Ski-area expansions and the bottom line
There are few touchier subjects in the Colorado business world than expansions at the state’s ski areas. Many in the industry would rather stay mum on the dollar-and-cents decisions that go into an expansion of skiable terrain, but those who will talk about it see tangible benefits.
Breckenridge Ski Resort, owned by Broomfield-based Vail Resorts, is expanding by 550 acres on Peak 6 for 2013-14, and Monarch, Eldora, Wolf Creek and Crested Butte all have development plans on the drawing board, awaiting costly environmental studies and stamps of approval from the U.S. Forest Service. These moves of course all come along with multi-million dollar chairlift installations, glading and earthmoving operations, in the process stoking some serious environmental passions; let us not forget one of the last times Vail Resorts expanded in Colorado resulting in a high-profile arson by members of the Earth Liberation Front.
And if you manage to navigate this thorny labyrinth of politics and public opinion, you then need to sell a whole bunch of lift tickets, hotel rooms and cheeseburgers before there’s a meaningful return on investment.
In his scathing 2002 critique of the corporate ski industry, “Downhill Slide,” writer Hal Clifford posited that expansions were almost always follies from a business perspective. Expansions do nothing to grow the market – the number of skiers and snowboarders remains relatively static – so resorts that expand are doing nothing but fighting for a bigger piece of the same size pie.
It’s no surprise Vail Resorts declined an interview for this story. So did Hal Clifford, now a filmmaker in Boulder. Industry association Colorado Ski Country USA did not want to talk, either.
In most of the country, this is not even a story. The National Ski Areas Association says its most recent data pegged the average acreage of a ski area in the U.S. at 960 acres in 2011-12, up from 946 acres in 2008-09. Rocky Mountain West resorts in Colorado, Utah, Idaho, Wyoming and Montana edged up from 1,822 acres in 2008-09 to 1,838 acres in 2011-12.
Of course, this data doesn’t include expansions at Telluride, A-Basin, Breckenridge and Vail in the 2000s, or anything for the 70-plus years of the industry’s history in the state. Cumulatively, Colorado has undoubtedly seen more ski-area expansions than anywhere else, not surprising given that the state dominates all others in terms of skier-days. The state’s usual 11 million annual skier-days, give or take, is typically more than Nos. 2 and 3 (California and Utah) combined. This is where the ski business is at its biggest. And it doesn’t get much bigger than Breck, where annual skier-days are usually neck-and-neck for tops in the country – i.e. about 1.75 million.
Breckenridge’s controversial expansion is the first in the state since 2008 and the first at the dominant Summit County resort since 2002. While it’s hard to deny that the resort’s slopes aren’t near or at capacity, opponents have decried the lost lynx habitat and other environmental hazards. The Forest Service ultimately denied an appeal of its expansion approval last fall, paving the way for construction to begin this summer, and Peak 6 is expected to be open for the 2013-14 season, complete with a high-speed, six-passenger chairlift and a fixed-grip lift.
“I don’t know of any other industry that can ask the question every year, ‘What’s new?’” laughs Tom Watkinson, communications manager for Telluride Ski Resort. “Do they ask that of cruise ships and beaches? No, but they ask the ski industry that every year without fail.”
Greg Ralph, director of marketing for Monarch Mountain, echoes Watkinson’s opinion. “Skiers always want something new. That’s the pizzazz of the industry,” Ralph says.
“We’ve had some really strong growth in the past seven or eight years,” says Ralph, citing an uptick from about 140,000 skier-days in the winter of 2005-06 to about 185,000 this past season. He expects more as Monarch’s top metro market, Colorado Springs, is expected to increase its population by about 100,000 in coming years. “You don’t want to lose the look and feel of the area.”
It follows that Monarch, which has not expanded its lift service since the early 1990s, wants to add about 300 acres of lift-served terrain. The resort has submitted the master plan to the Gunnison and San Isabel National Forests and is awaiting word on approval.
Ralph compares the plan to Arapahoe Basin opening the 400-acre Montezuma Bowl in 2007-08. “That’s been very well received,” he says. He says the target is to have a new chairlift running on the back side of Monarch by 2020.
