Industry News
Brains
Successfully operating a ski resort is not an easy task. Many variables must be accounted for, some of which are uncontrollable, like the weather. Managing these variables and costs is key to ensuring the resorts continue to stay in business. All ski resorts have similar operating expenses, but depending on their location and size, providing a specific dollar amount for each operating cost can be difficult.
If you think it costs a lot of money to go skiing, running a ski resort costs millions. There are general costs associated with operating a ski resort, which can cost hundreds of millions of dollars depending on the size of the resort. However, if resort leadership can properly manage the profit and loss statement, they can still profit from running a ski resort.
The 10 general costs that ski resorts have to manage are:
- Infrastructure and maintenance
- Labor costs
- Energy and utilities
- Insurance
- Marketing and advertising
- Employee housing
- Food and beverage
- Capital investments and upgrades
- Climate and weather
- Environmental and regulatory costs.
Infrastructure and maintenance consists of three components: lifts and gondolas, snowmaking equipment, trail maintenance, and grooming. High-speed lifts with heated seats and a bubble are in high demand. Those cost a lot of money, especially for smaller independent resorts, and gondolas cost even more. A new chairlift can cost anywhere from $2 million to $10 million (or more), depending on the type and length of the lift. Gondolas cost even more and can range from $10 million to $30 for a mid-sized system. Maintenance and operational costs for lifts cost an average between $200,000 to $1 million annually, depending on their complexity and how many lifts the resort operates.
Snowmaking equipment is a necessity for many ski resorts to operate. The capital cost for snowmaking equipment can range from $500,000 to $5 million, depending on how much snow coverage a mountain needs to operate safely. Maintaining snowmaking equipment can add $100,000 to $1 million per season as the equipment requires electricity, water, and labor to run successfully.
Trail maintenance and grooming are key to most resorts where skiers are not going off-piste. Most skiers out West are used to skiing in fresh powder, while generally speaking, resorts in the East are more geared towards skiers who are used to hitting hard-packed groomers. Snowcats and groomers are big pieces of equipment that cost money. Resorts can find used snowcats for $100,000-$150,000. Buying a new snowcat can easily cost between $250,000 and $500,000. There are also the costs of running and operating the snowcats and groomers, which can range from $500,000 to $1.5 million for larger resorts with more skiable terrain.
The costs of labor at a ski resort can add up very quickly. Specific staff and teams directly affect mountain operations, such as ski patrol, ski instructors, and lift operators. Ski patrol wages can range from $15 to $30 per hour, depending on the individual’s experience and the resort’s policies. Ski instructors can earn $30,000 to $60,000 a season, depending if they are full-time or part-time staff. Seasonal and part-time staff wages can range from $12 to $25 an hour. Larger resorts may have hundreds of ski patrol and ski instructors on their payroll, which can easily reach $2 million per season. Entry-level lift operators and ticket checkers can earn $12 to $20 an hour. A mid-sized resort’s labor costs can easily range from $2 million to $5 million per season.
The energy and utilities to run and operate a ski resort also add up quickly. Buildings, lifts, and snowmaking equipment require electricity. A ski resort can spend anywhere from $500,000 to $3 million annually on electricity. Water is a vital resource for ski resorts when operating snowmaking equipment. Depending on how much snowmaking equipment and how much snowmaking is needed at a resort, the costs to run the equipment can range from $100,000 to over $1 million per season.
It does not matter what business you are in; every business has to have insurance, and the ski industry is no different. Insurance premiums range in price depending on the size of the resort and the risk profile. Insurance covers ski resorts in general liability, accidents, and property damage, often costing anywhere from $500,000 to $3 million.
Every business needs to market and advertise itself to attract customers. Marketing budgets for ski resorts range from $500,000 to $5 million per year, depending on the size of the resort and the desired market reach of the resort. Destination ski resorts tend to spend more on advertising to attract tourists from overseas and broader regions.
Employee housing has become a necessity for a ski resort if it wishes to have the personnel to run and operate the mountain. The cost of housing near and around resorts is too expensive for most employees who may be part-time or seasonal to afford. Providing housing for seasonal staff can range from $50,000 to $500,000 a year, depending on the quality of the accommodations and also the number of employees a resort is providing housing for.
Running a restaurant is one of the toughest businesses to run. Managing food costs, staff, perishable goods, and dealing with customers is not easy. Ski resorts need some place(s) for their guests to grab some food and, therefore, need a food and beverage department to run it. Depending on the size of the resort, there can be multiple dining options on the mountain for guests to eat at. Smaller resorts may spend $500,000 to $1 million on food-related operations. Larger resorts with more upscale restaurants may have an operating cost between $5 million to $10 million annually.
The weather is something that no one can control, and the ski industry relies on Mother Nature to provide cold temperatures and snow to operate. If the temperatures are too warm and not enough snowfall, ski resorts can lose millions of dollars in revenue. Low snowfall seasons or shortened seasons can reduce a resort’s overall revenue by 20% to 50% or more.
Each season, ski resorts must analyze and assess what they need to do regarding capital investments and upgrades at their mountain. Many skiers are looking for better and faster lifts, new lodges with more amenities, and more terrain options. Those costs can range from $1 million to $10 million or more, depending on the type of upgrades the resort is doing.
The last category is environmental and regulatory costs that ski resorts must manage. These include compliance with environmental regulations, waste management, and sustainability projects. Depending on the resort’s initiatives, these can range from $50,000 to over $1 million.
The overall cost breakdown for a mid-to-large size ski resort’s (2,000 to 4,000 acres of terrain), total operating expenses can range from $15 million to $50 million annually. Smaller, local resorts will operate on a much smaller scale, with annual costs perhaps ranging from $5 million to $15 million. Despite these significant costs, ski resorts can generate significant revenue through lift ticket sales, rentals, food and beverage sales, and lodging. Larger resorts can make anywhere from $10 million to $100 million annually, depending on visitor numbers, pricing, and additional services such as events, food and beverage, ski lessons, and spa services. This is a rough estimate, and actual costs can differ depending on many factors, but it gives a good sense of the scale of operating a ski resort. It ain’t cheap!
