Bare Slopes: The Profitability of Ski Resorts in a Warming World

As ski season shortens due to warming temperatures, ski resort companies will need to develop all-season revenue streams.

Squaw Valley Alpine Meadows, a ski resort in North Lake Tahoe, California, is one of many ski resorts around the world grappling with the enormous problem of climate change and its significant implications for the profitability of its winter sport business.  The industry expects decreased snowfall and shorter ski seasons in the future.  Accordingly, the ski resort industry has been making large capital investments in snow making equipment to keep slopes open and covered in powder [1].  Resorts also face later openings than the historical norm, meaning that there might not be snow over the critical Christmas and New Year holidays that generate lots of business and also kick off the season and perform the important function of getting skiers excited about skiing throughout the rest of the winter.  Faced with fewer revenue generating days and increased costs incurred in having to make snow, Squaw Valley need to become an all-season resort to prepare for a less profitable future in its ski business.  While making snow helps the low snow problem, it has to be cold enough outside to work [2].

There is broad potential for Squaw Valley to expand its business to other recreational activities.  The resort is situated among several beautiful national forests and is a short drive away from Lake Tahoe and a slightly farther jaunt to the stunning northern end of Yosemite National Park.  The mountains, clean air, and proximity to serene hiking trails make it highly suitable for a variety of recreational activities.  Mountain biking, trail running, hiking, meditation retreats, bird watching, and business conferences and retreats are all logical uses of this geography and so are suitable expansion options for Squaw Valley Resort.

A second important feature of these potential expansion areas is that they require fairly low level of capital investment.  If for instance the company takes on hiking and trail running, Squaw Valley could establish itself as a luxury destination for spring through fall outdoor recreation by developing strategic partnerships with leading running brands like Salomon and Brooks alongside sponsored influencers and athletes who will provide high visibility through social media for the resort as a key destination for the sport.  Investments in marketing for an off-season business will increase overall brand awareness for the resort.

Trails in national parks are maintained by the forest service, so the hotel’s role would be to attract guests and then to provide pampering and support to runners and hikers.  The hotel could hire guides and put together resources such as maps, rides, and trail friendly picnic lunches and snacks to minimize the logistical requirements for guests who plan to get outside.

Currently Squaw Valley resort is making several efforts to improve its business model.  First and foremost, the resort is moving toward renewable sources of energy and is buying the most energy efficient snow making equipment available.  These are good business practices, however they fail to address the root cause, which is that the environment is changing so the ski business will be less profitable in the future.  Secondly, Squaw Valley is hosting some other spring and summer events to include Ironman Races [3].  This is a very strong move, and it links nicely into the outdoor sport expansion that I recommended above.  The only problem is that holding a race is a one-time event, and does not result in a steady stream of business.

Ski resorts like Squaw Valley will see the effects of climate change before many other types of businesses are confronted with profit losses associated with warming temperatures.  In order to prepare for a less snowy future, the resort must develop an all-season business model that will be sustainable in the context of changing weather patterns.  The unfortunate truth is that skiing alone may not provide a sufficient source of revenue for ski resorts to remain profitable in the future as we currently understand it.

(644 words)

Map: Squaw Valley Resort Surrounding Attractions
Map: Squaw Valley Resort Surrounding Attractions

[1] John Branch, “As Snow Fades, California Ski Resorts Are Left High and Very Dry,” New York Times, November 23, 2014, [http://www.nytimes.com/2014/11/24/sports/skiing/as-snow-fades-california-ski-resorts-face-a-brown-future.html?_r=0#], accessed November 2016.

[2] Evelyn Spence, “Fake Snow, Real Money: The High-Tech Fight to Save California Skiing,” Bloomberg News, March 6, 2015, [http://www.bloomberg.com/news/features/2015-03-06/fake-snow-real-money-the-high-tech-fight-to-save-california-skiing], accessed November 2016.

[3] Squaw Valley, “Environmental Stewardship,” http://squawalpine.com/about-us/environmental-stewardship, accessed November 2016.