While the goal is to maintain an “uncrowded” feel, the results of expanding terrain would have the effect of luring more customers. “We’d instantly grow skier visits,” Ralph says. “We’d have more terrain and more skiers.” The resort’s forecast calls for an immediate post-expansion bump to about 200,000 skier-days a year.
Thus Monarch doubled the size of the base lodge for 2012-13 and pushed the Forest Service to approve a larger parking lot. A huge snowstorm in late February maxed out the parking lot at 9:30 a.m., says Ralph, forcing a shuttle bus into service to ferry skiers from a lot several miles away. “It’s not the experience we want to provide,” Ralph says.
“The number-one thing we hear every year: They’d like to see more terrain,” says John Sale, director of planning and sustainability at Crested Butte Mountain Resort. Crested Butte features 638 developed acres and another 550 acres of extreme in-bounds terrain that’s a mismatch for “the average skier from Oklahoma or Texas,” Sale says. “Two to three days on our mountain and people are looking for more.”
After the Forest Service denied the resort’s controversial proposed expansion onto Snodgrass Mountain in 2009, the resort’s management pivoted to a new vision of expanding into 400 acres of the Teocalli Drainage.
“It’ll be totally different from the front side,” Sale says. He describes the master plan’s vision of “an in-bounds, pseudo-backcountry experience” with very thoughtfully gladed runs. “In the old days, they would just get a bulldozer and glade the runs. This is going to be much different.”
Sale is also pursuing a new Snodgrass plan that includes no lifts, just routes for Alpine tour (AT) skiers to skin uphill. “We think there’s an opportunity for human-powered use,” says Sale. “It’s the fastest growing trend in the industry. We could really have something that’s unique.”
Sale says expansions at Breckenridge and larger resorts serve a much different strategic purpose. “They’re looking to disperse people from the lift lines. We’re trying to add more terrain so people can have an enjoyable experience for four to five days of skiing. It’s more about our customer than anything else.”
Numbers don’t typically lie. Crested Butte’s skier-days have plunged after peaking at about 250,000 in 1997-98. “Last year, we were at 122,000,” says Sale. “That’s a drop of 53 percent.”
A reduction in the number of flights into nearby Gunnison has also factored into this decline, as have cancellation of free and discounted lift-ticket deals and a number of other factors. The community is working to bring in more flights, but ultimately “it’s really about how do we bring more people here?” Sale says.
It’s not about fighting for a bigger chunk of a stagnant pie, he adds. “Compared to the golf industry, the ski industry was seeing positive growth” – nationally, skier-days peaked at 60 million in 2010-11, but dropped to 51 million when the bone-dry winter of 2011-12 hit.
Sale says the resort could see a return on an expansion investment in the near term, but that it needed to attract more airlines to do so. “The overall return is based on access to Crested Butte,” he says. “It’s not just terrain.”
Nonetheless, Sale points out that Crested Butte’s prime competitors – Steamboat and Telluride – have considerably more space. “We’re under no pretenses that we compete with Vail,” he says, pointing to Telluride’s Prospect and Revelation Bowls as models for the type of expansion he’d like to oversee. “We could have something new for every season for the next 10 years.”
Prospect Bowl opened at Telluride in 2002, followed by Revelation in 2008. “The timing was great, because it happened as the recession began,” says resort spokesman Watkinson. “It was on everybody’s radar and it still is on everybody’s radar.” Prospect was the big one, adding nearly 700 acres and nearly doubling Telluride’s skiable terrain.
Telluride does not disclose its skier-day data, so it’s hard to gauge ROI. “We’ve been steadily increasing our skier visits,” says Watkinson, citing modest growth even in 2011-12 when the industry was down nearly 20 percent nationwide because of skimpy snowpack.
Watkinson attributes it more to runs for beginners than those for experts. “There’s terrain for everybody,” he says. “You can take beginners up to the top of the mountain. You just don’t get that anywhere.”
But the expansions cost the resort a pretty penny and were not without critics. Was it worth it, or more importantly, will it be in the long term? Answers Watkinson: “Yep – definitely.”