Not much snow in Snowmass, Colorado this week. However, there is a good base from previous winter storms, so the skiing is still pretty good.
In the last twenty years, the history of the ski industry has been a two part tale. First, consolidation: several large companies have rolled up all of the independently owned ski areas. For example, Aspen Associates owns Aspen, Snowmass, and Buttermilk mountains, along with other areas in other states.
The second part of the story has been the evolution of the ski companies from entities that make most of their profits from skiing, to real estate developers that have ski areas attached. The ski company will put in a new lift line from the peak into a location at the bottom of the hill where they own all the land. The presence of the lift line turns cheap land into ski in/ski out home sites, that can be sold for millions of dollars each.
This transformation has changed the nature of the industry. Instead of trying to maximize the number of skiers, the ski areas are largely insulated from trying to increase lift ticket revenue. At the same time, people who can afford a million dollar home site display low price elasticity of demand. With the general public, if lift ticket prices increase 10%, demand will drop by more then 10%. People have other ways of spending their entertainment and recreation dollars.
With the 1%’s who can buy multimillion dollar second homes, a 10% price increase leads to a 10% increase in sales, with an even bigger boost to profits. From the perspective of the ski companies, the logic is compelling. Skiing has moved from a mass market sport to a luxury good. Prices for lift tickets and on-mountain ding reflect this shift.