The ski business, like so many other industries, has been transformed over the past two years by subscriptions.
Instead of buying lift tickets à la carte, the model has changed dramatically thanks to two ski passes: the Ikon Pass from the Alterra Mountain Group and the Epic Pass from Vail Resorts (MTN).
Both Alterra and Vail have been gobbling up or partnering with resorts in the past few years, breaking all the traditional norms in the ski industry. Today, instead of buying a single-mountain’s pass, many skiers opt to spend $1,099 on an Ikon Pass or $989 for an Epic Pass that provide a buffet of dozens of resorts to choose from. (Vail is public and profitable, and though Alterra is private and doesn’t release financials, it says it’s profitable.)
The subscription passes have attracted tons of skiers based on their value. In the past, breaking even was only possible for the most dedicated of skiers, after about 30 days buying day tickets.
“That’s the big change,” says Rusty Gregory, Alterra’s CEO. “Now passes break even within four to six days. If you’re going to ski a few days, that’s a great value proposition.”
Today, 40% of skiers have passes, whereas traditionally, the number was 30%, and the vast majority of Ikon Pass holders break even, Gregory says. “Someone got 110 days in at our resorts last year, and there was a few over 100. Some really get it down to a small cost per visit, which is great.”
The companies track usage copiously, thanks to the RFID features in passes, and communicate the data to the individual mountains, helping them to tailor their offerings and to figure out what to improve and what to invest in.
A ski pass is not Movie Pass
This industry is the polar opposite of the Movie Pass idea, since it doesn’t use an insurance-like business model where premiums or subscription fees are pooled to buy the services, with the middleman hoping people don’t use it. Gregory says the company tries to get people to ski as much as possible: the revenue split is 50/50 between hospitality and tickets.
There’s been an especially pronounced effect on consumer behavior thanks to the wide array of offerings. When Alterra is deciding which mountains to buy or partner with, the company sorts the mountain into three tiers: local, regional, and aspirational. Local mountains are often smaller but with a dedicated crowd of skiers; regional mountains are ones that people might drive to for a long weekend; and aspirational mountains are resorts that are worth a plane ride.
“The big change is the fact that it’s driven a propensity to travel with our consumers,” says Gregory. Going forward, the company is looking to fill the geographic gaps near big population centers.
The new business model probably doesn’t look good for independent ski mountains. Even these resorts have already sought out alliances with other independent resorts in search of their own value propositions to compete with the Ikon and Epic passes. Though Gregory is firmly captaining a big player in the industry, he expects there to be opportunities for innovation from independent mountains, though it’s far from clear what that would be.
However, Gregory views what Alterra is doing with partnerships as a middle-ground to Vail’s acquisitional approach. The company says it doesn’t want to come in and dictate, or otherwise tell mountains that what they’re doing is wrong.
“We’re allowing Deer Valley and Mammoth to be who they are. We support those brands a lot,” says Gregory, noting that a laissez faire relationship with partnering mountains often yields better results.
How Alterra views climate change
For a company like Vail or Alterra, having a copious number of ski options is like an advanced hedging strategy against the largest problem facing the ski industry: climate change. In Vail’s “risk factors” part of its 10K filing, only the whims of a customer base having enough disposable income is higher up on the list than the fears of warmer weather.
For individual ski resorts, the future might be bleak. In the recent past, Gregory noted, there were over 900 ski areas and now the number is in the 400 range. The company subscribes to numerous climate data sources, but for the most part makes its climate-based decisions on altitude.
“From a planning standpoint, who we partner with and think about acquiring, elevation makes a huge difference,” says Gregory. “The ski areas that are left tend to be in relative terms in higher elevation snow areas. At the end of the day, we need cold weather and snow.”
-
Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, personal finance, retail, airlines, and more. Follow him on Twitter @ewolffmann.
Exclusive: Strava co-founders return to run the company as CEO and exec. chairman
What would a healthy social network look like? Maybe like Strava.
9 tips for not getting spied on while traveling
Hidden security risks caused by the latest technology
Large-scale credit card hackers back for the holiday season, ex-FBI investigator says
How to know if your next flight is on a 737 Max
Read the latest financial and business news from Yahoo Finance
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, YouTube, and reddit.