Ski Industry Analysis 2004-2005 PDF

INTRODUCTION Skiing began to be used for recreational purposes in the 19th century. Norwegian Sondre Norheim developed a stiff toe-and-heel binding, allowing for long, gliding turns. Skiing’s popularity grew in the United States. In the early 20th century, Austrians developed downhill skiing techniq...

INTRODUCTION Skiing began to be used for recreational purposes in the 19th century. Norwegian Sondre Norheim developed a stiff toe-and-heel binding, allowing for long, gliding turns. Skiing’s popularity grew in the United States. In the early 20th century, Austrians developed downhill skiing techniques. The International Ski Federation recognized downhill and slalom skiing. The first ski lift was unveiled in Vermont. Innovations in technology and equipment increased skiing’s popularity. During World War II, the Tenth Mountain Division and European skiers contributed to the industry’s development. Advancements like metal skis and ski boots further popularized the sport. The relationship between skiing and real estate development was strengthened. If people don’t start skiing early in life, they are unlikely to take it up later. The decline in teenagers caused concern in the industry. However, the children of baby boomers returned to the slopes as both skiers and snowboarders. The rapid increase in snowboarding is encouraging, with many resorts developing specific runs for snowboarders, attracting more people with money to spend. ECONOMICS Number of Ski Areas: The number of U.S. ski resorts decreased to 492 in the 2004-2005 season. From 1983- 1994, there was a rapid decline due to increased competition and challenges in operating smaller resorts. Between 1993- 2000, the number of resorts ranged from 503 to 521, then stabilized between 490 and 494 over the next five seasons. This stability indicates that the industry has overcome its previous challenges, and the remaining resorts are showing strong staying power. Ranked Distribution of Ski Areas by Size: During the 2004-2005 ski season, the ski industry was highly fragmented. Resorts were divided into four groups based on the number of visits: Bottom quartile: Fewer than 38,950 visits. Second quartile: Between 38,950 and 110,043 visits. Third quartile: Between 110,043 and 233,719 visits. Top quartile: 233,719 visits or more. Top decile: More than 445,758 visits The top 20% of resorts controlled about 60% of total visits, but no single resort accounted for more than 3% of total skier visits, indicating a highly fragmented industry with no dominant player Resort sizes varied by region: Midwest and Southeast: Generally smaller resorts due to climate and topography. Rocky Mountain region: Wide variety of resort sizes, from very large to very small. Northeast: A small group of resorts hosted a large number of participants This distribution highlights the fragmented nature of the ski industry and the significant variation in resort sizes across different regions Ski Areas by VTF/H: Vertical Transport Feet per Hour (vtf/h): Measures a ski area’s ability to transport skiers uphill. Resort Distribution by vtf/h: Large resorts (12,000 vtf/h and above) make up 11.6% of all ski areas but account for nearly half of all skier visits. Small resorts (less than 3,000 vtf/h) make up 59.6% of all ski areas but account for only 16.5% of skier visits. Medium resorts (3,000-11,999 vtf/h) make up 28.9% of ski areas and account for 36.3% of skier visits Larger resorts attract a disproportionately large percentage of skier visits. Number of Lifts: The average vertical transport feet per hour (vtf/h) in ski resorts has been increasing over time due to the continuous addition and upgrading of lifts. This trend is observed across all resort sizes, with the most significant increase in the second-largest resort size group (up 9.4%) and the smallest increase in the smallest resort size group (up 5.3%). Overall, the average number of lifts per resort has been gradually increasing nationally, regionally, and by resort size. Top States and Top Regions by Skier Visits: In the 2004-2005 season, skier visits in the U.S. declined slightly to 56.9 million, with the number of ski areas stabilizing at 492. The largest states for skier visits were Colorado (11.8 million), California (7.8million), and Vermont (4.6 million). The Rocky Mountain region accounted for about one-third of all skier visits, followed by the Northeast with about a quarter, and the Pacific West with just under 20% Capital Improvements: During the 2004-2005 ski season, capital improvement spending increased significantly, particularly in real estate. Over a three-year period (2003-2006), investments were distributed as follows: Real estate: 43% 2. Mountain support and facilities: 41% 3. New or upgraded lifts: 16% For the types of new or upgraded lifts: Chairlifts: 48 2. Conveyors/carpets: 32 3. Tows/surface lifts: 15 Terrain Features: Many ski resorts feature terrain parks. The distribution is as follows: Half-pipes: 42% 2. Super-pipes: 34% 3. Other specialized terrain features: 11% (including quarter-pipes, rails, kickers, jibs, tabletops, box jumps, snowskate parks, kids’ terrain parks, progression