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Looking Back and Looking Forward. Michael Berry, President NSAA. SANY/PSAA Fall Tradeshow & Seminars. September 2008. 65. 60.5. 58.9. 57.6. 60. 57.3. 57.1. 56.9. 55.1. 54.6. 54.4. 54.0. 54.1. 54.0. 53.9. 53.7. 53.3. 52.7. 55. 52.5. 52.2. 52.1. 51.9. 51.4. 50.8. 50.7.
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Looking Back and Looking Forward Michael Berry, President NSAA SANY/PSAA Fall Tradeshow & Seminars September 2008
65 60.5 58.9 57.6 60 57.3 57.1 56.9 55.1 54.6 54.4 54.0 54.1 54.0 53.9 53.7 53.3 52.7 55 52.5 52.2 52.1 51.9 51.4 50.8 50.7 50.6 50.2 50.0 48.2 50 46.9 46.7 45 Skier Visits (millions) 39.7 40 35 30 25 20 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2007/08 Total Visits Another record season, up 9.9 percent over 2006/07 and 2.7 percent from prior record (2005/06)
Contributors to Record Season • International visitation up 28% • Increase in local/within region/day trips • Increase in weekend/holiday visitation • Estimated total number of participants up (specifically, non-passholders) • Overall increase in length of season, up to 129 days on average from 120 days • Natural snowfall up 44% overall • Slight increase in lesson participants
Ticket Revenue per Skier Visit • Ticket revenue per skier visit is up across various sizes of ski areas
Northeast Region INSERT MAP HERE
Northeast Region • Snowfall up dramatically • Very strong visits during December through New Years • Increase in season length to 133 days • Increase in day visits to 52% of total • Decline in number of season passes sold per ski area, but increase in proportion of skier visits from season pass holders • International visits flat • Snowboarding up slightly to 28% of total visits
Skiing and Bear Markets THE GOOD NEWS: While recessions and bear markets are typically linked to drops in consumer spending, skiing historically DOES NOT correlate with economic cycles. WHY? • Skiers are largely drawn from the upper economic tier of society, whose spending habits are less affected by the market. • Skiing is more closely tied to weather and snowfall than to the economy.
Skiing and Bear Markets • 1957: Stock market fell by 22%. Despite thin snow cover in the East, skiers flocked to the slopes in record numbers. • 1969: Stock market down by 36%. It was a bonanza snow year for all areas of the country. In Michigan, the ski season lasted from Thanksgiving to mid-April. • 1974: Stock market down 48%. In addition, it was the third poor snow season in a row. The oil crisis caused many Sunday gas station closings, which severely impacted the ski industry. • 1981: Stock market down 27%. Unfortunately, the lack of snow caused skier visits to fall by 19% as well. • 2001: Stock market down 40%. Not so with skiing. Visits reached a then-record of 57.3 million.
Macroeconomic Challenges • Increasing unemployment • Stalling GDP growth rate • Soaring oil and gas prices • Mortgage and credit crisis • Plunging consumer confidence • Declining travel indicators • Reduced hotel occupancies • Declines in air travel
Stay Focused • Despite these challenges, resorts need to remain focused on doing what they do best. • Continue to provide a memorable guest experience: Net Promoter Factors. • Emphasis on managing revenues and expenses: Peak Performers.
Satisfaction with Experience • Attributes that correlate most highly with the overall experience • Employee service, friendliness • Overall value • Equipment rentals and lessons • Snow conditions/coverage • Variety/number of trails • Grooming • Restaurant cleanliness and overall lunch experience
Satisfaction with Experience • Consistently high level of satisfaction with employee service • Improvement seen overall in lessons, food & beverage, quality of grooming, and overall value • Equipment rental satisfaction shows room for improvement • Overall food & beverage, though improved, remains the area in need of attention
100% Excellent (77%+) NPS 90% Good (64-76%) 80% Mediocre (47-63%) 70% Needs Improvement (<46%) 60% 50% Net Promoter Score 40% 30% 20% 10% 0% Net Promoter Score Out of 76 US resorts surveyed in 2007/08, net promoter scores ranged from a high of 95% to a low of 15%. The average score was 62%, up from 60% last season and 57% the year prior.
Day Ski Areas • Characteristics of Peak Performers vs. other ski areas (Day Ski Areas) • More skier visits (210K vs. 140K), but lower total revenue per skier visit • Higher EBITDA profit margin (25% vs. 16%) • Slightly lower ticket yield ratio (58% vs. 59%) but higher percent of visits from season pass holders (41% vs. 36%) • Slightly higher capital spending ratio (about 12% of revenue, 5-year average, vs. 11%) • Nearly all have night skiing (93% vs. 68%) • Higher utilization (53% vs. 47%)
Day Ski Areas • Characteristics of Peak Performers vs. other ski areas (Day Ski Areas) • Similar proportion of total revenue from summer (3.5% to 4.0%) • Lower expenses as a percent of revenue for G&A, direct labor, other direct, payroll taxes, depreciation, operating leases, and marketing • Higher margins overall and for each department (particularly lessons)
Day Ski Areas • Revenue per Skier Visit (2-year average, 2005-06 and 2006-07)
Day Ski Areas • Expenses per Skier Visit (2-year average, 2005-06 and 2006-07)
Day Ski Areas • Gross Margins • Peak Day Ski Areas outpace their peers for lessons, mountain operations, and rental shops
Overnight Drive Ski Areas • Characteristics of Peak Performers vs. other ski areas (Overnight Drive Areas) • Very similar skier visit levels (280K), but much lower total revenue per skier visit • Higher EBITDA profit margin (23% vs. 12%) • Slightly lower ticket yield ratio (53% vs. 56%) but higher percent of visits from season pass holders (28% vs. 23%) • Similar capital spending ratio (about 7% of revenue)
Overnight Drive Ski Areas • Characteristics of Peak Performers vs. other ski areas (Overnight Drive Areas) • Nearly twice as likely to offer night skiing (62% vs. 35%) • Smaller VTF and capacity, leading to higher utilization (43% vs. 30%) • Higher proportion of total revenue from summer operations (14% vs. 10%) • Higher margins for Lessons, F&B, Lodging • Lower expenses for direct labor, other direct, marketing, G&A, depreciation, payroll taxes, and interest
Overnight Drive Ski Areas • Revenue per Skier Visit (2-year average, 2005-06 and 2006-07)
Overnight Drive Ski Areas • Expenses per Skier Visit (2-year average, 2005-06 and 2006-07)
Overnight Drive Ski Areas • Gross Margins • Peak Overnight Drive Ski Areas outpace their peers for lessons, F&B, and lodging
Observations & Conclusions • Summary of measures discussed in this presentation
Observations and Conclusions • Record visits this season despite significant headwinds • Resorts are well-positioned to take advantage of favorable operating conditions • Satisfaction with the experience is high • Health of the industry remains strong • Ethnic diversity an opportunity • Macroeconomic conditions are concerning
Observations and Conclusions • Consider more programs to keep older participants in the sport, particularly women • Managing costs / staffing levels boosts profitability, but could be detrimental to the guest experience in the long term • Areas of concern • Level 1 lessons down • Season pass unit sales down • Demographics – age, ethnicity • Conversion challenges • Work force/staffing issues