Roger Marolt: Roger This |

Roger Marolt: Roger This

Roger Marolt
The Aspen Times
Aspen, CO Colorado

Breaking news: People in Colorado don’t ski … at least not very much.

Want proof? Here goes: The population of Colorado in 2008 was about 5 million people. Meanwhile, the total number of skier days for the 2008-09 Colorado ski season was about 11.9 million. But, according to Center for Business and Economic Forecasting Inc., only about 17 percent of these skier days were generated by residents of our state. That means Coloradans accounted for only about 2 million skier days last year. This means that Coloradans averaged about 2.6 hours of skiing last winter (or about four gondola laps and hot chocolate break).

And fish don’t drink water; so what? That just means less-crowded slopes for the rest of us, right? Well, yes, at least as long as they can keep the lifts running in a dying industry. More importantly, Colorado ski resorts may have missed an incredible opportunity over the past decade to remain viable.

Look at what has happened in the past 10 years within driving distance of the best ski mountains in the world: The population has increased by nearly 17 percent, and its per capita income has shot up by almost 33 percent. Great news for the home-state ski areas, right? So why over the same period have Colorado skier numbers grown at a measly annual 0.85 percent?

Could it be that the ski industry ignored the demographic boom in its own front and back yards? The answer is very probably “yes,” and the reason should be less shocking than the fact that people in Ski Country USA don’t ski: The ski industry lost sight of how their bread was buttered and went for caviar on crackers instead.

Who could blame them? Between 1967 and 1998 the median income in the United States increased 27 percent. But, during the same time the incomes for the top 10 percent of the population increased at a clip nearly 250 percent greater than that, and the local ski industry chose to fish in this exclusive pool for revenues. Skiing became less about snowfall and terrain than it did about squeezing premium pricing out of this flush demographic. Ski mountain operations morphed into a slope-side amenity to sell high-margin real estate, which in turn subsidized luxurious on-mountain improvements that were touted to sell even more real estate, etc, etc.

But, a funny thing happened when the century turned that the ski industry seems to have missed: Between 1998 and 2008 median incomes for all people in this country grew 0 percent in real terms – even for the top 10 percent of income earners! That’s 10 years of big fat nothing gained in the pocketbooks of this nation’s skiers. Yet, lift ticket prices skyrocketed. To wit: In 1999 a day of skiing in Aspen could be had for $60. Today it’s $96. While skier incomes were stagnating, the cost of a lift ticket here rose 53 percent. Tell me how this trend was going to pencil out over the long haul.

So, to get things back on track, we simply abandon the outdated model of luxury resort operations and lure all of our Colorado neighbors who don’t ski to the slopes by offering them lower prices, right? Well, not so fast. While I do believe that there is opportunity in this thinking, the fact is that the infrastructure of our resort towns can’t very well handle a seismic shift such as this. As currently financed, our resorts will crumble under a discounted price scheme.

Very simply put, our mountain resorts have been built at such extravagant costs that middle-class pricing can’t support them. Over the past decade Colorado ski towns “reinvented” themselves at the peak of a great real estate boom. Chalk that up to really bad timing and temporary insanity. Resort infrastructures (e.g. shops, restaurants, hotels, condos, timeshares, and even municipal town governments) were developed assuming full occupancy, maximum pricing, and at capitalization rates that inexplicably mimicked long-term U.S. Treasury issues. In order for this scenario to pan out gold, extraordinarily high growth rates had to be imputed over a very long time frame. This is just a fancy way to say it was all a dream.

Plan “B,” unfortunately, involves one hell of a quandary. Flat skier numbers, flat personal income growth, and a flat real estate market mean everything, ahem, is now headed downhill in the ski industry. Lowering prices across the board to rekindle growth would mean that many resort developments won’t make enough to service their gargantuan debts. It would mean a drop in sales taxes collected by local governments. It would suggest lower salaries and wages for workers already struggling with the high costs of resort living. It could even mean further declines in residential real estate values. Oh, crap!

On the other hand, maintaining the status quo of luxury pricing doesn’t bode much better. In fact, we are already seeing the beginning of what is occurring under this hold ’em, bluff ’em, and raise the ante strategy (e.g. failures-in-progress such as Snowmass Base Village, The Limelight Lodge, The Mother Lode, The Chart House, Stage Three, The Boomerang, The Viceroy, The Residences at Little Nell, etc., etc.).

So, what do we do? Do we stand pat until the global economy and real estate market inflate back to their Hey Day levels and then resume business as usual until the next crash? Or, do we lower prices across the board knowing that our towns will implode under the weight of their own infrastructure costs?

There isn’t an easy answer here, although changes in demographics and economic trends would suggest that lowering prices and preparing for pain is probably the best answer. At least under this scenario we can see a new equilibrium being supported … eventually. What we don’t know, however, is whether we can count on our fellow Coloradans to support us on the slopes. Skiing is not what they do.

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