Alterra Mountain Company has announced that it has entered into an agreement to purchase Arapahoe…
According to ski country “visits don’t matter as much as pass revenue and guest spending”. Should you care? Will this impact real estate investing throughout the mountain towns? Will skiing follow the same path as golf? A recent Denver post article furthers this argument. For the 16/17 season, skier visits are down, but revenue is up throughout Colorado.
First how can visits decline, yet revenue still increase. Like many businesses the ski industry has started using data to hone in on the most profitable consumers and drive more spending out of each guest. For example, upselling on private ski lessons, etc… Is this sustainable?
Before talking about the impact of this business decision it is important to discuss Price Elasticity: This is an important economic concept that is necessary to fully grasp the future of the industry. Price Elasticity is an economic theory that basically shows the relationship between price and demand. In most cases as price increases demand at some point will decrease. Buyers will migrate to other less expensive options that might offer similar value. By increasing revenue while keeping demand basically constant this shows me that in Colorado the price elasticity is “inelastic” meaning price can increase with nominal impact on demand. (see more on this concept).
If you talk to anyone about skiing or snowboarding in Colorado two statements will always come up. First, the powder in Colorado is the best in the world. Second, man skiing and snowboarding has gotten expensive! With the major resorts consolidating (Aspen buying Winterpark and Steamboat) and Vail resorts and Copper mountain owning the rest this pricing strategy is going to become more profound. I suspect over the long-term prices will continue to rise.
What does this have to do with Golf? Golf is very similar to skiing in that it is an “elitist” sport. It is very expensive for the average consumer. Think of someone from Denver coming up to ski for the day. Assume a family of 4, the lift tickets alone are 400 to 500 dollars. Assume you have to rent equipment and put the kids in ski school, a day on the slopes Is around a thousand dollars! If you are coming for a vacation from across the country throw in food, airfaire, transportation to the resort, etc… it gets quite pricey.
What does this mean? As prices continue to climb skiing becomes more elitist and less diverse. According to a recent ski industry executive stated that 31% of all ski resorts will close in the near future (ski curbed magazine). It seems like pricing might not be a inelastic has the industry has anticipated!
As more ski areas close there will be less demand for the “mega” resorts of Colorado which will ultimately lead to less revenue down the road. The increase in pricing and demand staying constant could be very short lived as less people become interested in the sport.
Will real estate ultimately be impacted? If skiing is like golf as the golf industry declined, demand for properties on golf courses also declined (many of the courses ultimately closed) which greatly depreciated the value of the properties. Do I think this will happen at a major resort in Colorado? This is highly unlikely. But near some of the smaller resorts this is definitely a possibility. For example, think of the town of Bailey, CO, in the 70’s and 80’s it was bustling (see 4 golden rules of real estate investing in ski towns) There was a resort named Geneva basin that was outside of Bailey up Guenella Pass road. The ski resort closed due to financial difficulties. The town of Bailey has never really recovered (still vacant buildings and vacant hotels in Grant that remain unsold for years). There is a similar story outside of Steamboat Springs (stagecoach) that was supposed to be a ski resort. Hundreds of lots were sold that 20 years later are worth very little.
Skiing is starting to look like golf! There are several factors that caused golf’s demise. Various sources (see below) attributed golfs demise to cost, an elitist perception, and time. Sounds very similar to the ski industry!
Golf has declined over 30 percent in the last 20 years will the same happen to the ski industry? As the ski industry boasts about “increased revenues as visits declined” are they digging the same hole as golf? If you are investing in ski real estate, the only plausible investments are near the large resorts as many of the smaller resorts could be gone or become “zombie” resorts with no real prospects. Below are additional articles that are good reading! Please keep us in mind for any ski lending or private lending needs both in the ski areas, the front range, and throughout Colorado.
Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
Fairview is the recognized leader in Colorado Hard Money and Colorado private lending focusing on residential investment properties and commercial properties both in Denver and throughout the state. We are the Colorado experts having closed thousands of loans throughout the state.
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