The Economics of Everyday Things
00:00:00 · S0, S1, Zachary Crockett, Rob Goodell, S4
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00:01:33 · Zachary Crockett, Rob Goodell
[00:01:33] S2: Imagine for a moment that you're a venture capitalist, and you're looking for your next big investment. [00:01:40] S3: And I'm making a pitch to you, and I tell you that my business is seasonal, labor intensive, weather dependent, capital intensive, and is based on a discretionary recreational activity that has inherent risks. I don't know if the conversation would go much further, but that kind of sums up the ski industry. [00:02:04] S2: That's Rob Goodell. He's the chief operating officer of Loveland Ski Area near Silverthorne, Colorado. Loveland is 11,000 feet up in the Rocky Mountains, just an hour's drive from the Denver Metro Area. [00:02:18] S3: Been in operation for eighty five years. We're owned by one family from Texas. Chet and Virginia Upham were investors back in the fifties. And then in the early seventies, 1972, they became the outright owners. [00:02:33] S2: Chet and Virginia's descendants own Loveland today, and Goodell's been working for the family for thirty two years. [00:02:41] S3: It takes a lot of intestinal fortitude because there are seasons that are late to get started, early to close, dry spells in between, and you have to be committed to it. [00:02:52] S2: Over 70% of ski areas in The United States are independently owned like Loveland, but the industry has become more consolidated over the years, and the bigger companies are less vulnerable to the inherent instability of the ski business.
00:02:52 · Zachary Crockett, Rob Goodell
[00:02:52] S2: Over 70% of ski areas in The United States are independently owned like Loveland, but the industry has become more consolidated over the years, and the bigger companies are less vulnerable to the inherent instability of the ski business. [00:03:09] S3: Their model is global. They have resorts around the world, so they're kinda hedging their investment by saying that if the Eastern Part of The United States doesn't have a good winter, hopefully, Western Part or the Midwest or the Southern Hemisphere. [00:03:26] S2: So what does it take to stay independent? [00:03:29] S3: There is a joke in the industry that says, how do you become a millionaire in the ski industry? You start out as a multimillionaire and buy a ski area. [00:03:39] S2: For The Freakonomics Radio Network, this is The Economics of Everyday Things. I'm Zachary Crockett. Today, ski areas. Recreational skiing and snowboarding generate nearly $60,000,000,000 in economic activity in The US each year. On one end of the industry, you've got giant ski resorts like Vail in Colorado, Palisades in California, and Big Sky in Montana. These places are like Disneyland for snow enthusiasts. They have all kinds of activities, dog sled rides, snow tubing, ice skating. And with luxury lodges and fine dining on-site, you can stay for a week or more. But ski areas like Loveland cater to people who just want to enjoy a day of skiing. [00:04:30] S3: We pride ourselves in being just a day ski area. We have all the support services to make your day complete from rentals, food and beverage operations, retail sales.
00:04:30 · Rob Goodell, Zachary Crockett
[00:04:30] S3: We pride ourselves in being just a day ski area. We have all the support services to make your day complete from rentals, food and beverage operations, retail sales. [00:04:44] S2: A single day adult lift ticket costs a $149 at Loveland, and a season pass costs $699. [00:04:53] S3: Definitely the number one revenue stream for us is the lift revenue, which includes season passes, the lift tickets. 60 to 65% comes from lift ticket sales, and then food and beverage, ski and ride, school, and rentals, probably about 30% all combined. Most years, we do make money, but you also keep a capital reserve. We call it lack of snow fund instead of a rainy day fund. But from one season to the next, it is fairly sustainable. We do a decent volume in our season pass sales and ticket sales and ancillary revenue that we can make it. [00:05:35] S2: Loveland Ski Area faces fierce competition for skiers from conglomerates like Vail Resorts and Alterra Mountain Company. Together, those two companies own about 10% of the ski areas in The US, and they offer package deals to skiers who wanna try the slopes at more than one resort in a season. [00:05:57] S3: Within, you know, that one hour drive from the Denver Metro Area, pretty much all the rest of our competition is either with the Ikon or Epic Pass, which is Alterra and Vail Resorts, really puts us on an island that we don't have that cooperative pass with the big guys.
00:05:57 · Rob Goodell, Zachary Crockett, Andrew Gast
[00:05:57] S3: Within, you know, that one hour drive from the Denver Metro Area, pretty much all the rest of our competition is either with the Ikon or Epic Pass, which is Alterra and Vail Resorts, really puts us on an island that we don't have that cooperative pass with the big guys. [00:06:17] S2: A single day adult lift ticket at a big resort can cost over $300, but many skiers save money buying a season pass. Passes usually go on sale starting at the end of the previous ski season and increase in price through the summer and fall, and they're generally a much better deal. The spring sale price for Vail's Epic Pass is a little more than a thousand bucks, and it gives skiers access to 42 resorts around the world. The smaller independent ski areas have trouble competing with that kind of offer. [00:06:52] S5: Those mega passes are very, very affordable. [00:06:56] S2: That's Andrew Gast. He's the general manager of Mount Ashland Ski Area, a small independently run mountain in Southern Oregon. [00:07:05] S5: And often that pass price is comparable to our season pass, and that's just a function of the fact of buying power and us having to be self sustaining and do everything ourselves. [00:07:16] S2: But Rob Goodell says there are other dimensions besides price that make independent mountains desirable.
00:07:16 · Zachary Crockett, Rob Goodell, Andrew Gast
[00:07:16] S2: But Rob Goodell says there are other dimensions besides price that make independent mountains desirable. [00:07:23] S3: We just do not get as crowded as the bigger guys with those that accept those passes. One of our most limiting factors is our parking. Our uphill capacity far exceeds what our parking capacity is. The experience on the hill is not congested at all because everyone spreads out and is able to find their own terrain. And we are actually, looking to expand some parking so we can accommodate more people. [00:07:49] S2: In the early nineties, Mount Ashland Ski Area was on the verge of closure. The owners, a company called Harbor Properties, were tired of losing money during the drier winters, so they planned to shut down operations. [00:08:04] S5: The community came together and bought the mountain from that company and formed the nonprofit that operates it today. [00:08:11] S2: As a nonprofit corporation, Mount Ashland takes donations, but donations only cover about 1% of their day to day costs. Their operating budget is in the millions. [00:08:23] S5: In a typical year right now, it's a little over $4,000,000. For our particular mountain, the most profitable months are December, January. February is a little bit less so. And then we're actually budgeted to lose about a $250,000 in March. We opened just because it's a nonprofit mountain, and we're there for the community.