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It's The Price, Stupid

Fall Line
posted: 06/03/2001

While the giant ski conglomerates were working to boost their stock prices on Wall Street, unrolling blueprints for their real estate deals and wondering why the sport isn't growing, a guy who didn't start skiing until the age of 35 triggered what may be the biggest gain for skiers since the high-speed quad. Mike Shirley, in fact, may be the most influential man in skiing you've never heard of.

As president and general manager of Bogus Basin in southern Idaho, Shirley started a price revolution in March 1998 by cutting the cost of an adult season pass from $500 to $199¿less than a night on Broadway. He then sold eight times as many passes as the previous year, while generating nearly four times as much pass revenue.

Like an anvil dropped into a bathtub, Shirley's deep-discount strategy has made waves, sending ski executives scrambling for their calculators as resorts from California to Maine soften prices for multi-day, multi-area and season passes. In the industry debate on whether it's decreased leisure time or increased prices that has kept skier days flat at roughly 50 million since the late Seventies, Bogus Basin's experience points to price.

Or does it? "Price is key," Shirley says, "especially when you consider how little time people have to ski." The average number of days Bogus pass-holders skied under the old price: 23. Under the discount price: 9. With the new low cost, you would think skiers would ski more, not less¿until you realize cheap prices are attracting lapsed skiers who previously weren't skiing at all.

The new Bogus Basin business plan? "More skiers skiing less," Shirley says. "The vast majority of people just can't ski that often."

Shirley, 57, wasn't always so sure. In 1991, after working for two decades in corporate management, he took over a resort struggling to reach 200,000 annual skier visits. He saw that Bogus' skier count had leveled off while the population in nearby Boise had doubled in the past 20 years. "You lie awake at night thinking about what in the hell you can do to get more business," he says.

Inspired by discount-pricing at Southwest Airlines, Shirley cut the adult season pass price 60 percent, then slashed the children's pass price nearly 90 percent to $29. There was one hitch: Skiers had to buy the passes for the upcoming winter by June 1.

Shirley was shocked by the response. He had hoped to surpass the 2,854 passes sold the previous season. "We finally stopped selling at 25,000," he says. By season's end, day-ticket sales had shrunk by 28 percent, but total skier visits skyrocketed from 191,714 to 303,441. That was a trade-off Shirley was willing to make. Critics had predicted the new pass-holders, derisively called "Brown Baggers," would ski all day without opening their wallets. But the revenues per skier visit only dropped pennies, from $24.84 to $23.89. "When you have a huge increase in volume and you're collecting as much per skier as before, you're making out like a bandit," Shirley notes. Bogus' bottom line ended all internal debate. Total revenue before the discount passes: $4.7 million; after the discount passes: $7.3 million.

Resorts everywhere have joined Shirley's discount-pass parade, but with mixed results. Receiving most of the headlines was the "Buddy Pass" price war of Colorado, which was instigated by Winter Park, then matched by Breckenridge, Keystone and A-Basin and Intrawest's Copper Mountain. The format was simple: Four skiers buy four season passes as a unit at a cost of roughly $200 per skier¿a discount of about 75 percent. The resorts¿and Colorado skiers¿were floored by the turnout, with ski shops resembling rock-concert box offices as customers waited for hours to buy in.

An estimated 100,000 Buddy Passes were sold during the program's initial season last year. A few clever skiers reportedly flew in from both coasts to purchase passes, calculating that $800 unlimited skiing for a family of four beats the price at the window for a week's vacation. With Colorado suffering poor snow last season, skier counts dropped 5 percent statewide. "It would have been worse if not for the Buddy Passes," says Bear Stearns analyst Christine Lumpkins.

This winter, Swiss Valley, Mich. (60 acres, 225 vertical feet), is doing the Colorado Buddy Pass one better. The resort's $159 season pass is sold in groups of five. "This forces skiers to talk other people into trying the sport or returning to the sport," says Swiss Valley's Linda Benthin.

Vermont's Mad River Glen is removing price altogether from the decision process, giving free season passes to children 12 and under. "We don't offer snowboarding and we want to attract more families and kids," says resort executive David Hatoff. Colorado's battling Buddy Pass resorts have increased their pass prices by up to $99, but costs remain well below previous levels. Shirley sees these discount passes as feeder systems for destination resorts. "Getting all of these people committed to skiing gives us a chance to grow the sport for everyone," he says.

Timing is key to the success of most discount programs, which, in part, bank on human psychology. Most resorts sell their discount passes late in the season. "In spring, when the snow is perfect and the sun is warm, a $199 season pass is an easy sell," Shirley says. Ski shops love this early sales period because by the time new gear hits the racks in autumn, the cost of a pass is a forgotten expense. Next skier decision? What gear to buy. Some Boise, Idaho, ski shops reported sales increases up to 50 percent last season.

There are downsides to bargain skiing. All of these newly minted pass-holders have to get to the slopes. Colorado's Buddy Pass skiers clogged the Interstate-70 corridor with miles of bumper-to-bumper traffic nearly every weekend. During the Presidents' Day holiday, a winter record 107,103 vehicles traveled through the Eisenhower Tunnel¿the choke point between Denver and the slopes. "I bought the Buddy Pass, which was priced great, but with the ridiculous traffic I used it twice," says Longmont, Colo., resident Jing Tsong.

The proliferation of discount passes tends to benefit day skiers, so destination-resort skiers are now asking "What about us?" The new discount programs do exert downward pressure on all ticket prices, season-pass or otherwise. Witness Aspen's new $39 lift ticket, which must be purchased by Dec. 1. Resorts also are trying to better serve destination skiers by "customizing" lift tickets, so that skiers only pay for on-snow time that best suits their schedules. This has led to innovations such as lunch-hour tickets, lift-specific tickets and morning and afternoon half-day tickets (or even Steamboat's "late, late arrival" ticket that runs from 2:15 pm to closing).

Not everyone is applauding the discount-pricing trend. "Skiing is an expensive industry to operate in," says Skip King, vice president of communications for American Skiing Company, operator of nine resorts. "The better discussion is value versus cost. Even the most expensive lift ticket in North America doesn't approach the cost of greens fees at a premier golf course."

Skiing may not be as expensive as certain other leisure pursuits, be it golf or a family trip to Disneyland. But the "Bogus Experiment" shows that skiers want a bargain. "There are still many in the industry saying that price is not important," Shirley says. "I think we can end that discussion now."

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