170-Impressive Results from a Change in Pricing Strategy

About a year ago, we wrote a blog about the leading ski resort in Northern California, Squaw Valley, emerging from a Leader’s Trap (see Blog here). We predicted at the time that Squaw Valley would gain market share quickly as a result of its change in pricing strategy. The preliminary results from this change in strategy are in. They are impressive.

First, some background. For several years, a large well-run ski resort, Northstar, offered very attractively priced season passes. The other ski resorts largely ignored Northstar’s pricng, so that ski resort gained market share with its low-priced season passes. (See “Audio Tip #141: The Power of Price in Non-Hostile and Hostile Markets” on StrategyStreet.com.) Last year, Squaw Valley, the largest and most varied ski resort in North Lake Tahoe, reduced its season pass prices drastically from something like $1449 to either $369 or $469, depending on black-out dates. (See “Audio Tip #102: When is Price Likely to go Down?” on StrategyStreet.com.) This change in pricing reduced Northstar’s season pass price advantage over Squaw Valley’s season pass from 75% to about 11%. (See “Audio Tip #107: Peers and Their Pricing”.)

With something less than half the season completed, virtually all the resorts in North Lake Tahoe have seen an increase in skier visits. The economy has recovered somewhat and the snow has fallen in abundance for the first time in the last four years. Here are the changes in individual resort skier visits for a few of the larger resorts in North Lake Tahoe:

• Northstar +10%
• Alpine Meadows/Homewood +20%
• Sugar Bowl +21%
• Squaw Valley +46%

By any measure, Squaw Valley’s change in pricing has brought it a massive increase in market share. Of course, the growth in revenue is considerably below the growth in skier visits due to price discounting. However, each of those additional skiers also is likely to be a customer for (undiscounted) food, beverages, equipment and other purchases at the resort.

My guess is that the Squaw Valley resort joins the rest of the local businesses in North Lake Tahoe in being delighted at the results of Squaw Valley’s change in pricing strategy.

Posted 2/18/10

Update:

The last 10 years have seen the emergence of ski area collectives into major season pass groupings. Five of the better-known of these season pass collectives are: Ikon,  Epic, Mountain Collective, Indy and Snowpass.   These collectives function like quasi acquisitions in the ski industry.  They create extremely large industry competitors.  These collectives set their pricing so that any regular skier can break even on a season pass purchase in about five days of skiing.  They have captured virtually all the Core and Near Core skiers in the industry. They enhance the drawing power of the major ski resorts and put smaller resorts at a significant cost disadvantage. See HERE and HERE for more explanation.

9/22

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