parks, snowcross courses, snowdeck parks, trail features, and more any ski resorts feature terrain parks. DEMOGRAPHICS Gender During the 2004–2005 ski season, U.S. resorts recorded about 56.9 million skier visits, with a gender ratio of 59% male to 41% female. This ratio has been stable over several seasons. Females made up 40-43% of downhill skiers and 31-33% of snowboarders during the previous eight seasons. Males predominated in several categories: they were 77% of those who started skiing independently, 72% of advanced skiers, and 67% of snowboarders. Additionally, 63% of helmet wearers and 62% of season pass holders were male Conversely, females represented 58% of beginners (excluding first-timers) and 48% of participants who learned through organized groups 54% of participants are first-timers. 57% take lessons. Many plan to ski once (52%) or two to three times (47%). Nearly half (49%) rent equipment. 48% have dropped out in the past five years. 48% participate in organized groups. 46% are couples without children, and 45% are aged 35-44. Females are more common in lower-ability groups but underrepresented overall. The industry appears effective in attracting a diverse range of participants. Age The median age of snowsports participants rose from 32 to 36 between the 1997- 1998 and 2004-2005 seasons. There is a growing share of participants aged 45 and over, while numbers of those aged 25 to 44 have declined, largely due to the smaller Generation X. Participation among young adults and children has remained stable. The industry needs to attract younger participants while retaining older ones. Family status Nationally, 48% of skiers and snowboarders live in households with children, split between 32% parents and 16% kids under 17. Singles without children form the next largest group. Over time, family participation has risen while singles have declined. At smaller resorts, 33% of visitors are children, compared to 9% at larger ones. Larger resorts attract more singles (31%), couples without children (14%), and empty-nesters (15%). The proportion of participants with children remains similar across all resort sizes, averaging 31-33%. Race ethnicity In the 2004–2005 season, 88% of skiers and snowboarders were white, a stable trend over recent years. The Pacific West has the most diversity at 19% minority representation, while the Northeast has the least at 6%. Ethnic minorities tend to use snowboards more, identify as beginners, rent equipment, and take lessons at higher rates than whites. They are also younger, with a median age of 25. Minorities often start with friends rather than family, indicating less familial history in the sport. Overall, minorities make up only 12% of snowsport participants, despite being 33% of the U.S. population SKIOGRAPHIC Equipment type In the 2004–2005 season, alpine skiers made up 69% of ski resort visitors, while. snowboarders accounted for 26%. Participation in snowboarding, alpine skiing, and telemarking has plateaued after previous growth. Snowboarding lessons stabilized around 23.2% to 23.7% of all lessons. Interest in snowboarding is high among younger age groups (45% of 10-14, 55% of 15-17, and 54% of 18-24), but drops to 38% in the 25- 34 age range, reflecting a trend toward an older visitor demographic. Ability level Most snowsports participants are intermediates (46%), followed by advanced/expert (41%), beginners (9%), and first-timers (3%). The advanced/expert category has grown from 31% to 41% over the eight seasons leading up to 2004– 2005, largely due to increased age and experience. Regionally, intermediates dominate except in the Pacific West, where advanced/expert skiers are more prevalent (46%). The Southeast has the highest percentage of beginners and first-timers (26%). Demographically, beginners are often younger, female, and diverse, with a tendency to rent equipment and take lessons. In contrast, advanced/expert skiers are typically older, male, and non-Hispanic white, with more days on the slopes and ownership of gear. Advanced/expert participants usually start young through family, while beginners tend to begin later with friends or groups. Number of seasons of participation Alpine skiing has a longer participation history, with 63% of skiers having over ten seasons of experience, compared to only 15% of snowboarders. While snowboarding attracts more first-year participants (14% vs. 6% for skiing), growth in participation has stagnated over the past five years, raising concerns about lower retention rates among snowboarders compared to skiers Ski trips to Canada and eroupe In the 2004–2005 season, about 5% of U.S. snowsports enthusiasts planned to ski in Western Canada, 3% in Eastern Canada, and 4% in Europe, similar to the previous season's figures. Residents of Pacific states were over four times more likely to ski in Western Canada than the overall U.S. skier population, while those.from the Middle Atlantic were more inclined to ski in Eastern Canada. Season Pass Ownership During the 2004–2005 season, about 27% of snowsports enthusiasts owned a season pass, similar to past years but slightly lower than the 29.6% reported in the Kottke survey. Season pass holders were