34 replies to this topic

[Callao]

Have you ever wondered how the money you spent at a ski resort is spent by the resort? The resort is probably not as profitable as you thought.
Recently in an industry forum on this website, there was a discussion about what could be done to cut, specifically, insurance costs. What resorts need now is fresh thought from people like you--how can resorts cut costs and increase profits?
Below is a table put together for SAM Magazine (May 2007, Pg. 70) by Jeff Harbaugh. It shows where all the resort revenue goes, shown here as percentages in each category. The table is split up according to year, and also by resort size:


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Things to note:
1. Direct Labor is by far the largest expense, totalling a quarter of your day ticket price.
2. Insurance (which includes liability) accounts for only 2.4% of your day ticket.
3. The total is supposed to always be 100%, but may show differently due to rounding error.
4. The most important thing in the table is the "Profit before tax." Considering that most resorts are grossing in the millions of dollars, .7% is a very small margin! A bad snow year will turn this to a negative number in a heartbeat.
5. The Profit margin looks decent for small resorts and pretty blinging for large resorts. What is the deal with medium-sized resorts?

As small as some of the expenses seem, when compared to profit, a slight decrease in costs in any category will significantly increase the profits. Now we need some ideas--What can resorts do to decrease costs?
Any ideas will be helpful.

This post has been edited by Callao: 02 November 2007 - 05:11 PM

[SkiBachelor]

Respondents by Size (VTFH) => Terrible measurement method.

It's better to measure by skier visits and acreage than VTFH. Up hill capacity has nothing to do with how profitable you are. A mountain might have invested heavily one season with new lifts and has yet to see the payoff from it. Ski areas like Hoodoo and Tamarack are good examples where its lift systems are under utilized. I see this chart and get the impression that I shouldn't have a VTFH between 10,000 and 16,999 because I'm better off leaving my money in the bank to earn interest off of it.

[Callao]

You might be right on that, but this is how the NSAA broke it up in their Economic Analysis, so that's all we have to work with.

Setting aside poor measurement methods, What can resorts do to decrease costs?

[SkiBachelor]

Depreciation seems to play a significant role with resort expenses, yet I can't comment on this that much because I don't know what's being depreciated and how it's being depreciated (Straight line, accelerated or activity based)

Cost of Goods - While ski resorts can choose the types of goods they want to use, they can't really control the cost of them. However, they can take advantage using the accounting method LIFO (Last in, first out). Even though LIFO makes profits look lower on paper, the resort actually pays less taxes because of this while actual cash stays the same.

Payroll Taxes? Why is this included on here when payroll taxes comes directly out of the worker's paycheck and not the resorts? It has no affect on the profit of the resort to my knowledge. This is already included with 'Direct Labor' expenses.

[Callao]

Depreciation does not reflect any money coming out of a resort (it is recorded for tax purposes), but does represent large purchases a resort may make during certain years--such as ski lifts, and lodges (and other things that depreciate). Essentially, It decreases the taxable income, but the money is technically still there.

Taxes are withheld from employees paychecks. However, not all taxes are passed on to the employee to be paid. Employers also pay a "payroll tax," which is also determined by the amount paid for labor.

Remember, these numbers come out of the NSAA Economic Report, not from me.

[Callao]

How easy do you think it would be to attract volunteers? I'd heard of one guy who volunteered as ski patrol every Saturday (Castle Mountain, AB) I believe. Do you think it is common that resorts have a sort of campaign to pull the volunteers in? Probably all you have to do is wave a season pass in their direction . . .

[SkiBachelor]

This is actually very common with mountain tour guides and mountain host people.

[Allan]

We have 40 volunteer patrollers and a bunch of volunteer snowhosts (guides). The problem these days (here anyways) is retaining the volunteer staff. They always seem to get jobs and move on rather quickly - except for the core group of them. One's been here 52 season all volunteer.

[Callao]

Allan, on Nov 4 2007, 05:27 PM, said:

We have 40 volunteer patrollers and a bunch of volunteer snowhosts (guides). The problem these days (here anyways) is retaining the volunteer staff. They always seem to get jobs and move on rather quickly - except for the core group of them. One's been here 52 season all volunteer.

Not bad! It probably doesn't work really well with positions like lift operators (are there any liability concerns with with volunteers?), but it's probably good for guides and such. Hey, can we attract a bunch of volunteers and oust half of the ski patrol?

