Ski Resorts: Melting Away

How will ski resorts cope with declining snowfall?

Intrawest Resort Holdings is a business that will be significantly affected by climate change.  Intrawest owns and/or operates six ski resorts, as well as real estate and a helicopter skiing operation.  Intrawest’s ski resorts are Steamboat (Colorado), Winter Park (Colorado), Mont Tremblant (Quebec), Blue Mountain (Ontario), Stratton Mountain (Vermont), and Snowshoe Mountain (West Virginia).

Ski resorts may the industry most immediately affected by climate change.  According to a study by Daniel Scott at the University of Waterloo in Ontario, half of the 103 ski resorts in the Northeast will not be able to sustaining a 100-day ski season by 2039 (under certain forecasts).  He believes that by 2039 no ski resort in Connecticut or Massachusetts will be financially feasible, and only 7 out of 18 resorts in New Hampshire and 8 out of 14 in Maine will be.  The resorts in the higher mountains of the West will suffer as well.  In the Colorado Rockies, temperatures are expected to rise as much as 7 degrees by 2100, causing Park City to lose its snowpack and Aspen’s snowpack to be limited to the top 25% of the mountain.[1]

Climate change has certainly already negatively impacted Intrawest’s snowfall and financial results in recent years, and will continue to impact its business going forward.  Intrawest discloses this risk in its 10-K: “The effects of climate change, including any impact of global warming, could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.”[2]  However, the company has not put forth public statements on mitigating this threat to their business.  Yet, coverage of the ski resort industry tells us that there are two main mitigation strategies Intrawest is likely pursuing.

The first mitigation strategy is snowmaking.  According to the New York Times: “resorts big and small are combating the trends [climate change] with bigger investments in snow making ($8 million worth at Squaw Valley and neighboring Alpine Meadows in the last three years [article from 2014]).”[3]  In fact, artificial snowmaking now contributes to snow cover at 88% of American ski resorts.[4]  However, according to Porter Fox, author of Deep: The Story of Skiing and the Future of Snow: “Snowmaking is not the answer…It’s a stopgap measure to keep the ski resort industry from collapsing.”[5]  Furthermore, snowmaking is very expensive and uses tremendous amounts of energy and water.

The second mitigation strategy is diversifying into non-skiing activities.  These fall into two buckets: winter activities to supplement skiing and off-season activities to generate year-round revenue.  For example, Washington School House, a high-end boutique hotel in Park City, Utah, now offers 18 winter sport activities, including bobsledding, zip-lining, yoga, hot-air ballooning, and therapeutic soaks.[6]  Diversifying into summer activities can include golf, waterparks, and sports which utilize the chairlifts, such as mountain biking and downhill carts.

I believe ski resorts are pursuing the right general strategy to mitigate the negative impact of climate change.  However, rather than adding new activities in what appears to be a scattered and improvised fashion, I would sketch out a holistic vision of what the winter resortnot the ski resort – of the future looks like.  Then, I would build a plan for how to transform from today’s resort to this resort of the future in a staged and financially realistic manner.  Rather than muddling along, these resorts need to have a vision and detailed execution plan for transforming into the winter resorts of the future.

(675 Words)

 

[1] Katharine Q. Seelye, “Rising Temperatures Threaten Fundamental Change for Ski Slopes,” New York Times, December 12, 2012, http://www.nytimes.com/2012/12/13/us/climate-change-threatens-ski-industrys-livelihood.html, accessed November 2016.

[2] Intrawest Resorts Holdings, Inc., June 30, 2016 Form 10-K, http://ir.intrawest.com/docs.aspx?iid=4424057, accessed November 2016.

[3] 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, accessed November 2016.

[4] Porter Fox, “The End of Snow?” New York Times, February 7, 2014, http://www.nytimes.com/2014/02/08/opinion/sunday/the-end-of-snow.html, accessed November 2016.

[5] Evelyn Spence, “The High-Tech Fight to Save California Skiing,” Bloomberg, 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.

[6] Simon Hudson, “Diversification is the Key for Ski Resort Hotels,” HotelExecutive.com, accessed November 2016.

