The Economics of Everyday Things: Episode 87 - Ski Areas
Hosted by Zachary Crockett, Freakonomics Network & Zachary Crockett
Release Date: April 7, 2025

Introduction to the Ski Industry

In Episode 87 of The Economics of Everyday Things, journalist Zachary Crockett delves into the intricate world of ski areas, unraveling the economic dynamics that sustain these winter recreational hubs. The episode provides a comprehensive analysis of both independent ski resorts and conglomerate-owned giants, exploring their operational challenges, revenue streams, and the community impact they foster.

Independent vs. Conglomerate Ski Areas

Rob Goodell, Chief Operating Officer of Loveland Ski Area near Silverthorne, Colorado, opens the discussion by painting a vivid picture of the ski industry's complexities:

"And I'm making a pitch to you and I tell you that my business is seasonal, labor intensive, weather dependent, capital intensive, and is based on a discretionary recreational activity that has inherent risks. I don't know if the conversation would go much further, but that kind of sums up the ski industry."
[01:09] Rob Goodell

Loveland Ski Area, established 85 years ago and currently owned by the descendants of original investors Chet and Virginia Upham, epitomizes the independent ski resort model. With over 70% of U.S. ski areas being independently owned, these resorts face unique challenges compared to larger conglomerates like Vail Resorts and Alterra Mountain Company, which collectively own about 10% of U.S. ski areas and offer extensive package deals to attract skiers.

Operational Challenges and Sustainability

Maintaining an independent ski area requires navigating a myriad of operational hurdles. Goodell emphasizes the resilience needed to manage unexpected weather patterns and the inherent volatility of ski seasons:

"Takes a lot of intestinal fortitude because there are seasons that are late to get started early to close, dry spells in between, and you have to be committed to it."
[02:10] Rob Goodell

Andrew Gast, General Manager of Mount Ashland Ski Area in southern Oregon, highlights the labor-intensive nature of the industry:

"One of our largest costs is labor. We have about 60 year-round employees. Then we'll balloon up to just over 600, about 620 to maybe 640, depending upon different department needs."
[08:36] Andrew Gast

Securing and retaining seasonal workers is a significant challenge, especially in expensive real estate markets. Loveland mitigates this by providing housing for employees, a strategy Gast notes has improved staffing stability over recent years.

Revenue Streams and Financial Management

Ski areas primarily generate revenue through lift ticket sales, which account for approximately 60-65% of income, followed by food and beverage operations, rentals, and ski school services:

"The number one revenue stream for us is the lift revenue, which includes season passes. The lift tickets, 60 to 65% comes from lift ticket sales and then food and beverage, ski and ride school and rentals, probably about 30% all combined."
[04:21] Andrew Gast

Independent resorts like Loveland price their single-day adult lift tickets at $149, with season passes available for $699. In contrast, conglomerate-owned resorts offer expansive packages, such as Vail's Epic Pass priced at over $1,000, granting access to 42 resorts worldwide. This disparity poses a competitive challenge for smaller operations.

Infrastructure and Maintenance

Chairlifts are a critical component of ski area infrastructure, representing significant capital expenditure and maintenance costs. Modern high-speed detachable lifts, while increasing capacity and operational efficiency, come with higher installation and maintenance expenses and a shorter lifespan compared to traditional lifts. Gast explains Mount Ashland's recent investment in a new chairlift:

"Mount Ashland recently installed a new chairlift. The nonprofit spent over $3 million total—$2 million for the lift itself and an additional million for installation, trail braking, and lighting."
[21:13] Community Member

The intricate process of chairlift installation involves extensive engineering, ground surveys, deep foundation foundations, and rigorous safety testing, ensuring these vital systems operate flawlessly to transport thousands daily.

Snowmaking and Environmental Considerations

Snowmaking is essential, especially during seasons with insufficient natural snowfall. Loveland employs nine large snowcats to groom snow efficiently:

"We have nine snowcats, very large, powerful, tracked machinery to push and groom snow that cost more than the first house that I owned."
[14:32] Andrew Gast

Water rights are a critical asset for snowmaking operations. Loveland holds a Special Use Permit from Colorado, supplemented by additional water purchases, to meet their snowmaking needs—a costly but necessary investment to ensure consistent operations.

Community Involvement and Nonprofit Models

Mount Ashland Ski Area operates as a nonprofit, a model sustained largely by community support and ancillary revenue streams. Facing potential closure in the early '90s, the local community intervened to purchase and sustain the mountain:

"The community came together and bought the mountain from that company and formed the nonprofit that operates it today."
[07:33] Community Member

Despite donations covering only a fraction of operating costs, Mount Ashland generates revenue through summer activities, such as trail running, hiking, and innovative additions like axe throwing, aiming to diversify income and engage the community year-round.

Risk Management and Insurance

Ski areas must navigate substantial operational risks, including liability insurance due to the inherent dangers of skiing and infrastructure maintenance. Gast points out the high costs associated with comprehensive insurance policies:

"Our insurance amounts to about 9% of our expenses that we pay annually for the mountain."
[19:09] Community Member

Property insurance remains a significant expense, especially with the increasing wildfire risks across the West, necessitating robust coverage to protect valuable assets like chairlifts and lodges.

Adapting to Market Demands and Future Prospects

To remain competitive, independent ski areas must continuously innovate and adapt. Loveland considers upgrading to high-speed lifts to enhance capacity and efficiency, while Mount Ashland focuses on maintaining manageable lift capacities to suit its size:

"Some ski areas, like Loveland, are choosing to upgrade their chairs to high speed lifts. Mount Ashland is not."
[21:13] Zachary Crockett

Additionally, exploring off-season revenue opportunities is crucial. Mount Ashland's introduction of summer camps and activities like axe throwing exemplifies strategic diversification to stabilize income beyond the winter months.

Conclusion: The Resilient Joy of Skiing

Despite tight margins and fierce competition, the enduring passion for skiing and snowboarding ensures a loyal customer base. Goodell encapsulates this sentiment:

"It's the pure joy of skiing, snowboarding, being outdoors. It's a family activity, and once people get introduced to it, and have that feeling. It's really unsurpassed."
[24:08] Rob Goodell

The episode concludes by highlighting the delicate balance ski areas must maintain between operational efficiency, financial sustainability, and fostering community engagement to thrive in an ever-evolving market.

Notable Quotes:

• Rob Goodell [01:09]:
  "And I'm making a pitch to you and I tell you that my business is seasonal, labor intensive, weather dependent, capital intensive, and is based on a discretionary recreational activity that has inherent risks. I don't know if the conversation would go much further, but that kind of sums up the ski industry."

• Andrew Gast [04:21]:
  "The number one revenue stream for us is the lift revenue, which includes season passes. The lift tickets, 60 to 65% comes from lift ticket sales and then food and beverage, ski and ride school and rentals, probably about 30% all combined."

• Rob Goodell [02:10]:
  "Takes a lot of intestinal fortitude because there are seasons that are late to get started early to close, dry spells in between, and you have to be committed to it."

• Rob Goodell [24:08]:
  "It's the pure joy of skiing, snowboarding, being outdoors. It's a family activity, and once people get introduced to it, and have that feeling. It's really unsurpassed."

This episode was produced by Morgan Levy and Sarah Lilly, mixed by Jeremy Johnston, with contributions from Daniel Moritz Rapson and listener Naboja Kulich.