Dave Byrd has spent the past two weeks dispelling the notion that ski areas won’t feel the pain of the coronavirus shutdown because they pulled the plug so late in the season.
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“This is roiling everyone,” said the director of regulatory affairs for the National Ski Areas Association, which last week estimated the country’s 460 ski areas in 37 states could suffer $2 billion in losses stemming from the shutdown. “Ski areas did not dodge a bullet here.”
Byrd is corralling lawmakers in the Congressional Ski and Snowboard Caucus to amplify the resort industry’s voice. Just because the sudden shutdown of the ski season came late in the season does not mean the industry will emerge from the pandemic unscathed.
The list of losses is long. And the industry is lined up hoping for federal assistance.
“We are working those levers in Congress. We don’t know what the actual shape of any relief might be but we are looking for economic assistance and we are willing to offer up some pretty big conditions on any aid we get,” Byrd said. He outlined an assurance that any aid directed toward the ski industry would go only for payroll and capital expenditure projects that largely employ local workers in ski communities.
March ranks as not just among the snowiest months of the year, but it accounts for about 20% of visitation and is the second highest month for revenue for ski areas, behind December. In Colorado, March 14 is the busiest day of the season for arrivals of visitors, almost all of them coming from out-of-state for spring break vacations.
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That was the date Colorado Gov. Jared Polis ordered all Colorado ski resorts to close, forcing thousands of vacationers to return home. Within days resort hotels were closing and mountain communities were requiring all visitors to leave as local health departments scrambled to slow the spread of COVID-19.
The losses stretch beyond the immediate impact of the sudden shutdown.
- Many ski areas had fully stocked coolers at thousands of restaurants when they abruptly closed in the middle of March. Vail Resorts last week said they had distributed 50,000 pounds of food to food banks, schools and community groups in their resort communities in six states and Canada.
- Beyond the lost retail, lessons, dining and lift ticket revenue, the industry typically launches next season’s season pass sales in March and many in the industry fear the pandemic could weaken demand.
- Many resorts canceled lucrative events and weddings scheduled for spring. Jay Peak in Vermont, for example, has canceled and is rescheduling 70 weddings.
- Resorts are shouldering increased costs when revenue is nil. Aspen Skiing Co. for example, has waived employee housing rent through April and may extend that through June.
- Some ski areas are on the hook for subsidies to airlines that support flights into rural airports.
- While many resorts have business interruption insurance, none of those policies cover a pandemic. “Most resorts have business interruption insurance … and it typically requires some kind of physical damage,” Byrd said. “But every policy has a pandemic exclusion. We have been paying these premiums for years and all the sudden no one can put a claim in. I think that’s true for most of the hospitality industry.”
- The impacts to summer operations are a concern as the pandemic stretches into spring. Nationally, summer activities account for 14% of ski resort annual revenues.
Vail Resorts projects the skidding halt to its season will cost the ski area operator $180 million to $200 million.
Even before the sweep of the new coronavirus forced Vail Resorts on March 14 to shutter its 32 North American ski areas, the company was weathering a difficult season. Declines in visitation and spending at its Pacific Northwest and California ski areas through February left the company projecting total resort earnings before interest, taxes, depreciation and amortization, or EBITDA, to fall on the bottom end of the guidance it offered at the beginning of the season, which was $778 million to $818 million.
As the impacts of COVID-19 grew, the company told investors on March 9 it was withdrawing that guidance. A week ago the company told investors the closure of operations would cost as much as $200 million, which would push the fiscal year’s resort EBITDA to $578 million, down from $707 million for 2018-19. The last time Vail Resorts’ earnings from its resort operations declined was in 2009, when the recession triggered a 25% decline.
The last time the company’s resort earnings were below $600 million was in 2016-17.
So far Congress has rolled out three waves of help. The first came on March 5 when lawmakers approved $8.3 billion to help fight the spread of COVID-19. The second phase came on March 14 in funding for added sick leave and family leave, tax credits for employers and more money for testing. The third wave, signed Friday by President Trump, directed $2 trillion to hospitals, extended unemployment, checks for individuals and $500 billion for loans to businesses, including a bailout for airlines.