Another expense which doesn't seem that great, is insurance, at 2.4%. I think that's mostly liability insurance (correct me if I'm wrong). However, I'm not sure that most liability insurance gives the resort full protection. Does anybody know about how resorts manage risk and liability?

[SkiBachelor]

I have a feeling that insurance rates have to be about 8% of total costs because of how many ski areas had to close down or be sold when KKK insurance shut down. This is what I read from an old SAM Magazine from the early 1990s.

[Callao]

It says 2.4% for both 2005 and 2006. Is there a reason why an additional 8% would not show up on this breakdown?

If it is as much as 8%, then it would be a bigger problem.

Hey, maybe those who are dishing out 8% don't have a ski patrol!

[Woodroe77]

I agree with Allan in that retaining that exp. in that returning employee only goes so long. Eventually everyone "has to get a real job" as ive heard before of returning staff that have moved on. The only dept. that i see a solid returner rate every year is the volunteer patrollers. These are usually financially stable middle aged people. You just can't simply have a full staff of volunteers unless you have a wealthy ski town full of rich people that enjoy giving of their free time and helping the community and local resort....(guess thats a little local sarcasm).

[Lift Dinosaur]

Volunteer personnel, no matter what department, supplement (not replace) full time employees. If you think you can run a mountain on volunteer personnel only, you need to spend a day working on any mountain.
It's hard enough to get the PAID employees to show up -
$0.02


Dino

[Lift Dinosaur]

mjturley34, on Nov 7 2007, 10:36 PM, said:

"wealthy ski town full of rich people"

Is there another kind ?

A poor ski town full of commuters?

[zeedotcom]

One possible solution might be to actually pay employees more, and therefor get better employees (more lucrative).

I've worked primarily in Rental shops for several years, and as a supervisor, I could run a shop on some nights with an "all star" crew of 5 guys with no issues. These are the continually returning employees with more than just a couple of seasons under their belts. If I had the high school screw offs, I would need 50-75% more "bodies" and have continual headaches. If you pay those 5 guys 9/hr instead of 7/hr for anybody with a pulse, you are actually saving money through reduced staffing and increased efficiency. That is actually... ~20% lower labor costs per hour if my math is right?

Everybody knows that a ski job is for ski bums. Bums being the operative word. No body wants to live hand to mouth with no change in sight. Dangle a season pass and you only get so far. In a lot of places, you get more ride time and have more free cash if you buy a pass, rather than work for it. I looked at moving to Breckenridge from the Midwest one season. If I worked enough to pay my bills rather than lose money, I was actually going to have more money and get just slightly less (western) ride time, with more ride time overall by staying in the midwest and spending a couple grand on 3 weeks in the mountains.

(PS, I've been lurking on the forums for a while, and basically dove in to posting now)

[Callao]

Thanks zeedotcom. That is a good point you are making--really, there are just a lot of ski bums on the staff who are there to ski--not to work ("Yay! A season pass! See you all later. . ."). Can a resort attract better employees? Probably with higher pay, yes.

I recently attended a Brian Head job fair here at Southern Utah University. One thing I was reminded of is how many seasonal jobs there are, as opposed to year-round positions (very few!). That is one reason I would have a hard time choosing a resort like this to work at as a career. Can this be changed? Can resorts attract more professional people?

[Emax]

Callao, on Nov 13 2007, 10:57 AM, said:

Thanks zeedotcom. That is a good point you are making--really, there are just a lot of ski bums on the staff who are there to ski--not to work ("Yay! A season pass! See you all later. . ."). Can a resort attract better employees? Probably with higher pay, yes.

I recently attended a Brian Head job fair here at Southern Utah University. One thing I was reminded of is how many seasonal jobs there are, as opposed to year-round positions (very few!). That is one reason I would have a hard time choosing a resort like this to work at as a career. Can this be changed? Can resorts attract more professional people?

For technical jobs, I would prefer to hire people who have no more than a casual interest in snow sports. For the most part, a love of skiing is the last thing I'd like to see on a resume.

However - what about finding interesting off-season work for lift operators, i.e. those who like to spend time skiing - and then allow quite a bit of skiing time during the season? If we can make "lift operator" a year-round position, the quality of work is bound to go up.
Yes, a higher rate of pay will be needed.