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7 thoughts on “Ski Resorts: Melting Away

  1. The article poses a somber future for Ski, its resorts may survive by diversifying their service offering, but the picture portrayed is for the skiing itself to die. Some other alternatives different to artificial snow thrown in the mountains could include:
    -Relocation or expansion of ski resorts in to areas of higher altitude or latitude, where the global warming is not limiting as much snow availability.
    -Creation of indoor year-round ski parks, in the same fashion of water parks in the middle east, where the dependency on natural snow is eliminated. This could alleviate the water and power usage of artificial snow in the mountains and provide a financially feasible model.

  2. This is a really interesting example of an industry where a large portion of the target market has disposable income, and tend to be insensitive to price, and yet the effect of climate change will have a drastic impact. The one thing to note is that the estimate of 2040 as the tipping point would seem to be pretty conservative. At least in the Northeast, I feel like the quality of snow, which already can be pretty bad on the fringe of each season will drive a much lower adoption of skiing by new consumers, even if the mountains are able to open for 100 days.

  3. In the near term I think there are also opportunities for ski resorts to mitigate some of the energy and water use associated with snowmaking. Whistler recently opened a hydro-electric power facility that provides enough electricity to power all of Whistler’s operations (including 300 snow guns, 38 ski lifts, and 17 restaurants). Whistler also maintains its own water reservoirs on the mountain.

    Long term I definitely agree that the future looks rather grim for the ski industry.

  4. After reading this post, it’s clear to me just how significant of a headwind climate change is to the current concept of a “ski resort”. What’s also clear in this case is that Intrawest is in a different position than many of the other companies I have read about in these posts: namely it faces a headwind that could literally eradicate its business model not just force it to change. What is also clear is that Intrawest, with snow-making, is simply trying to prolong its current business model and not come up with any lasting solutions. The business is doing this while actually making things worse for the climate by the excessive use of energy and water required to make man-made snow. It’s not that I disagree with Intrawest’s attempts to slow-down the negative impacts from climate change, it’s that I think it should be investing in novel ways to create man-made snow that may allow it to produce snow faster without expending such a significant amount of energy.

  5. For an industry so negatively impacted by rising temperatures associated with climate change, I am surprised Intrawest Resort Holdings and others in the ski resort industry are not doing more to combat climate change’s destruction. Could they find opportunities to decrease their energy and water usage and become more vocal advocates of doing your part to care for our environment and preserve our ability to ski? I really like that they are trying to diversify their options, and perhaps focus more on summer sports and activities to be able to maintain revenue streams despite climate change’s impact on their primary business. But while this is a clever plan, it is sad to see they are more focused on these risk mitigation tactics to help their company vs. focusing on ways to make a change in the way we are destroying our environment, and the future of skiing in the US and Canada.

  6. I find it fascinating that you mention that Intrawest has not yet made a public comment on how it will specifically deal with this issue. To me their business model is truly fundamentally challenged by the issues you have described. Unlike many of the other posts I have read where there are clear mitigating strategies (technological development to use fewer resources, fuel efficiency, etc.) here the ultimate customer experience of what they are serving is in question. I think this illustrates the large risk inherent in single service (or single hospitality) concepts. Sure these businesses can try to monetize the off-season (zip line, etc.), but fundamentally these were large bets on the longevity of skiing whereas now a more diversified service offering is clearly required.

  7. Thanks for an informative (and scary) article, it’s easy to see why climate change is an issue keeping ski industry execs awake at night. That said, I’m not convinced by the quote you provide from Porter Fox. He doesn’t offer any explanation as to why artificial snow is a stop gap measure, and my experience in Australia would suggest otherwise. More than 80% of the snow in Thredbo or Perisher, Victoria is artificially produced, and the cost of this is passed on to customers through expensive ski passes (up to $200 a day). Given the luxury nature of skiing and its target market, customers have been willing to pay these prices for the past two decades, and Australian ski resorts are quite profitable (Perisher, for example, was purchased by Vail Ski Resorts last year for $136m).

    Compared to alternatives (like switching from skiing to yoga or ziplining, or re-building resorts at higher altitudes), artificial snow seems like the best available option for both resorts and skiers.

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