[4] Featured Image by Max Whittaker for The New York Times, “As Snow Fades, California Ski Resorts Are Left High and Very Dry,” New York Times, November 23, 2014, [http://www.nytimes.com/2014/11/24/sports/skiing/as-snow-fades-california-ski-resorts-face-a-brown-future.html?_r=0#], accessed November 2016.

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14 thoughts on “Bare Slopes: The Profitability of Ski Resorts in a Warming World

  1. A very interesting post! As a keen skier this is something that is close to my heart. I really like the way you’re thinking about extending the operating window to not only include the typical winter snow season (which is shortening). I agree with you that a clear push in this direction requires not only one time events but a continuous flow of travelers to ensure a more consistent revenue stream is generated. I would like to see ski resorts, such as Squaw Valley, to increase their sustainability educational activities for consumers. As ski resort consumers, we could become strong advocates and help to drive a more sustainable tomorrow as we are so motivated to do so given our heavy reliance on mother nature’s good health. I also think summer, spring, autumn presents a great opportunity to inspire typically less active people to get out and enjoy the great outdoors while the temperatures are less extreme. There is also the benefit of lift infrastructure for those who may be unable to traverse uneven, hilly terrain but still want to experience the views and fresh air.

  2. Thanks for this post! Your overall recommendation here–which I’d summarize as a move towards non-ski activities to correct for a shorter skiing season–makes total sense.

    I’d be curious, though, about whether there’s still hope for regular skiing seasons through snow-blowing and other artificial snow technologies. Right now, as you note, it has to be cold enough outside for snow blowing to work. But is this necessarily true going forward? Do we have any potential chemicals or technological breakthroughs that could make “snow” that wouldn’t melt at temperatures a few degrees warmer?

    I know the answer is likely no–but here’s to hoping we don’t have to resign ourselves to snowless futures just yet!

    Spencer

  3. Very interesting article! I am an avid snowboarder and lived in a ski town for a year and can attest to the huge influence that weather (ultimately snowfall) makes on the number of visitors to the resort. I completely agree with your point that year-round activities are necessary for sustainable operation; I am also an avid mountain biker and have found that bike runs on ski hills are near perfect in terms of slope, clearance, and trail features.
    One question would be on the other end of the spectrum: Are there ski resorts (or locations) that have been affected by climate change where they now receive MORE snow or a longer ski season? Would be interested to see if such a thing has occurred…

  4. Very interesting post! While I agree that the ski resorts will need to make a change to combat the negative impact that climate will have on its revenue stream, I have to inquire whether there are any other options that can preserve the ski traditions of the winter season. Squaw Valley, Lake Tahoe, these resorts are currently synonymous with skiing. I understand that snow making equipment is expensive and not environmentally friendly, but what are your thoughts on creating an indoor ski resort on the land – similar to Ski Dubai? Of course, they would need to do a cost analysis to see whether this makes sense.

  5. Love this post! I definitely agree that this is already an issue for many resorts and is only going to get worst. I really like your recommendation of placing more of an emphasis on year round entertainment. Perhaps they can even create an indoor waterpark (something Jay Peak Resort has done.) I wonder, however, if they can work with other resorts or engineering companies to create some type of new technology around perserving the snow (in addition to creating snow), the same way that they have driveways that heat to melt the snow. This may involve laying metal down underneath the top layer of dirt, for example. This would likely be very expensive to develop, however, skiing is already an expensive sport and there are many people who would pay very high prices to continue skiing when and where they want.

  6. Great post, its been a bit upsetting for the skiing community to see how much climate change has changed the ski seasons regularity and length. Is there anything that you think ski resorts can do to reduce the impact of climate change? I am a big proponent of ski resorts in the summer and spring, as an outdoors fanatic I don’t understand why it has taken them so long to start this, but part of me thinks this is a bit too reactive and doesn’t really get to the root of the problem. I realize many resorts have limited and very seasonal resources to utilize to address this, but I wonder how much of a role they could play in educating the community and skiers who would find this issue close to heart.

