| Since a sweeping shutdown in March, ski CEOs have been underpromising. Winter, however, has overdelivered. A massive snowstorm arced through New England earlier this month, and COVID-crazed crowds lined up at resorts all over the region, including many in Vermont where out-of-state skiers are supposed to hole up for at least a week before riding a lift. What would typically have been a dream for the $8 billion U.S. ski industry, threatened to be a nightmare, as resorts rushed to open new terrain, enforce capacity limits and comply with strict state health and quarantine guidelines. Powder fever has never been so fraught. The blizzard crowds were no surprise. On the spectrum of COVID-compatible activities, skiing appears to have landed well clear of restaurants and gyms, at least in the calculus of many. Vail Resorts Inc., which owns 34 American mountains, sold 20 percent more season passes for the current winter than it did a year earlier. "Anecdotally I think there are a lot of people who are thrilled to be outside," Vail CEO Rob Katz said on a conference call Dec. 10. "People who are just looking at this as a great opportunity for them, their family, their friends to be together." Perhaps a little too together, but we'll see. Alterra Mountain Co., which owns 15 resorts and partners with another 29, doesn't disclose data on season passes, but CEO Rusty Gregory said sales through the summer and fall were shocking. "We were on our way to well above expectations last year and demand this year is stronger than that," he told me a few days ago. "It's quite a testament to the optimism of humans, to be honest." In short, skiing is one of the few businesses that is both a pandemic winner and loser. While demand has never been stronger; supply is the problem. Almost all resorts have capped capacity, so the mountains don't get too crowded. Lift lines are spaced and stretched longer than usual by seats ascending empty; groups are no longer allowed to mix and singles ride up alone or in pairs. The legacy of this caution is that getting on a gondola is now remarkably similar to boarding a plane: season pass holders get on the mountain first, those with less prestigious passes -- say via mountain partnerships -- are next in line for a ski slot, that is, if there's still room. At the very back of the queue are the poor schlubbs who just walked up and tried to buy a ticket that day. This week, one of the busiest in the season, a lot of those folks will be turned away -- forced to apres-ski all day, or more accurately avant-ski. For resort executives, the situation could not be more fraught. Faced with a steep loss for the season -- or a wash at best -- they are bending the laws of economics. If they simply jack prices to sync demand to supply, they may never see a crowd of skiers again. They are, to some extent, taking their lumps this winter, to win more business next year. "We've got to do well enough in the short term to get to the long-term, so we've got to be careful," Gregory said. "But we don't want to be trading against the pandemic." Primarily, Alterra and Vail, which together dominate the American ski industry, just want to keep selling season passes. Sliding down a mountain on boards is often unique and glorious, but always expensive and uncomfortable. It works best as a habit, a lifestyle, to borrow a tired phrase. The season pass at a not-astronomical price, a product dreamed up by private-equity honchos and powder hounds gone straight, protects ski companies from volatile conditions both economic and meteorological. It provides a slug of summer cash and essentially locks in a chunk of winter revenue before any snow falls. Of course, if people don't re-up every year, they might never make it back to the slopes. "It's kind of the keys to the kingdom of the resorts we partner with," Gregory explained. "We look at it as much more than a product, it's really a membership." That's why Alterra and Vail drastically loosened pass policies all year, giving their customers more time to decide, delaying price increases and rolling out liberal cancellation and deferral policies. While Vail sold 20% more passes, its pass revenue was flat, because of all the discounts and concessions it dangled. "I would say broadly speaking, we feel really good about where we sit, given again the environment that we're dealing with," Katz told analysts earlier this month. While skiing may be an esoteric business, companies all over the world are crunching a similar calculus. How much short-term profit can we sacrifice for long-term gain? How elastic is the relationship between loyalty and price, or convenience for that matter? Surviving this virus wasteland is the goal, but how exactly a company does that may take a toll later on. The National Ski Areas Association estimates U.S. resorts will lose up to $5 billion to COVID when all is said and done. As infections numbers climb, they face the threat of closures or more extreme quarantine measures. On Saturday, Blue Mountain Resort in Ontario, an Alterra property, switched its lifts off indefinitely to comply with a province mandate. A pile of cash from season passes, however, will likely tide Alterra and Vail over. And as the fallout continues, COVID may help them expand their empires. After all, people clearly want to ski, whether their home mountain is solvent or not. "I'd like to think we can all make it through this, but there may be some that don't," Gregory said. "We certainly want to be ready for that."  Featured in Bloomberg Businessweek, Dec. 28, 2020. Subscribe now. | 
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