How the ski industry price discriminates – BRANDON DONNELLY

Snowboarding in Europe, of course, sounds really fancy. And don’t get me wrong, it can be fancy if you want it to be. But the reality is that it’s also a cheaper option. And that’s because the price of a single day lift ticket at most resorts in America is now many multiples of what it costs in Europe. Think $250 vs. €50.

North America has become the expensive destination.

According to a recent Economist article titled “the economics of skiing in America,” resorts in Europe are often owned by local or national governments. This is not the case in America, and it’s why the lift tickets in Europe seem, by comparison, cheap. But this price differential is also the result of an evolving business model.

Historically, owning a ski resort has never been a stable business in the US. And this makes sense. Most resorts make their money on lift ticket sales. However, sales are dependent on snowfall. If you get a lot of snow, then you make a lot of money. If the planet starts warming up and you don’t get a lot of snow, then you don’t make a lot of money. Vail has since changed this.

What they have done is made it so punitive to buy a single day lift ticket in North America, that even if you’re an occasional skier, the only sensible thing to do is buy a subscription-like pass in the spring — well before the next season starts.

This is what I have started doing and it gives you unlimited skiing for less than the price of a few days. It also gives Vail a source of revenue that isn’t so dependent snowfall. Season passes now make up about 61% of their lift-ticket revenue, according to The Economist. At the same time, it is a model that relies on being able to price discriminate against single-day, non-pass users:

In basic economic theory, excessive market power reduces the efficiency of an industry. Firms reduce output so as to be able to charge more. There is, however, an exception: if a monopolistic firm can charge different prices to different customers, it need not reduce output to increase its profit. The skiing industry shows the truth of this. As the industry has consolidated, daily prices have soared, extracting more cash from price-insensitive skiers.

But this isn’t the only way to do it. There’s also the whole real estate thing. Last year, Reed Hastings, cofounder of Netflix, became the majority owner of Powder Mountain. And here, they’re trying out a different business model:

This December, Powder Mountain in Utah announced that it would be moving to a model where only local property-owners are allowed to ski certain chairlifts. The idea is to profit from real-estate sales, by offering private skiing without the crowds. “To stay independent and uncrowded, we needed to change,” says Reed Hastings, the firm’s boss.

Even still, neither of these approaches is making snowboarding and skiing more accessible. Which is why it’s not uncommon to come across stickers and t-shirts at local ski shops that say, “Vail — ruining ski towns since 1966.” People are missing the old days when lift tickets were cheap and the lines on powder days weren’t so long.

What skiing needs is in fact much of what the economy more generally needs: supply-side reform, and especially the construction of new housing and transport in the most popular spots. Though there are more skiers than ever, there are in fact fewer resorts than there were a few decades ago.

This sounds familiar.

All quotes are from The Economist.