  7. Great post! We should all go to Dubai:
    https://en.wikipedia.org/wiki/Ski_Dubai

    1. Amazing post!
      We should all be more concise!
      https://en.wikipedia.org/wiki/Concision

  8. Very intersting post! I would be curious to know what other resorts do. From my experience, as the likelyhood of snow in low mountains decreases, tourist are changing they travel destinations, aming for resorts located in higher mountains of just at higher altitudes. In Europe such trend leads to tourist going more often to Austria, Switzerland or France for skiing, instead of going to Slovakia, Poland, Czech Republic or Germany. Unfortunately, for the countries with lower mountains, it means tourists will spend money somewhere else. Also attracting new group of spring or fall tourist is more difficult. I would be courious to see investments in indoor activities correlation with snowfall decrease over time 😉

  9. While there are opportunities for investment in non-skiing activities, I’m not sure these resorts can stay profitable given their large operating and capital expenses and decreased revenues. Revenues will decrease because travelers can do many of the summer-time activities offered by ski resorts at other non-ski resort locations (national parks, for example). I would also expect the resorts to charge premiums for the same product.

    While I love skiing, I’m fairly bearish on the future of the industry.

  10. This post clearly resonates with a lot of people. Too often families schedule ski trips out West (or to the Alps) only to find poor snow conditions. I am curious as to how the numbers look regarding further investment in snow producing machines, with the hopes that that will continue to attract skiers who will pay the hefty lift ticket prices. The problem is with the all season activities, they just don’t charge the premium that a weekend one day lift ticket charges, and that really hurts the revenues for the mountains. I have no doubt that a lot of research is being conducted to improve snow making technology for these mountains, but you’re right, with warming winters, or winters that get colder in Jan-Mar vice December when schools are out for the holidays, the ski industry will continue to face hurdles.

  11. Great job on this post! As someone who used to ski almost every weekend from December through April (I used to live in Denver), this issue is very important to me.

    First, I agree with you that ski resorts like Squaw Valley Alpine Meadows can combat the effects on climate change by developing their resorts into “four season” destinations. They have to look no further than Vail to see how effectively it can be done. A quick trip to the Summer section of their website (www.vail.com) shows how they have successfully moved into offering hiking and biking trails, gondola rides, zipline tours, and much more.

    Second, do you think that Squaw Valley should be engaging in more artificial snow-making to help them deal with the lower levels of snow occurring each year? This is a technique many ski mountains are resorting to.

    Third, what are you thoughts on Squaw Valley’s responsibility to help educate consumers on the effects of climate change on the mountain? While it isn’t a direct solution, I see it as an opportunity to potentially slow down the rate of climate change over time. The National Ski Areas Association estimates that almost 10 million people participate in on-slope activities every year in the US. If every ski resort started educating these consumers, there could be a widespread affect on awareness and hopefully reduction in activities which directly increase the rate of climate change.

  12. Great article thanks. In Italy, especially in the Apennine mountain chain, we are experiencing similar challenges. Skiing season is shrinking and the decreas in available capital is causing an aging of hotels and lifts that are not regularly upgraded. Unfortunately, the ski industry in the Apennine seems to be headed down a death spiral.

    Your plan is very well laid out, but I would challenge the assumption that minimal capital investment would be needed to turn around the resort from a winter one to an all-season one. Setting up hiking trails, mountain bike paths and facilities to take full advantage of the existing body of water might need substantial capital investment. Additionally, I would be concerned about regulatory restriction and permits required to put the plan in place. Finally, I would be interesting in learning more about your marketing strategy. What is your value proposition, who are you customers etc.? That being said, with a proper risk assessment your plan looks very solid and possibly the only way to save the resort.

  13. Great topic, thank you for writing this. I think your recommendation is right on point — as snow melts away, there is little option but to turn to non-ski activities. I do wonder if there is a possibility for snow-generating technologies, as some others have suggested in the comments. I would think that this is prohibitively expensive, especially in an outdoor setting and over large spans of land. But perhaps not. And perhaps the melting of the snow is localized in certain areas and can be fixed with this type of technology in a cost-effective way.

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