| The Spring Break set — louche and lucrative — was just starting to hit the slopes when COVID shut down the U.S. ski industry. More critically, the country's 9 million or so or so skiers and snowboarders had just begun buying season passes for next winter — all-you-can-ride tickets for chairlifts that might or might not be running when snow starts falling once again. The closing calculus was particularly tense at Alterra Mountain Co., which owns 15 of the largest winter resorts in North America including Mammoth Mountain and Steamboat. CEO Rusty Gregory and CFO Tim Donahue holed up in a war room for three days as the pandemic took hold. On the third day, Donahue tested positive for COVID, Gregory went into quarantine and started winding things down via a massive Zoom call with about 50 resort managers. "It was absolutely the opposite of everything I've experienced in the ski industry," Gregory said, "which is that you do everything you can to stay open at all costs." Around the same time, Vail Resorts Inc. was shuttering its 37 locations as well. "It was certainly the hardest business decision many of us have ever faced," CEO Rob Katz told me last week. There's never a great time for an economy-crushing pandemic, but for the $8 billion U.S. ski industry, coronavirus seemed scheduled for maximum damage. Not only did it kill off the most profitable weeks of the year, but the business is modeled in such a way that the disease quickly infected next winter's prospects as well. In normal times, skiing is a brutal business. Those who run resorts darkly refer to it as "snow farming," a term that captures how helpless they are to volatility in both weather and the economy. But in recent years, savvy ski CEOs like Gregory and Katz did two things to hedge their risks. First, they bought up mountains all over the country, then they started selling season passes. Skiers got unlimited access to a broad swath of terrain for a relatively reduced price. In return, resort companies locked in a chunk of revenue months before it starts snowing. In a snowy year, the buy-in-advance setup means ski resorts sacrifice some profit from powder hounds who would otherwise have paid up to $200 a pop for one-day tickets. In a lean year, however, they collect more than they might have otherwise. It's a simple hedge for both sides and one that has appeared to be a win-win. Skier visits have stabilized and ski resorts are finally making more money with less risk. Last year, Vail got 21 percent of its revenue from season pass sales, about $486 million. "We're big believers that for the long-term health of the ski industry, advance commitment is critical," Katz said. Coronavirus has torn up the contract. In the past few months, Alterra, Vail and other season-pass properties have been scrambling to save next season months before it even starts. First, they had to assuage the scores of pass holders who had their winter cut short; then they had to try to get those same people to pony up once again, even as they are bombarded with headlines about a second-wave of infections. Vail is granting its current season pass holders discounts of up to 80% on passes for the coming season. It dove deep into its visitations data and broke customers into six groups; those who skied the least in the recent winter, will get the largest concessions. The company also did away with a tier of price increases that traditionally ratchet up as the fall approaches. Now, would-be Vail guests will see the same pass price until Labor Day. "We knew we were going to have to do something unique to maintain the loyalty," Katz said. "It's incumbent upon us to make it attractive for them to come back." At the same time, Vail also slashed its capital improvement budget and deferred $121 million of season pass revenue to the 2021 fiscal year. Alterra took similar steps, offering a $200 "renewal discount" for current pass holders. Pass-holders who don't like the looks of the coming Covid winter have the option to defer their pass for the 2021/2022 season anytime between Sept. 10 and Dec. 10. "We wanted to take away this gray mist that's kind of hanging over everything," Gregory said. "And it wasn't just a matter of looking at a product and pricing strategy, it was a matter of trying to figure out the landscape we're all living in and that's very difficult." The shutdown presents an opportunity of sorts. Pass holders who didn't make it to the mountains much in the recent winter weren't likely to buy another all-you-can ski ticket for the coming season. The deep discounts, may nudge them back into the market. In the meantime, resorts are also trying to figure out what Covid-era skiing might look like. How does one socially distance a gondola, lift-line, or lodge? Whither the shot ski? At the moment, Alterra's COVID playbook is 111 pages long and get longer by the week. "It's everything from the right hand sanitizers, to the right stickers on the floor for distancing," Gregory said. The document does not yet call for mandatory masks or visitation limits, but both ideas are on the table. Vail is talking about those things too and carefully watching summer ski traffic in the southern hemisphere. "We're looking at everybody," Katz said, "Disney, theme parks, casino operators, restaurants, retail stores." At the very least, the ski-set should expect to keep their smartphones in a convenient pocket. Contactless payments will be the norm. Apps will track crowds and lines and other chokepoints. Apres beers will be by appointment. Still, on the spectrum of escapist leisure, a snowy mountain feels far safer than a sweaty gym or crowded restaurant. The ski moguls aren't ruling out a spike in participation — if not in the coming winter, then perhaps the subsequent seasons. Vail declined to detail how season pass sales are faring, but Katz says response to the policy changes and discounts has been largely positive. "Right now, it feels like a huge number of guests feel like we did the right thing," he said. At Alterra, Gregory says early pass sales are going "shockingly well," though he declined to give specifics. "It's become clear," he said, "that people are really dreaming about going skiing."  Bloomberg Businessweek, July 6, 2020. Subscribe now. | 
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