A note from Liftopia CEO, Evan Reece
March 8, 2019 – Vail Resorts made a very interesting announcement this week, cementing the priority of the industry to seek incremental pre-sale of both lift tickets and passes as ski areas quickly shift the majority of their sales online.
While much of the marketing language paints a picture of some legitimately interesting opportunities for consumers to improve their buying experience, what did Vail really announce? Discounted lift tickets.
Over the past 10 years, the ski industry has been in a bit of an arms race for presale – first with season passes for individual resorts and then with multi-resort passes like Epic, Ikon, Peak Pass, Mountain Collective, etc. Quietly alongside, many within the industry have taken great strides to focus similarly on pre-sales of traditional lift tickets. As measured by walkup rates, the industry has seen dramatic increases in the cost of skiing (a topic I covered last spring at the National Ski Area Association conference), with the average window rate for ski tickets rising from ~$57 when Liftopia was founded in 2005 to somewhere near $110 (expected) in 2018/2019.
Now the industry would rationally respond that walkup rates are not an accurate measure of how much it costs to ski, as there is often cost savings to be found in effective “per-day discounting” in the pass products mentioned above as well as through the various dynamic pricing strategies (that our company advocates) employed by the majority of ski areas. That said, the focus on pre-sale of pass products since the “season pass wars” started in Colorado in the 90s has yielded a troubling pattern in the cost of entry to our sport and the scale of our customer base that preceded Vail’s correction earlier this week.
That said, the focus on pre-sale of pass products since the “season pass wars” started in Colorado in the 90s has yielded a troubling pattern in the cost of entry to our sport and the scale of our customer base that preceded Vail’s correction earlier this week.
As pass visits increased as a percentage of overall skier visits, a dramatic negative impact on yield (average ticket price) and yield ratios emerged, a cause of concern for ski areas big and small, but particularly for those who disproportionately skew in the direction of season pass visitation. This, along with the goal of increasing season pass sales, meant ski areas continuously raised their window rates to recover some of the missing yield. Unfortunately, this meant that the cost of entry to the sport (again, as measured by window rates, and typically the driver of new-entrant perception of cost) rose substantially, and further drove resorts to “cater to the core” skier and to the hyper-competitive pass market that exists today. The increased variability of conditions/weather driven by climate change further impacted consumer confidence and pricing power.
Along the way something else interesting was happening – Vail’s portfolio and high quality execution gave them an ability to focus on Epic Pass sales, and they did so utilizing ever increasing window rates (typically at the top of the market, with Christmas week exceeding $200 in many of their destinations this winter). They ruthlessly focused on driving pre-sale primarily of their pass products, but also of day passes. While day tickets have been priced at a discount to walkup, the price points remained (from my perspective) unnaturally high in order to further support core Epic Pass sales. For a long time they continued to see tremendous growth with that side of their business (not to mention all of the ancillary thereafter).
And then something else happened… Vail’s price leadership not only supported their own yield/revenue growth, but empowered what I argue to be an unhealthy focus on unending yield growth within the rest of the industry – further contributing to the narrowing of the North American skier audience. While that yield growth came alongside a meaningful shift from offline to online sales, the unnatural elevation of the pre-sale price points has kept the industry from moving as hastily as it could from being offline to wholly online businesses (something critically important in an industry with tremendous fixed demand variability – that is holiday to non holiday, and tremendous variable demand – that is weather and hangovers).
And overnight – Vail just made a massive correction to its lift ticket pricing that is likely to have (dare I say) very positive impacts to the broader industry, as it will serve to shed a light on the delicate balance between yield and volume, if at first in a broad stroke move as the one they announced this week.
Vail is a smart operator – so we should be careful to judge this first movement too quickly. First, it is clear that the messaging they are providing is closely tied to the Epic Brand, but it also initially appears like too broad stroke of a pricing shift (it is as an example surprising, that this move was made with essentially an “anytime” discounted lift ticket as opposed to a date-specific strategy that provides more granular revenue management opportunity). But what is likely happening here is the following. One, a simple message to consumers (though it will be interesting to see if infrequents care about the brand itself vs. just using “discount lift tickets”). Two, quickly testing the bottom of the market in order to iterate upwards thereafter.
They likely were starting to see the inevitable end to season pass growth strategy, but alongside that Vail has been testing the top of the market for a while with their pre-sale day ticket strategy and, they needed to test a floor up from which they can iterate. One thing we’ve learned about price sensitivity for unconstrained inventory sets like ski areas and amusement parks, is that pre-buying customers disproportionately punish overpricing, as the thing they are buying never sells out. Starting with a dramatic move like this will give them clearer signal that would not appear if they made slight movements downward. By taking this action after every major holiday period this season has already passed, they are able to test a low price floor with less risk, not to mention a lot of press during a critical pass-sale time of year. I anticipate seeing more iteration as the summer progresses, both with these anytime lift tickets and (my prediction) a more granularly revenue managed date-specific ticket strategy alongside.
One thing we’ve learned about price sensitivity for unconstrained inventory sets like ski areas and amusement parks, is that pre-buying customers disproportionately punish overpricing, as the thing they are buying never sells out.
Now I am certainly wrong in here somewhere – as this is my opinion, crafted only by my observation of Vail’s execution and also what I believe is the “right” thing for them and the rest of the industry to do. But last year at NSAA I said my biggest fear was that as resorts appropriately chase higher window rates to empower presale, they should be careful to not move those pre-sale prices in lockstep with window. This is one major correction that is likely to ensure that does not happen moving forward. Vail just moved further in the direction of wishing to win every pre-sale transaction, which will require meaningful, and thoughtful, pricing responses from the rest of the industry.