mostly advanced or expert skiers and were often on day trips to the resort. Age When First Tried Snowsports In the 2004–2005 season, the median age for first trying snowsports was 12. Early participation is key to becoming an avid skier or snowboarder. Males typically start younger, and those who begin at age five or younger are more likely to reach advanced levels. Overall, younger starters tend to participate more frequently in snowsports throughout their lives. Method of Entry into Snowsports Most participants in snowsports begin with their families (50%), followed by friends (34%). The age of entry influences these patterns: those starting at age ten or under primarily start with family, while friends become more significant for those aged 11 to 25. Schools play a key role for the 11 to 15 age group, and ski clubs are more relevant for older beginners. Other groups are particularly important for those aged 41 to 60 Lessons Models of skier visitation suggest that long-term growth in the ski industry depends on retaining entry- level snowboarders and skiers through improved lessons. In the 2004– 2005 season, alpine and snowboarding lessons increased slightly, with Level 1 lessons rising and Level 2 lessons stable. Alpine lessons represented 76.4% of total lessons, while snowboarding accounted for 23.6%. Level 2 lessons were more common than Level 1, and adult lessons outnumbered children's. Despite a moderate increase in kids' lessons over the past four seasons, the proportion of snowboarding lessons remained flat Night skiing Night skiing is popular but makes up only 6.6 to 7.3 percent of skier visits before the 2004–2005 season. The Midwest has the highest proportion of night visits, while the Southeast is also notable. Additionally, night skiing visits decrease with resort size, with smaller resorts seeing 35.1 percent of visits compared to just 2.4 percent at the largest resort TRIP CHARACTERISTICS Day/overnight trip In the 2004/05 National Ski Areas Association study, 59 percent of respondents were on overnight trips. Overnight visitation varied by resort size, with 31 percent at the smallest resorts and 71 percent at the largest, while mid-sized resorts had 50 to 60 percent. The findings indicate a higher proportion of overnight visitors compared to the Kottke report, which may be more accurate due to its larger sample size. Additionally, snowboarders are less likely than alpine skiers to stay overnight, and older participants tend to take more overnight trips Nights in area Out of the overnight visitors, the average stay length nationally was 4.8 nights, with a median stay of 4 nights—identical with the two seasons prior to the 2004–2005 season. The longest average stays were logged at resorts in the Rocky Mountains Accommodations Type Most overnight guests (67%) preferred rented accommodations, followed by 17% staying with friends or family and 16% in vacation units owned by acquaintances. Guests in owned vacation housing were older (median age 44), more skilled (50% advanced/expert), more likely to have season passes (38%), and stayed longer (average of 5.5 nights). In contrast, those staying with friends or family were generally younger Flight About 43% of ski vacationers flew to their destinations, up from 41% the previous season. Flights were most common for Rocky Mountain resorts, moderate for the Pacific West, and least for the Northeast, Southeast, and Midwest. Additionally, fliers generally took longer trips than those who drove Rentals In the NSAA study, 27% of respondents reported renting equipment, consistent with the previous season. Renters are generally less experienced and less passionate, often being female, infrequent skiers or riders, overnight visitors, first-time resort goers, lesson-takers, part of organized groups, and from the southern U.S Lessons Nine percent of respondents reported taking a lesson on the day of the interview, with the highest rates at smaller resorts. First-time participants are more likely to take lessons, emphasizing their role in welcoming newcomers to snowsports. Lesson-takers often resemble less active and relatively inexperienced skiers or riders Participation with a Ski Club/Group On the interview day, 14% of respondents were at the resort with a ski club or organized group, consistent with the 13 to 16% range from the previous two seasons. These groups contribute significantly to visitor numbers, especially in the Southeast and Midwest, and make up a larger share of guests at medium- and small-sized resorts compared to larger ones Satisfaction Ratings Visitor satisfaction at the resort is highest for employee friendliness and overall enjoyment, while food and beverage services receive the lowest ratings. Satisfaction levels significantly impact the likelihood of recommending the resort, with "promoters" giving high ratings and "detractors" giving low ones. The largest gaps between these groups are in the areas of trail variety, perceived value for the price, and overall enjoyment, indicating that these factors are crucial for visitor recommendations SNOWBOARDERS In the 2004–2005 season, snowboarding represented 28.8 percent of all skier visits to U.S. ski areas. The