America’s Ski Resort Duopoly

The week between Christmas and New Year’s is the busiest skiing week of the year.

America’s skiing market is dominated by two major players: Vail and Alterra — both of which are thriving at the moment.

But this market is worth understanding not only for its unique supply & demand qualities, but for its fascinating behavioral economics, and its rapid transformation into a luxury market amidst a very uncertain future.

You’ll learn:

  1. What caused skiing demand to spike?
  2. Why is skiing more expensive than ever?
  3. How busy are ski resorts these days?
  4. Why are ski resorts like gyms?
  5. What are skiing’s biggest long-term threats? One is obvious…
  6. …But the other is not 🎟️
  7. How did the market reach the point where Vail and Alterra are the only major players? 🎟️
  8. How do Vail and Alterra’s strategies differ? 🎟️
  9. Why is competition so limited when skiing is more popular than ever? 🎟️
  10. Why is European skiing cheaper than American skiing? 🎟️
  11. How did seasonal passes come to dominate the market? 🎟️
  12. Why have only four new ski resorts been built in the last 23 years? 🎟️
  13. What does the future hold for the ski industry? 🎟️

Note: To read the full issue you’ll need the All-Access Pass. 🎟️

Skiing demand is spiking…

In the past few years, America’s skiing obsession has reached new heights.

2022 was the ​busiest ski season on record​, with 64 million ski resort visits. That’s up 6.6% over 2021.

Two influences seem to explain the surge:

  1. Post-pandemic “outdoor boom.” Since Covid ended, outdoor activities have seen a renaissance. ​Demand has climbed​ for stuff that gets people out of the house. Skiing is no exception.
  2. Social media. With pristine white snow and cozy mountain lodges, skiing is Insta-friendly social media gold.

It’s hard to quantify the extent to which Instagram and TikTok are driving more people to the slopes, but ski resorts have certainly been ​prioritizing influencer partnerships​ in its marketing efforts.

That’s great news for ski resorts – but not so much for skiers themselves. The industry cannot easily create supply. This isn’t like manufacturing iPhones or cars. Companies can’t just quickly spin up new ski resorts to meet the demand.

And all this extra demand means high ticket prices and long wait times.

…but threats loom large

Skiing is more expensive than ever

Even before the recent demand spike, the cost to go skiing in America was flying past inflation.

In 1962, a day pass at ​Vail Ski Resort​ was just $5. If that figure had climbed in line with inflation, it would be $44 today.

But last season, it cost $239.

The Vail Day Pass just represents prices at one resort, but it’s indicative of broader market trends – especially because ​​Vail Resorts​​ is a dominant force in the American ski market. Keep reading for our discussion of market structure and competition later in the issue.​ Image courtesy of ​Snow Brains​​

Are these exorbitant prices simply an inevitable fact of skiing?

Well, not quite.

In Europe, despite having ​world-class facilities​, not a single resort charges over $100 for a day pass.

It’s not just ski passes that are getting expensive – check out these prices for the snack bar at Vail. $13 for a hot dog! ​Image Courtesy of ​troutlink on /r/skiing​.​

But these high prices haven’t turned off American skiers.

In fact, the resorts are busier than ever.

Ski resorts are packed

As more people have been drawn to skiing, resorts have become incredibly crowded.

In one 2020 incident, dubbed the Vail ​lift line apocalypse​, skiers had to wait over two hours to ride to the top of the mountain.

As you’d expect, this overcrowding has additional knock-on effects.

Parking has been getting scarce. And locals are complaining about ​housing shortages​ in ski towns wealthy residents snap up second homes and investors convert properties to short-term rentals.

In fact, housing shortages have gotten so bad that local workers often struggle to find a place to live when competing with deep-pocketed transplants.

As our friends at ​The Briefcase​ pointed out, this has prompted ski resort companies to ​invest tens of millions​ just to ensure their employees have housing.

Despite the problems associated with such big crowds, ski resorts have shown little interest in creating capacity limits, which could hamstring their revenue.

While ski resorts may limit the number of day passes they sell, most ​seasonal ski passes are sold in unlimited numbers​. This means when fresh snow draws people to the mountain in droves, wait times for ski lifts can get outrageous.

Ski resorts have similar dynamics to gyms. Since a crowded gym degrades the experience for everyone, gyms want to sell you a membership, but they don’t actually want you to show up!

But in the grand scheme of things, high prices and crowded mountains are just two minor annoyances resulting from skiing’s recent surge in popularity.

In contrast, skiing faces two long-term threats that could upend the industry as a whole.

One of them is obvious, the other not so much.

Skiing’s long-term threats

Climate change is already affecting resorts

To state the obvious, skiing requires snow. And due to climate change, there’s been a whole lot less snow in recent years.

Ski seasons are set to shrink most noticeably on the east coast of the US. Here are the median projected days below freezing in each state by year, based on ​​NOAA estimates​​. ​Image courtesy of the ​Financial Times​​

While a shrinking season is the most existential climate threat to the ski industry, higher temperatures mean ​terrible snow quality.​ Skiers may put up with bad snow to get a few runs in, but they’re unlikely to continue to pay ultra-premium prices for it.

The state of play in Adelboden, Switzerland, as the resort prepared to host the 2023 Alpine Skiing World Cup. Less snow and worse quality. Welcome to the future of skiing. ​Image Courtesy of the ​BBC​

Resorts are investing huge sums in artificial snowmaking capacity, but let’s be clear: this is no panacea.

Making fake snow takes a ​ton of energy​. And as temperatures rise, fake snow requires even more energy to produce, making the process increasingly uneconomical.

But there’s another looming problem. One that is quieter and rarely discussed…

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Author

Brian Flaherty

Brian Flaherty

Brian's interest in finance started from an early age, when he used money saved from working summer jobs to purchase his first mutual fund at 15. He went on to pursue the field in school, eventually graduating from the University of Virginia with a Bachelor's degree in Economics. After graduation, Brian put his expertise to work advising institutions and high-net-worth investors as a strategist at a wealth management firm. Recently, Brian transitioned to pursue a career as a financial writer, where he leverages his writing skills and his financial knowledge to help investors uncover the best opportunities and make intelligent use of their capital.

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