Market Watch: News from the North

Last April, I headed to Mont Tremblant for the Canadian Ski Council’s annual symposium on the state of the Canadian resort industry. Naturally, my naive anticipation of great snowboarding had nothing to do with my decision to go. Groomed hardpack with mud and rocks sticking through on narrow runs wasn’t what I’d expected. Thanks El Niño.

At least the conditions motivated me to go to most of the seminars. One of the presentations that really jumped out at me was by Richard Basford of Integrated Marketing Strategies, who conducted the annual skier/snowboarder survey for the Canadian Ski Council.

First, Basford said that about twenty percent of the Canadian resorts’ winter visitors were snowboarders. No big surprise there. Then he announced that out of 4,293 responses, only seven percent of the Alpine skiers considered themselves beginners (three times skiing or less) and nine percent considered themselves novices. That’s a total of sixteen percent of the Alpine ski population who are just starting to ski.

Now, the numbers for snowboarding were, respectively, 36 percent and seventeen percent, for a total of 53 percent who are starting to snowboard.

Only fifteen percent of skiers have been skiing for two years or less. The number is 69 percent for snowboarders!

Go back and read that again, please. It’s okay, I can wait.

By the way, I’m pretty certain that a similar situation exists in the United States. Jim Spring of Leisure Trends presented some numbers at the SIA show in Las Vegas this year that supports that conclusion.

None of the Canadian resort managers and owners seemed the least bit perturbed at this startling fact. They all sat there calmly. Nobody asked a question, fainted, yelled “Oh dear!” or said anything at all. I wondered if they were all hopelessly hung over from the previous evening’s “business” meetings. Some of them were definitely moving, so they weren’t all dead.

If you put a frog in cold water and slowly raise the temperature he’ll just calmly boil to death rather than jump out of the water. Unfortunately, that same type of denial during a period of change is also commonplace in the wintersports industry.

For me, that stark, black and white survey was kind of an epiphany. If the number of people starting to ski is relatively low, the drop-out rate among beginners is high, and the number of existing skiers is declining due to aging, how many skiers will there be in ten years? In twenty?

However, the percentage of snowboarders new to the sport is high, and I’ll bet that the drop-out rate is lower than skiing. I’m confident we aren’t starting to retire from snowboarding because of old age.

But for every twenty snowboarders, there are still 80 skiers. It’s not clear whether the resort industry can solely rely on the growth of snowboarding to make up for the decline in skiing-assuming current trends continue.

Somewhere in the bowels of some ski manufacturer or resort group, I’ll bet these trends have been thoroughly quantified and analyzed in a formal and systematic way. That’s why there’s a proposal for the resorts and manufacturers to fund a three-year, 57-million-dollar promotional campaign. That’s why summer activities, tubing, and mini skis are being embraced and promoted. That’s why individual resorts are upgrading facilities and creating more terrain even as their overall financial condition is worsening.

What are the implications of this declining Alpine ski market for the snowboard industry?

First, while much of the expected consolidation-measured by the current number of brands-may be behind us, competitive conditions are still very difficult. The brands may be gone, but most of the production capacity-with its need to keep producing something-still exists.

If ski companies can’t make money selling skis (one projection is that pre-season ski orders for the ’98/99 season are down ten percent or more), they’re going to continue to flock to the growing sport of snowboarding.

The evolution of the snowboard industry from its entrepreneurial roots as a distinct sport to becoming a part of the wintersports industry is already being confirmed by the market segmentation that is occurring.

There’s no longer a bias against snowboards made by ski companies and almost all independent snowboard companies are fighting an uphill battle toward profitability. More and more boards are being sold by large companies that view snowboarding as just another cog in the product line.

This industry evolution is consistent with most business theories that suggest you must either compete on price as a volume producer, or by defining a market niche that will allow you to sustain your competitive position even though you’re more expensive.

But the explosion of quality product at lower and lower prices has made it tough to be a traditional niche player. If everybody’s product quality and pricing is basically comparable, marketing becomes the primary way to differentiate your brand. But to do that, you have to have more marketing dollars than your competitors.

The second implication for the snowboard industry is that what happens at resorts and what resort managers choose to do makes a big impact to the bottom line of snowboard brands. We’re past the point where just letting snowboarders on the lift was all they needed to do for us.

Resort shops are charging manufacturers for space and displays like grocery stores charge for shelf space. Exclusive deals are being made to supply resort rental fleets-witness Rossignol and Intrawest. Joint promotional efforts are becoming more commonplace. It seems as if “resort marketing” should be a standard category in every snowboard company budget.

Some additional statistics from the Canadian Ski Council survey support that point of view.

Sixty percent of resort visitors won’t be staying over night. Half expect to board/ski for only one day on a given trip. Seventy-six percent of visitors live two or less hours from the mountains they visited.

I think this says something about the location of the shops snowboard companies should focus on. Maybe there are products that can be developed just for the day boarder. Maybe we should be providing benches and lockers-or at least having banners-in the day lodges.

Snowboard companies should be interested in building relationships with local resorts where information is shared to the benefit of both of the company and the resort. Use the resort’s perspective and information on their visitor composition to help differentiate your brand.

We’ve all talked about when the consolidation will end. If it’s measured by stabilization in the number of snowboard brands, the consolidation will be over by next year. However, the end of the brand consolidation doesn’t mean a return to a more rational competitive environment.

The snowboard industry is not the distinct industry it use to be. It’s part of the wintersports industry and subject more than ever to the trials and tribulations of the ski companies and resorts.

Maybe the snowboard consolidation is coming to an end. But the wintersports business, which we are now a part of whether we like it or not, is having a hard time. Their pain is our pain. What the numbers tell me is that the growth of snowboarding may not be able to make up for the decline in skiing. I hope the drowning swimmer doesn’t drag the lifeguard down with him.

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Jeff Harbaugh works with action-sports companies in transition. Reach him at: (206) 232-3138.