figure did not change from the previous season. To a certain degree, this plateau effect was a result of the reduced influence of the Pacific Northwest, which has high snowboard participation Participation by Region and Resort Size the Pacific West has consistently had the highest rate of snowboarder participation, followed by the Midwest, the Southeast, the Northeast, and finally the Rocky Mountains. Interestingly, resort size also affects the number of snowboarders who ride there: the smaller resorts have continually attracted the highest proportion of snowboarders, a trend that decreases steadily as the resort size grows. Projections Snowboarding is expected to grow, especially in the Pacific West and smaller resorts. The sport is maturing, influenced by regional differences, changing preferences, and new ski technologies. The shift from older skiers to younger snowboarders will also drive continued growth and opportunities for the industry. Attitudes The relationship between snowboarders and skiers is improving, especially at smaller resorts. This is due to snowboarders getting older, more skiers trying snowboarding, and resorts investing in specialized facilities and policies to reduce friction. These changes are making integration smoother for both groups Programs and Facilities Most resorts offer separate snowboard lessons and lessons for children, starting around age six. They also rent snowboards and provide specialized repair services. Many have specialized racks and tools for snowboarders, but fewer have retail shops or separate snowboard stores. Larger resorts often feature half- pipes and terrain parks. Almost all resorts organize special snowboarding events, with an expectation of more in the future. To attract snowboarders, resorts are upgrading mountains, enhancing customer relations, offering beginner packages, creating snowboard-specific ads, and promoting frequent-rider programs and giveaways. SNOWTUBING Prevalence Snowtubing is available at nearly half of all U.S. ski areas, more commonly at larger and medium-sized resorts. It is especially prevalent in the Southeast and Northeast regions, where it is offered at a high percentage of resorts. Average Visits During the 2004-2005 season, snowtubing visits saw a slight increase, averaging 18,271 per resort. The Southeast had the highest number of visits, followed by the Rockies, Midwest, Northeast, and Pacific West. Visits significantly dropped in the Pacific West but saw a notable increase in the Rockies. In the other regions, the number of visits remained relatively stable. Ratio of Visits Snowtubing's popularity varies significantly across regions and resort sizes. Nationally, it accounts for a small percentage of visits, but in the Midwest and Southeast, where it's a main activity, the percentage is much higher. Smaller resorts place more emphasis on snowtubing compared to larger resorts. Day vs. Night Most snowtubing happens during the day, but a significant portion occurs at night. Night tubing is popular in the Northeast, Southeast, and Midwest, especially in the Rockies, but very low in the Pacific West. Larger resorts tend to have more night tubing, though it’s not a major difference. Age Snowtubers are roughly equally divided between three different age groups: 12 and under, 13 to 17 years old, and those over 18 years old. On an overall national basis, this age distribution does not vary largely, but the average age of participants decreases slightly at larger resorts. Pricing Most resorts charge by the hour for snowtubing but also use various pricing methods like day/night rates, per ride, or hourly blocks. Prices vary, with averages around $5.14 per ride, $9.23 per hour, and $15.40 for a full day or night. Resorts often employ multiple pricing strategies to meet different preferences. EXPANDING TO MULTI-AGE VISITORS Ski resorts are expanding their winter activities to attract visitors of all ages. According to a 2004 survey of 138 ski resorts: Popular Activities: 41% have snowtubing hills 38% offer cross-country skiing 36% provide snowshoeing Less Common Activities 15% offer sleigh rides  10% include activities like dogsledding, air boarding, paragliding, heli-skiing, bobsledding, orienteering, and ice-climbing Innovative Approaches Some resorts are creating indoor winter sports domes, like those in the Netherlands, which serve as themed indoor snow and ice amusement parks for kids. ECONOMIC FEASIBILITY. The objective of an economic evaluation is to express development design concepts in financial terms to visualize the economic characteristics of the project, and to assess the probability of success Critical Variables. Four critical variables determine whether or not a resort will make a profit: capacity, the length of the season , the amount of capital investment , and the amount of revenue per visit. Ski Area capacity Determining ski area capacity involves several variables and some subjectivity. Developers consider financial goals to break even and achieve ROI. There are different capacity types: physical/ecological, social/normal, maximum, and safety limits. Comfortable carrying capacity is the maximum number of participants without