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The Business of Ski Resorts

This video was made possible by Curiosity
Stream. When you sign up at the link in the description
you’ll also get access to Nebula—the streaming video platform that Wendover is a part of. 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 issue—housing. 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 more—again, 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 way—they 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 changes—like building
more snowmaking capacity—most 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. This goes to demonstrate just how diverse
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