As the next wave of relief is scripted, the ski resort industry has its hand in the air. Ski areas are hoping to secure funding to float them through the coming economic crisis. Skiing stirs a $55 billion impact in the U.S., and just about all of that trickles through remote and rural communities. Byrd said at least half of the country’s areas are small businesses. The Small Business Administration defines a ski area as a small business if it grosses less than $30 million in total revenue or has a certain number of employees.
“We are trying to remind Congress that we are an incredibly important part of the tourism industry and rural economies,” Byrd said. “For every one skier visit, $17 is reinvested in the local community. I’ve been saying this so often this week: ‘When the ski industry sneezes, rural economies catch a bad cold.’”
Byrd’s team at NSAA estimates the ski industry’s loss at around $2 billion, which amounts to roughly 30% of the season. They have the numbers to back it up. For 50 years NSAA has compiled annual economic reports for the ski industry, tracking both revenue and income as well as capital spending.
“I think we are going to lose half of our capital investment,” Byrd said. “And that’s a conservative estimate.”
Telluride ski area, for example, was planning to spend $8 million to $9 million on capital improvements this year for the 2020-21 ski season but has whittled that down to $3 million to $4 million. If the shutdown lasts longer than July and creeps closer to September, Telluride’s capital investment may drop below $3 million, resort chief and co-owner Bill Jensen said.
Bob Nicolls, the owner of Monarch ski area, also plans to slash capital spending for next season by half, but he is keeping his full-time staff on the payroll.
For Vail Resorts, the collapse of the 2019-20 season means the company is reconsidering its plans to invest $150 million to $160 million across its resorts this year, according to its latest note to investors.
Colorado’s U.S. Sen. Cory Gardner, a Republican, last week sent a letter to Sonny Perdue, the Secretary of the U.S. Department of Agriculture, asking him to waive fees paid by ski areas operating on federal land. Colorado’s 23 resorts operating on public land sent $26.8 million in revenue-based rent to the U.S. Treasury for the 2017-18 season. Nationally, ski areas on federal land pay more than $50 million a year in rent to the U.S. Treasury. Gardner spoke with Perdue on Friday.
“I believe there is a payment coming up that he has some discretion over. I don’t think he can forgive (payments). I don’t even know if he can say ‘next year we won’t collect them.’ I think he can delay a collection point and then give us time to work on the statutory side,” Gardner said on Thursday.
Gardner says he will be working on legislation to help resorts either secure delayed or eliminated payments for the next ski season.
The mountain lodging community is still weighing the impact of the shutdown as ski area hotels refund millions in reservations. Tom Foley, the head of Inntopia’s business operations and analytics, said mountain lodges are seeing many guests shifting their reservations to rebooking for later this summer or next ski season.
“We are blessed with a very dedicated consumer base who identify as skiers and mountains are a big part of their lifestyle,” Foley said. “They were instrumental in pulling the resort industry out of the 08-09 recession and they will be just as instrumental in pulling us out of this downturn.”
But it’s harder to say when that rebound might come. This pandemic has travel fears and unprecedented restrictions delivering an economic punch that has yet to be detailed. With the economic recession a decade ago, the slow and steady decline was obvious months ahead. This economic impact was sudden, with an unexpected collapse.
“There are factors at play here that we have never dealt with,” Foley said. “We have had a system shock and it’s harder to predict what recovery might look like.”
Foley does see a sliver of an economic silver lining, though.
“Which might, ironically enough, lie in the fact that the industry is shut down,” he said.
During the recession, lodges painfully slashed rates as they struggled to lure visitors. Lodges spent almost two years cutting room rates to keep visitors coming. It took more than five-and-a-half years for mountain lodges to slowly return to room rates that peaked in 2007, Foley said.
“Lodges and resorts now have a chance to make a strategy and plan for rates and bookings,” Foley said. “It’s possible that parts of that slow rebuild can be avoided because we have an opportunity to ponder a strategy.”
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