crowding or environmental damage. Factors affecting capacity include terrain steepness, trail design, snow quality, grooming, skier skills, and uphill capacity. the capacity of the supporting facilities contributes to overall capacity. Facilities in a ski area base lodge comprise: food service, rest rooms, first aid ,ski school, retail sales ,rental shop, lockers, ticket sales, employee lockers ,bar/lounge ,nursery, storage. The length of the season. The length of the ski season is primarily influenced by weather and climate. Season length is measured in skiing periods, each lasting seven hours. Capacity skier visits are calculated by multiplying ski area capacity by the season length, representing the maximum number of skiers visits the resort can accommodate. Capital Investment. Capital investment is essential for developing a ski area, with costs varying widely based on design and site specifics. Key cost elements include ski lifts, slope and trail construction, snow maintenance and making equipment, day-use lodges, maintenance centers, furniture and fixtures, base area equipment, parking, power and slope lighting, water and sewer systems, site development, planning, financing, land acquisition, and access roads. These factors together determine the financial feasibility and total cost of creating a ski resort. Revenue per skier visit. Revenue per skier visit is determined by dividing total revenue by the number of skier visits. Revenue comes from ski lift tickets and supporting services. How well the resort does in maximizing these four variables ultimately deter mines its economic success. Importance of Total Revenue per Guest. Total revenue per guest is crucial for resort hotels, as traditional metrics like average daily rate and occupancy can be limited by seasonality and reliance on other revenue sources. Guest counts are vital, with revenue from services like golf, food, and spas playing a significant role. A study of 199 resort hotels showed that rooms revenue makes up just over half of total revenue. Increasing total revenue involves boosting guest numbers and per-guest expenditures on recreation, retail, and food and beverage. ANALYZING FINANCIAL STATEMENTS Industry differences Some common financial issues faced by companies, including tourist villages, along with some causes and solutions to these problems: Low Liquidity: This refers to a company’s ability to meet its short-term obligations. When a company has a lot of short- term debts and lacks sufficient liquidity to pay them, creditors have the right to seize the institution. Solution: The company can convert short-term debts into long-term ones, giving it enough time to pay these obligations. Alternatively, it can sell or lease some fixed assets that aren’t needed to generate cash to pay these debts. high Debt to Equity: Debt and equity are two sources of business financing. If the debt ratio is higher than equity, it means the institution relies on loans rather than the owner for financing, which is a major problem. If the institution fails to pay its debts, creditors have the right to seize assets to recover their money. Solution: The institution can use its revenues to pay off debts instead of buying equipment or other items. low Operating income: Operating income is revenue minus expenses. Low operating income occurs when revenue is low or costs are high, often due to product pricing that doesn't cover costs or labor costs exceeding productivity. Solution: Explore scientific ways to increase revenue, like researching customer preferences to increase profit, and try to reduce costs as much as possible. low revenue to Employee: This indicates how well employees are being used to generate revenue. Low efficiency suggests there are too many employees or inefficient scheduling of work hours Solution: Reduce the number of employees to lower costs or increase revenue. low Pretax Profit margin: This is the profit after deducting operating expenses but before taxes. Low profitability means profits aren’t enough to cover general expenses. Solution: Try to increase the revenue rate or reduce expenses as much as possible. low revenue to Assets: This measures a company’s effectiveness in using its assets to generate revenues. A low ratio suggests the company earns low revenue compared to its assets. Solution: The company can sell unused assets or focus on selling more products to increase revenues. low return on Assets; This measures a company’s efficiency in generating profits from invested funds. Low efficiency means that the returns are low compared to the investment made in the project. Solution: Increase profits or consider borrowing. low Accounts Receivable turnover This refers to collecting payments from customers who have purchased products but haven’t paid yet, or have partially paid. A high ratio means the company hasn’t collected much of its recorded revenues, affecting its ability to pay debts, especially short-term ones, salaries, rent, etc. Solution: The company should send invoices to customers early, offer discounts, and regularly remind customers. OPERATING CHARATERSTICS BALANCE SHEET These are some key financial metrics used by accountants to evaluate the overall situation of a company. Due to seasonality, these ratios may change throughout the year, and at the end of the year, these ratios may not accurately describe the state of the resort or company throughout the year. For instance, the working capital ratio and the current ratio help to understand the company's ability to meet its short-term financial obligations. Networking Capital This means the difference between current assets and current liabilities of a company. 