Resort Retention and Occam’s Razor; Keeping it simple makes a lot of sense.
William of Occam was a Fourteenth century logician and Franciscan friar born in the English village of Ockham and, yes, somehow I’m going to get this back to snowboarding without claiming that he invented the first one. He’s the author of what’s become known as Occam’s Razor. It states, in its original form, “Entities should not be multiplied unnecessarily.” It’s been massaged and interpreted to mean that when you have multiple possible solutions to a problem, then, all things being equal, the simplest one is usually the correct one.
All things never seem to be equal. Still, I thought about Occam’s Razor at the National Ski Areas Association in New Orleans this spring. Mike Barry, NSAA’s president, was beating the drum for the group’s growth model, and talking about the issue and importance of retention. It shouldn’t come as a surprise to anybody reading this that one of the long term problems of the
winter-sports industry is that only about one of ten people who try snowboarding, or skiing for that matter, stick with it.
As consumers, maybe we can say that’s fine with us—the fewer people on the slopes, the better we like it. Of course, we also like fast lifts, lots of choices, and great amenities. And at a cheap price, too. But those things cost money, and the only way resorts can afford them is if enough people show up to cover the costs and leave at least a little profit.
If the retention rate doesn’t improve, the rate of snowboarding growth declines, and aging baby boomers drop out of skiing, then we could see a decline in snow-sliding participation that’ll leave the winter resort business in a world of hurt. That could leave us all with a lot fewer, more expensive choices. Taking a cue from Mr. Occam, isn’t there a simple way to improve retention?
Complexity
Studies have been done. Models created. Rental programs revised. Snow-sliding lessons revamped. Instructors reeducated. The competition analyzed. Lots of money has been spent. Some of it has been our money. Well, actually maybe most of it has been our money—the winter-sports industry’s that is.
This is, I guess, all good stuff. Certainly the problem’s urgent enough to require and justify some of our attention and treasure. And I even have a sense, though I couldn’t prove it, that we might be making some progress. Buried, or at least obscured, under all this noble activity is something we all know and accept without question. It’s that the upsurge of skiing in the 70s and snowboarding in the early 90s was driven by people who started young, got hooked, and stayed passionate about the sport. Especially in the 70s they
somehow managed to have a good time without a lot of five-star restaurants, quad lifts, on-snow condos and, from our perspective at least, good equipment.
Snowboarders, generally a younger group than skiers, are still a bit like those skiers from the 70s. They just want to be there and are willing to put up with some inconvenience if necessary to get on the mountain. No doubt that tendency will decline with age—there’s something to the phrase “youthful enthusiasm.” But it seems clear that, at its simplest, what we (you, me, and
the resorts, too) have to do is get them young and create a habit. How?
Simplicity
Sometime during my stay in New Orleans, I had occasion to hear Mike Shirley, the Chief Executive Officer of Bogus Basin, talk about his resort and to talk with him. Bogus, I learned later, is a community resort—a 501C4 corporation that doesn’t pay income taxes. There are no investors or stockholders and this, according to Shirley, lets them think long term.
I didn’t know all that in New Orleans. What had caught my attention was Shirley’s mentioning of Bogus Basin’s season pass program where any kid aged seven through eleven can get a season pass for 29 dollars.
Okay, I heard that. Then I waited for more explanation. There wasn’t any. My MBA-scarred mind, accustomed to sophisticated business models and complex financial strategies, froze. Could something this simple really be an affective approach to the problem of retention? And, equally important, how the hell was I going to write a Market Watch analyzing the idea when there wasn’t anything to analyze?
This was weighing heavily on my mind a couple of months after the convention when I finally called Shirley to try and get enough information for the article. He took pity on me and gave me something to work with. It seems that Bogus, like other resorts, used to have a complicated and arcane method of pricing lift tickets and season passes. Then in the spring of 1998, they chucked it all and went with a 198-dollar season pass and the 29-dollar pass for kids seven through eleven.
The idea of a cheap kid’s pass wasn’t new. Colorado was already giving free passes to all fifth graders. Bogus now sells around 30,000 season passes a year of which around 5,000 are the kid passes. Shirley thinks the purchase of the kid passes is often associated with the purchase of other season passes, but there’s no requirement for that.
What’s the short-term financial impact of the 29-dollar kid pass? Shirley sees it as not costing money, but of course you can’t know that unless you know what the actions of the pass purchasers (and their parents) would’ve been if they hadn’t bought the passes. What we can say is that the incremental cost to the resort of putting another butt in a lift seat is more or less nothing. To really evaluate the financial impact, we’d have to be able to answer the following questions:
- If these kids hadn’t bought 29-dollar passes, would they’ve bought the199-dollar pass or a bunch of lift tickets?
- What would their parent’s behavior have been if the 29-dollar passesweren’t available?
- Did they spend more days on the mountain and, as a result, spend more money on things besides lift tickets then they would’ve otherwise?
Shirley can’t offer specific answers to these questions. But he did tell me Bogus Basin is full of kids, and their visit numbers have doubled in the last five years. I don’t have any information on what the resort’s overall
financial performance is. Obviously, if they’d gone from making to losing money over the last five years, the strategy would be less attractive. “It’s so easy to convert these kids,” Shirley says. “We’re creating a lifelong habit without them even thinking about it.”
Return On Investment
Neither Shirley nor I, unless we know the answer to the three questions above, can tell what Bogus’ cost is for this program. From a cash point of view, it’s probably close to nothing, though there may be an opportunity cost as described above. Conceivably, it’s cash positive, but we can’t really tell. I’d go one step further and point out that by simplifying its pricing structure, Bogus has actually cut some administrative expenses, and that savings has to be included in any cost calculation. I don’t know if Shirley has measured that or not.
Looking down the road, the return on investment has to be huge if only because the cost is apparently so small. We can’t conclude that Bogus has doubled its visits in five years only because of this program, but it’s hard not to believe it’s worth the cost, if there is any cost. The NSAA study emphasized how valuable, in terms of dollars spent, a snow slider who started young was compared to one who started as an adult. Bogus’ 29-dollar kid pass is consistent with that thinking.
There’s another value to creating committed snow sliders early that I don’t think I’ve ever heard anybody talk about. If resorts have customers who are going to get there no matter what, come more often, and stay longer, they are going to be cheaper to get. And easier to keep. That has a favorable impact on your cost structure from top to bottom. Think of the competitive implications. Suddenly, you’re only competing with other winter resorts—not with Disneyland, cruise lines, and Arizona golf packages. Your committed snow slider has already decided they are coming to a winter resort.
I’m not prepared to proclaim such programs as the retention solution. But it’s simple, apparently cost effective, and consistent with what we all think creates committed snow sliders. I hope more resorts consider it, or other equally simple ideas.
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