries by climate

  • change and the rising temperatures it can bring.

  • Now, the projected effects of climate change on mountainous areas are complicated.

  • It's not as simple as saying that temperatures are going to be higher and therefore it will

  • snow less.

  • In some places, the change in global climate will actually bring more precipitation and

  • therefore more snow.

  • In most, though, it's the opposite.

  • Lower-altitude and more southern resorts especially will see their season lengths shrink and shrink

  • and shrink.

  • Eventually, at many of these, the number of days they stay open will not be enough to

  • pay the bills, especially as the use of expensive snowmaking increases.

  • Higher-altitude and more northern resorts will actually likely benefit from this, at

  • least in the short-term, as more people travel to them faced with fewer alternatives.

  • Looking at what's to come, the industry has become cognizant of the storm ahead and

  • started to make changes to address its primary threat.

  • While some are physical changeslike building more snowmaking capacitymost are changes

  • to the way they do business.

  • Money can overcome nature, at least for a while, so what they're doing is making sure

  • the money's still coming in.

  • Consequently, the North American ski industry has seen massive consolidation in recent years.

  • This trend only started in earnest five years ago when Vail Resorts, the company that owns

  • Vail, went on a spending spree.

  • In 2015, the company owned 11 resorts.

  • Now, five years later, they own 37.

  • The link this has to climate change is that now, Vail Resorts, which is a public company,

  • has properties spread out across different climates so, for example, if there's a bad

  • snow year in the Rockies, they always have properties in British Columbia, where the

  • snow might be better.

  • They even own resorts in Australia so Vail spins lifts somewhere on earth nearly year-round.

  • Not to be outdone, Aspen Skiing Company, which runs the four famous Aspen-area resorts, teamed

  • up with KSL Capital Partners, a private equity firm, in 2018 and formed a joint venture to

  • compete against Vail: Alterra Mountain Company.

  • Alterra now owns a more modest 15 resorts across the US and Canada.

  • With the resorts they own and partner with, both of these companies released offerings

  • that are changing the financial formula of the ski industry.

  • For Vail, it's the Epic Pass; for Alterra, it's the Ikon pass; but for the both of

  • them, these are essentially season passes that, instead of working at just one place,

  • work at dozens of resorts worldwide.

  • This is a killer competitive move against independent resorts since, in many ways, these

  • are better for the consumer and better for the company.

  • The consumer gets variety and flexibility at prices not much different than single-resort

  • season passes, while the companies are selling more season passes which is exactly what they

  • want.

  • That's because season passes hedge risk.

  • Even though they'll make more money in a day from someone buying a single-day pass,

  • those buying those day passes are highly weather dependent.

  • If there's tons of snow, they'll sell tons of day passes, if there's little snow,

  • they'll sell barely any.

  • Nobody wants their quarterly earnings reports to depend too much on the weather, especially

  • as it's getting worse, and so, by getting more of their customers onto season passes,

  • which are typically sold before the start of the season when there are few indications

  • of the season's snowfall, the consumer is sharing the risk with the company, and revenue

  • variability year-to-year will lower.

  • This is a crucial shift for the ski companies as year-to-year snow variation is expected

  • to only pick up.

  • So, in all, the real shift the ski industry is having to make is not how they run their

  • slopes, but rather how they make money.

  • For them, while they still might lobby, fundraise, and rally against it, they're now a point

  • where reality is imminent, and climate change is all but another component of their financial

  • plans.

  • If you want a little bit more of the action side of snow-sports, and a little bit less

  • of the business side, believe it or not, Curiosity Stream has something for you to watch next.

  • The series, “Jeremy Jones: Higher,” follows professional snowboarder Jeremy Jones as he

  • attempts to be the first person to snowboard down sections of the Himalayas, and shows

  • everything that goes on behind the scenes of an expedition as huge as that.

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B1 US ski aspen skiing resort season company

The Business of Ski Resorts

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    joey joey posted on 2021/06/10
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