The O'Connor family of Centreville, Va., usually goes skiing in Colorado or Utah for spring break. Not this year. Even though Ed O'Connor believes his retirement account will eventually rebound from this fall's stock chaos, he's canceling their tradition this season due to the unpredictable economy and airline costs. Instead, the family of four probably will spend a weekend skiing at Wisp, a regional resort three hours away in Maryland.
"It is time to watch our cash flow," O'Connor says. "A $6,000 to $8,000 trip can wait."
The economy's current free fall is taking place at the worst time of the year for the USA's $6 billion-a-year ski resort industry, which has only a few months to make most of its money. There's mounting evidence that despite their dedication to the sport, skiers — who tend to be wealthier compared with the average American — are rethinking when, where and if they'll ski. Some will cut week-long vacations and ski close to home. Others will travel for their ski trip, but stay fewer days, go to a lesser-known mountain within driving distance or stay in town instead of renting a plush condo at the base of the mountain, says Craig Cook, owner of Travel Organizers/American Express in Englewood, Colo.
The stakes are high for an industry that operates about 480 resorts, most of which attract skiers for one- or two-day trips, as opposed to week-long trips, and caters to a narrow portion of the U.S. population. Overall, the industry counts about 12 million Americans as committed skiers or snowboarders, with about half generating 70% of the visits, according to the National Ski Areas Association.
Business at the industry's biggest resort companies — Intrawest and Vail — already suggests a shortfall compared with a year ago. Vail Resorts, which operates Vail, Beaver Creek, Breckenridge and Keystone in Colorado and Heavenly in California, told investors that advance bookings were 17% below last year's level through Sept. 25 — before the stock market fell further. Intrawest, which operates Steamboat, Winter Park and Copper Mountain in Colorado and others in the USA and Canada, last month announced layoffs due to expected declines.
The fallout is already rippling beyond resorts.
"We're in for a very tough season," says Jerry Jones, a former resort executive who now brokers ski resorts and commercial properties.
Around this time, Vail real estate agents would usually be busy chatting up wealthy skiers from Texas, the Midwest, New York and Los Angeles about multimillion-dollar ski chalets. But this year, Jones says home sales are down by about half.
"It's a dead market right now," Jones says. "The phone doesn't ring."
Even tiny ski resorts that rely less on impassioned skiers and more on Boy Scout troops, church groups and others who'll try it for a day are bracing for a bad season. When the economy changed, Johnny Goin, the director of Ski Wolf Ridge in Mars Hill, N.C., decided to limit peak-season employment to 150, vs. 200 last year.
A suddenly bad turn of events
The season didn't start out this chilly. Initially, the industry's main worries were $4-a-gallon gas for resorts that rely more on drivers, and airline capacity cuts for those that rely more on fliers. Then Wall Street imploded, decimating retirement accounts.
Ski resorts such as Lake Tahoe's Kirkwood Mountain in California have since seen inquiries and bookings bounce up and down along with the Dow. In mid-October, Kirkwood had 20% more season pass sales than the prior year, but the gain vanished, says Tim Cohee, a Kirkwood senior executive.
"It turned on a dime," Cohee says. "When the news went from pretty bad to really bad, (business) basically cratered."
The industry's other obstacles:
•Airlines. Just before airlines started slashing winter schedules to offset spiraling jet-fuel costs, thereby raising fares, destination resorts retained service with new, annual revenue-guaranteeing contracts, says Andy Wirth, chief marketing officer of Intrawest. With such contracts, the Hayden, Colo., airport, used by Steamboat Springs skiers, was able to retain the same capacity as last season, compared with a 9% nationwide reduction. Other ski-area airports, such as Reno, lost as much as 18% of December seats.
To address fares, some resorts are helping customers pay.
Jackson Hole, for instance, has a deal in which a family can get reimbursed $500 if they buy four airline tickets through the resort's reservations system, says Jerry Blann, president of Jackson Hole in Wyoming. "That's a first," Blann says. But both Blann and Wirth say they expect to see more deals as airlines carry more empty seats. Wirth cites $218 round-trip fares from Chicago to Hayden, which is 45% less than the mid-September price. Yet airfares are just one hurdle. Ski-toting families also face new checked-bag fees that can add hundreds of dollars in costs. Resorts such as Steamboat and Winter Park prepared to capitalize on the fees by expanding their ski-rental fleet; others, including Vail, are offering guests credits to offset the fees.
Even wealthy families are turned off by the fees and hassles of flying, says Win Smith, who owns Sugarbush Resort in Vermont. He's noticed more upscale families on the slopes who chose to drive instead of fly out West, he says. Small resorts also hope to capitalize on skiers' frustrations with flying. Liberty Mountain in Pennsylvania, for instance, is playing up its proximity to the Washington, D.C., area, says Eric Flynn, Liberty's president.
•Fewer foreign skiers. Last season, the weakened U.S. dollar gave resorts such as Vail, Jackson Hole and Killington a bonanza of free-spending Europeans. But resorts expect fewer Europeans this year, as they face their own economic crises. Airlines also added fuel surcharges and reduced trans-Atlantic capacity, and exchange rates changed against their favor. Mathew Prior, head of Crystal Ski, a leading U.K. tour operator, says that the U.S. resorts responded with better sales offers "too late to make a big impact on sales now."
•Fewer extravagant trips. Rich Wall Street executives who'd normally go on $15,000-a-week ski vacations for work will likely ski less often this season — and when they do, on their own dime — due to the financial industry's cutting back on extravagant travel, Cook says.
Help needed from Mother Nature
All the economic uncertainty has many resort chiefs praying for snow.
"Historically, we've suffered less at times when there are economic headwinds at times when the snow is good," says Michael Berry, president of the National Ski Areas Association, which represents about 330 alpine resorts. "That's the single biggest influencer as to whether the industry's going to have a good year or a bad year."
It was a blockbuster snow season that helped the ski resort industry break attendance records in 2001-02 just months after the Sept. 11 terror attacks — and again in 2007-08, as consumers grappled with the unfolding mortgage crisis and soaring gas prices, Berry says. Conversely, the industry blames the 7% attendance decline during the 2006-07 season on spotty snowfall.
But even if snow blankets every region in the USA, Berry estimates attendance could fall below last season's record 60.5 million lift tickets by roughly 5%. From South Dakota to Pennsylvania, smaller resorts within a gas tank's drive to large populations expect as many skiers as last season, if not more, as long as Mother Nature complies.
"We're less than a tank away from 80 million people from Montreal, Boston, Hartford, New York, Washington, D.C., and Philadelphia," says Chris Nyberg, president of Killington Resort in Vermont. "So (the decline in) gas prices is a very good thing for our business."
At Okemo Mountain in Vermont, season pass sales are 17% higher than a year ago and hotel reservations are up 7%. Scott Clarkson, Okemo's marketing director, thinks that "maybe people said, 'Let's invest in themselves and not the stock market.' " He also suspects they're attracting more families who normally might fly to Florida but are turned off by airfares and fees and decide, "Let's just ski more."
At Sugarbush — where the typical skier comes from a home with an average income of around $125,000 — season pass sales are 17% higher than a year ago despite a 5% price increase, Smith says. The resort's also seeing record ski school reservations.
"That indicates to me that people are planning to spend the money and be here a lot," he says.
But Smith, formerly a senior executive at Merrill Lynch, says he doesn't take skiers' willingness to spend money for granted. "There's no question people have seen wealth destruction. That has to have an impact at some point."
TELL US: Once you add travel and all the equipment, getting on the slopes can be pricey. What are your cost-cutting tips for this ski season?