case study - driving profitability at steamboat ski & resort corp

Ski & Resort CorporationPaths to Growth

Authored by: Neha Randhawa

1

Objectives For Today’s Meeting

ObjectivesExecutive Summary

Situation Analysis Core Issue RecommendationsImplications &

RisksImplementation

• Level set understanding of competitive environment and situation at SSRC

• Determine core issue company is facing

• Review and evaluate recommendations

• Review implications and risks of recommended action plan

• Next steps in implementation plan

2

Executive Summary



RisksImplementation

• Ski destination resort industry increasingly competitive

• SSRC doing well, but losing share of Colorado skier market

• Customers spending fewer of their vacation days skiing on the mountain and repeat visit rate low

• SSRC needs to grow revenue by attracting new customers and retaining current customers

• Two-prong approach: Pricing actions and volume driving actions

• Will lead to higher revenue yield and increase # of skier days

• Add customer value and balance demand

• Implement pricing actions within 3 months, volume driving actions between 4-6 months, review program effectiveness in one year

3

Competition increasing and SSRC’s share of market declining



RisksImplementation

• SSRC had its best year ever (‘92/’93 season)

• Positioned as one of the premier North American ski resorts

• Direct competitors in Colorado area include Vail/Beaver Creek, Aspen/Snowmass, Crested Butte, Telluride, and Ski The Summit

• However, customers spending fewer of their vacation days skiing on the mountain• Customers looking for other wintertime activities (eg. Snowmobiling)

• SSRC’s share of Colorado skier market has steadily declined since 1990

• SSRC’s repeat visit rate was low, even compared to other resorts

4

Core Issue Facing SSRC



RisksImplementation

• How can SSRC continue to grow revenue in an increasingly competitive ski destination resort industry?

5

Grow Revenue

Attract new customers

Retain existing

customers

Recommendations – Two Prong Approach



RisksImplementation 6

1. Pricing

Increase multi-day discount on lift ticket

(4 and more days only)

Seasonal variance lift ticket (peak vs. non-peak)

Repeat customer discount

2. Volume(# of skier days)

Expand SCRS reservation system

Implement commuter service from airport

Market to international skiers (destination)

Legend:

Attracting new customers

Retaining existing customers

Both sets of customers

Optimize Price for Higher Revenue Yield



RisksImplementation

• Current discount level not competitive, does not provide financial incentive to buy

• Provide better customer value and increase multi-day ticket sales

• Incremental revenue to offset margin lost on multi-day discount

7

Pricing

Increase multi-day discount on lift ticket

(4 and more days only)

Seasonal variance lift ticket (peak vs. non-peak)


• Three season pricing: Peak @ $45 (Christmas, New Year’s, March Break), Regular @ $42, Value @ $37 (Nov 26 – Dec 11, April 5-close)

• Bring pricing more in line with direct competitors Vail/Beaver Creek & Aspen/Snowmass

• Balance demand; attract customers in slower periods and increase margins in peak periods

• Repeat visit rate low at 55%

• Incent customers to return by offering additional discount to drive sales and loyalty

• Incremental revenue from additional sales to offset margin lost on discount

Increase # of Skier Days to Lift Revenue




Volume(# of skier days)

Expand SCRS reservation system

Implement commuter service from airport

Market to international skiers (destination)

• 20% of customers used SCRS to reserve in ‘91/’92, trend increasing

• 75% of these customers used toll-free #, with 60k calls receiving busy signal

• Expanding capacity will allow more reservations to be made, increasing sales

• 81% of business from customers in US, outside of Colorado

• Commuter service adds value and easy transport to mountain from Yampa or Steamboat Airport

• Differentiation can help add value in ticket prices compared to other resorts

• International skiers segment growing in US

• Willing to pay premium for premium destination resort

• Incremental revenue from sales to this segment offsets cost to market to this segment

Implications & Risks



RisksImplementation

Implications

• Two-prong approach is balanced and conservative

• Will lead to higher revenue yield and increase # of skier days

• Deliver more value to multi-day skiers and repeat customers

• Maintain position of premier resort, in kind with Vail & Aspen

• Positive impact to local residents as business in area increases

9

Risks

• Little data on customer acquisition or retention costs – need to validate information

• Pricing actions’ impact TBD – could be viewed negatively by customers or not competitive given other resorts’ actions

• Unable to gain market share

• Uncertainty of how KIC (parent company) will respond to recommendations

Implementation Plan




Research & AnalysisConduct analysis on pricing actions

and feasibility, effectiveness

Time Immediately

Implement Pricing ActionsDetermine pricing actions’ details and implement in fee structure

3 months

Expand SCRS reservation systemExpand reservation system toll-free # capacity to be able to take in new reservations

4 months

Implement Volume Driving ActionsIntroduce commuter program and market to international skier segment

6months

Post Implementation ReviewReview and analyse effectiveness of pricing and volume actions

1 year

How to improve profit?

Increase Revenue

Reduce Costs

Fixed Costs

Variable Costs

Volume

Revenue Capture

Increase # of skier

days

Improve Mix

Optimize Price

Create commuter

service from airport

Market to Internat’l

skiers (desination)

No Change

Increase multi-day discount

Seasonal variance

Teen Program


Lift tickets

Accessory Shop

Ski school

Restaurant

Lodging

Other wintertime activities

On-Mountain

Dining

Summer activities

Current products

New products

Expand SCRS reservation

toll-free # to avoid busy

signal

Exhibit: Decision Tree

case study - driving profitability at steamboat ski & resort corp

Data & Analytics