No Business Like Snow Business
In the past three decades, the number of U.S. downhill ski resorts has fallen from nearly 750 to around 470. That doesn’t mean there are fewer skiers. But it does mean that running a winter tourism business, even in frosty Minnesota, is more complicated than simply praying for snow.
That said, Lutsen Mountains, a North Shore ski resort that’s the largest of Minnesota’s 15 downhill destinations, had its prayers answered this past December after two winters that were downers. “It’s exactly the opposite this season—it’s been winter since December started,” says Charles Skinner, who owns Lutsen Mountains, Minnesota’s largest ski resort. Indeed, as of mid-December, “we received, I think, about 4 feet of snow already.”
Lutsen Mountains is in Cook County on the North Shore, a county that is a microcosm of Minnesota’s winter tourism business. That’s in large part because outside of some logging and wood products manufacturing, tourism is Cook County’s economic driver. According to the most recent state statistics, 876 people out of the county’s population of about 5,200 work in tourism and hospitality. And Lutsen Mountains’ business makes up about 70 percent of the county’s winter tourism trade.
In Minnesota, tourism and travel accounts for about 17 percent of the state’s sales tax revenues, and about one-fourth of traveler expenditures are made December through March. In Cook County, about 30 percent of tourist spending occurs in winter.
Skinner notes that his business isn’t simply competing for skiers’ dollars. “We’re a vacation destination,” he says. “We compete on all vacations people may want to take in the winter.” That includes warm-weather locales, but also ski destinations in the western United States, such as Vail and Aspen in Colorado, and Sun Valley, Idaho. Skinner thinks that Lutsen Mountains “matches up pretty well” with its Rocky Mountain competition, with good runs and attractive scenery—not to mention lower-cost ski packages.
Though fewer resorts can mean more skiers for the surviving businesses, there also has been consolidation in the industry. Market research firm IbisWorld notes in a December 2012 report that four companies own more than half of the ski resorts in the United States, mostly in the West, Northeast and Michigan.
Consolidation reached Minnesota in 2012, when Colorado-based Vail Resorts, the biggest of the big guys, purchased Afton Alps, the major downhill resort closest to the Twin Cities.
Most of the resorts that have closed were small, family-run businesses that couldn’t afford to continually improve their operations. While the number of skiing enthusiasts has held steady, the smaller resorts “couldn’t compete with the bigger guys in terms of costs,” says David Yang, ski and snowboarding industry analyst at IbisWorld.
“A ski resort is a capital-intensive business,” Skinner notes. Lutsen Mountains has had access to capital, and it’s using it. Over the past decade, it has spent about $20 million in improvements. The upgrade that Skinner talks about the most involves the new high-speed lifts that can accommodate six. Faster, more capacious lifts mean more skiing, and thus more value for skiers.
And snowboarders should not be forgotten. Snowboarding amounts to about a quarter of downhill resorts’ business. The data suggest that the boarding business has plateaued, which Skinner has observed at Lutsen Mountains. Downhill skiing, meanwhile, has taken on some of the virtues of snowboarding—newer ski designs provide some of the control and action of the other sport. That means, Skinner says, that alpine skiing is actually “easier than it was 20 or 30 years ago.”
According to IbisWorld’s Yang, the bigger guys in the ski industry “can offer one pass that can let skiers visit various locations throughout the year. That’s one way they compete.” Lutsen Mountains also has introduced something similar with collaborative pass deals with Welch Mountain and Wild Mountain, two other independent downhill resorts in Minnesota.
Lutsen Mountains competes not only on its own merits. Skinner also notes the other amenities in Cook County—the restaurants, the art galleries—that can attract alpine ski visitors.
As part of its upgrading, Lutsen Mountains now has new snow equipment that draws water directly from Lake Superior, rather than from the trout stream that had long been its snowmaking source. Lutsen Mountains paid only a portion of the water system’s $4.8 million price tag. The town of Lutsen and other parts of Cook County also draw from the new system, so because it provides a public benefit, state bonding covered about three-quarters of the new supply system.
Another Northland ski resort, Spirit Mountain in Duluth, also is seeking to upgrade its facilities. It’s hoping that state officials will approve $3.4 million in bonding money, which would allow the business to update its snowmaking capabilities. A new pipeline from St. Louis Bay would not only benefit Spirit Mountain. It also could boost the water capacity in the western part of Duluth. Communities and ski resorts have intertwined interests, in more ways than one.
At Lutsen Mountains, Skinner is hoping that its shiny new snowmaking machinery isn’t much needed. The last few winters haven’t been all that great, however. Last year was a “medium” year for Skinner’s business, but the previous season was challenging, to say the least: March 2012 came in with a string of 80-degree days. “March is [usually] one of our biggest months,” Skinner notes.
A few old-school Minnesota winters would be good for Lutsen Mountains—and the Northland economy.
Source: Explore Minnesota