4 For example, if a company has current assets of 25,000 and current debts of 10,000, the Networking Capital here is 25,000 - 10,000 = 15,000 A positive 15,000 means that the company's current financial resources exceed its current debts, and it has enough assets to pay off its near-term debts without pressure, meaning creditors will not have the right to seize the company to take their money. In the 2004-2005 season, Networking Capital was positive for the first time in the snow sports industry in the largest resorts of the Rocky Mountains, with the highest positive Networking Capital ratios in the Rockies, the Midwest, and the Southeast, while the least positive ratios were in the Pacific and Northeast regions. Current Ratio This is another measure of liquidity and is calculated by dividing current assets by current liabilities. If the ratio is greater than 1, it means that assets are sufficient to cover short-term debts. For example, if a company has current assets worth 25,000 and short-term obligations of 10,000, the current ratio is 25,000 ÷ 10,000 = 2.5 A 2.5 means that the company does not have pressure in repaying its near-term debts. In the 2004-2005 season, the current ratio was above 1 for the first time, indicating an improvement in tourist resorts’ ability to meet their short-term debts, with the highest ratios found in the Rocky Mountain region and the Midwest. Debt Ratio if it decreases, it means the institution relies more on equity. For example, if a company has assets worth 25,000 and debts of 10,000, the debt ratio here is 10,000 ÷ 25,000 = 0.4 A 0.4 is a very low number, indicating that the institution relies more on equity and does not face any financial pressure. In the 2004-2005 season, the debt ratio decreased from 45% to 38%, indicating that the resorts relied less on debt, with the lowest debt ratios found in the western Pacific and the highest in the Southeast INCOME STATEMENT The income statement indicates three important variables: total revenue, visits by ticket type, and expenses Revenue As mentioned earlier in the chapter, resorts tend to rely on revenue sources in addition to that generated by occupied rooms. The following is a closer look at resorts’ various sources of revenue. Ticket Yield During the 2004-2005 season, the average weekend adult ticket price for ski resorts was $57.82, while the revenue per visit was $31.35, resulting in a yield ratio of 54.3%. Regionally, the highest yield ratio was in the Pacific West, with the lowest in the Rocky Mountains. Smaller resorts had the highest yield ratios, while larger resorts had the lowest. This decline in yield at larger resorts and irregular patterns at smaller ones were attributed to discounts, promotions, and season passes. Consequently, many resorts have shifted focus to non-lift-ticket revenues to diversify their income sources and strengthen their economic base. Season pass sales Recently, resorts increased sales of discounted season passes to attract locals and day-skiers. This boosted skier visits but sometimes lowered ticket revenue. From 2000 to 2004, the highest sales growth was in the Northeast and Pacific West. All resort sizes saw increased sales, with the smallest and largest resorts seeing the biggest gains. Visits by Ticket Type In the 2004-2005 season, 61.4% of skier visits were paid tickets, 29.6% were season passes, and 9% were employee or complimentary tickets. Each season pass holder averaged 10.6 visits, accounting for 28.9% of total visits. This highlights the importance of different ticket types for ski resort operations. Expenses In the 2004-2005 season, U.S. ski industry expenses dropped due to lower lease costs, interest, and insurance, boosting profitability. Main costs were direct labor and departmental expenses. Marketing, payroll taxes, property operations, and insurance were notable third-tier expenses. Smaller costs included property taxes, land use fees, and miscellaneous expenses. CRITICAL RATIOS Debt to Cash Flow Debt to cash flow measures how long to pay off long-term debt with current cash flow. In 2004-2005, it improved to 1.61 from 1.93 in 2003-2004, showing the ski industry could pay off debt in just over a year, indicating financial health. Operating Profit on GFA (Gross Fixed Assets) Debt to cash flow measures how long it takes to pay off long-term debt with current cash flow. In the 2004-2005 ski season, the ratio improved to 1.61, down from 1.93 in 2003-2004. This indicates the ski industry could pay off its debt in just over a year, showing financial health. Profit, Before Tax, on Equity Profit before tax on equity measures return on investment for stockholders before taxes. In 2004-2005, the profit before tax on equity was 14.2%. Southeast resorts had the highest profits, while Northeast resorts had the lowest at 6.5%. Capital Cost/Capacity The capital cost/capacity ratio measures how much a ski area spends on assets compared to its skier capacity, calculated by dividing GFA by skier capacity. This ratio rises when investments don’t increase capacity, like spending on restaurants. Recently, the focus has been on capacity improvements. In 2004- 2005, the ratio dropped to $5,378. The Rocky Mountains saw the largest decrease, while the Pacific West had the highest ratio. Total Revenue per Skier Visit Total revenue per skier visit measures how much money a ski area makes per skier day. This is calculated by dividing total revenue by the number of skier visits. In 2004-2005, the revenue per skier visit increased to $67.14. Most regions saw an increase, with the biggest improvement in the Pacific West. However, revenue fell in the Midwest. Total Expenses per Skier Visit are the costs for each skier day. In 2004-2005, this amount was $59.19. These expenses include things like labor, depreciation, and leases. Most regions saw an increase in expenses, except the Rocky Mountains, where costs stayed the same. The Southeast had the highest expenses, and the Midwest had the lowest. To make profits, resorts need to increase revenue while keeping costs steady or lowering them.. Total Expenses per Skier Visit SUMMER IN THE MOUNTAINS Most resorts are seasonal, earning revenue for about 100 days but facing yearround expenses. Financial su ccess lies in transforming into a four-season resort by adding recreational activities during non- peak seasons. Expand Summer Recreation Many U.S. ski resorts offer summer recreation to become year- round destinations. Besides mountain biking (46%) and hiking (38%), they also provide activities like zip- lining, golfing, fishing, outdoor concerts, and scenic lift rides. Installing an artificial slope can boost summer revenue, enabling skiers and riders to enjoy a water- covered incline using their regular gear. Many ski resorts enhance summer revenue with activities like alpine slides, waterparks, summer camps, bungee trampolines, canoeing, kayaking, mountain scooters, carriage rides, ropes courses, ATV tours, skate parks, paintball, driving ranges, cable rides, mountain boards, rock climbing, rafting, orienteering, human mazes, go-karts, riverboat cruises, paddleboats, and skating schools. Outdoor Waterpark Camelback Ski Resort's $4.2 million transformation into Camelbeach Waterpark boosted visitors from 50,000 to 700,000. It increased summer revenue, utilized staff year-round, and provided seasonal jobs. Feasibility depends on being a destination resort or day-trip and proximity to large populations. Outdoor waterparks draw from 50-75 miles, indoor parks from 200-250 miles. Indoor Waterpark Everett Kircher's son, Steve Kircher, faced challenges at Boyne Mountain Resort, including aging properties and new competition. He started constructing a 200-unit condo/hotel but paused due to economic issues and 9/11. Discovering the success of hotel waterpark resorts, Steve added a 58,000- square-foot indoor waterpark, Avalanche Bay, to Boyne Mountain Resort. This increased lodging from 304 to 524 units and is expected to add $9.9 million to revenues. Four-Season Resort Weather is crucial for ski resorts' financial success, as they rely heavily on individual leisure guests. To become four-season resorts, they must: Expand Winter and Summer Activities: Attract singles, couples, families, and all age groups. Fill Spring and Fall with Groups: Host conventions and meetings to utilize available rooms and generate revenue. Conference Centers Conference centers cater to organizations seeking effective meetings with advanced services and tech. They offer recreational facilities like tennis courts, spas, and golf. Complete Marketing Packages (CMPs) include all services for one price, eliminating hidden charges. They manage recreation, teambuilding, and travel, offering flexibility and superior service. A New Kind of Resort In response to the stagnation of the ski business in the 1980s and 1990s, many resorts turned to real estate development to boost profits. Base Village Resorts Developers turned ski resorts into year-round villages with activities like biking, shopping, and dining. These central villages are pedestrian-friendly and host events. Modern tech makes resorts attractive for long and short stays. Condo/hotels near village centers reduce empty units, benefiting resorts and municipalities. Resorts Focusing on Programming During summer, successful ski resorts like Smuggler’s Notch focus on being family resorts rather than just ski destinations. Located in Vermont, it attracts guests by keeping children engaged with various activities, allowing parents to relax. The resort offers a "Family Fun Guarantee" and organizes extensive programs for children, making it busier and more profitable in summer than winter. Problems Converting ski resorts to four-season operations boosts revenue but creates challenges like housing shortages and traffic issues. Solutions include building more employee housing and managing expansion pace.