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Review of Ski Resort Operating Costs and Market Analysis Dissemination Public / Internal / Confidential Version, Date V3

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Review of Ski Resort Operating Costs and Market Analysis Dissemination Public / Internal / Confidential Version, Date V3 PROSNOW Provision of a prediction system allowing for management and optimization of snow in Alpine ski resorts Document description WPs 2 Type Report Title Review of ski resort operating costs and market analysis Dissemination Public / Internal / Confidential Version, Date V3 Author(s) J. Cognard, H. François Reviewer(s) S. Bruyères, J. Köberl, S. Morin Related files Members attending or participating PROSNOW This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No730203 ................................................................................................................................................................................... 1 ABSTRACT ......................................................................................................................................................................... 3 INTRODUCTION ................................................................................................................................................................... 4 1. CONTEXT ................................................................................................................................................................. 7 1.1. Ski resort management practices between countries ................................................................................. 7 1.2. Investment dynamics .................................................................................................................................. 8 2. OPERATING COSTS IN SKI RESORTS............................................................................................................................... 11 2.1. Available operating costs information ...................................................................................................... 11 2.2. Turnover and operating costs ................................................................................................................... 13 2.3. Expenses by service ................................................................................................................................... 13 3. SEASONAL DISTRIBUTION OF SKI RESORTS OPERATIONS. ................................................................................................... 18 3.1. Snowmaking processes during the season ................................................................................................ 19 3.2. Criticality of snowmaking use under current climate conditions .............................................................. 21 3.3. Availability of water resource under current climate decisions ................................................................ 22 3.4 Relevance of energy consumption under future climate conditions .............................................................. 23 4. RELEVANCE OF PROSNOW TO OPTIMIZE OPERATING COSTS ........................................................................................... 23 CONCLUSION.................................................................................................................................................................... 25 BIBLIOGRAPHY .................................................................................................................................................................. 26 ANNEXES ......................................................................................................................................................................... 30 Annex 1: Online survey ............................................................................................................................................ 31 Annex 2: examples of operating costs reduction by Snowsat - Kässbohrer and Leica - Prinoth ............................. 40 Objective of the document This document is the deliverable 2.1. It aims to characterize operating costs of a ski resort so as to assess whether or not optimized snow management (through PROSNOW) could make a difference to ski resort operators. PROSNOWReview of ski resorts operating costs and market analysis 2 Abstract Our present study aims to understand what operating costs are in ski resorts and how they are shared between operations and / or services. Operating costs are a sensitive issue for any industry because they reveal operation choices, strengths and weaknesses within the common production framework of any given technology. Concerning ski resorts, this is even more the case since they also reveal structural choices related to the main features: elevation, steepness of the ski area, ski- lift organization, snow reliability, natural resources availability, etc. Literature does not provide much information about operating costs in ski resorts. This report gathers original information about operating costs based mainly on interviews within the PROSNOW consortium and an online survey set up for pilot ski resorts - partners of PROSNOW. With data available from various organizations in France and Austria, we highlighted the existing decreasing trend between 2002 and 2018 in snowmaking investments, even if some increases occur after a winter of natural snow scarcity. We provide an order of magnitude concerning operating costs (staff, maintenance, energy,…) within different services (ski lifts, grooming, snowmaking). We pointed out the differences in the distribution of turnover during the different periods during the season which reveal great heterogeneity. We also present an average daily share of turnover realized for each period of the season which provides an order of magnitude: a closing day during the winter holidays is almost four times more costly than a closing day at the beginning or end of the season. Regardless of the investments, snowmaking costs seem to be low in comparison with a closing day in the case of snow scarcity as four closing days are costlier than all seasonal snow production costs. This may explain the strong aversion to risks that ski resort managers have concerning snow production as the risk of a lack of snow is costlier than production costs. The PROSNOW project may reduce ski resort operating costs which may prove critical in a climate change context. For now, the service could support a global optimization of operations regarding meteorological constraint and may be improved by the experience acquired by ski resort managers if PROSNOW is able to offer the service for which it has been designed. The immediate advantages of this service have an environmental gain. They save water and energy and this saving of resources may also contribute to the improvement of the resort’s “green” image. PROSNOWReview of ski resorts operating costs and market analysis 3 Introduction For a long time, snow presence on the ground has been of great concern for mountain areas. Frost and snow reduce the vegetation time and limit the period of farmlands (mainly rural) usability. Snow also causes a problem for roads and mobility within and stemming from remote areas where steepness and elevation are already an obstacle. Along with tourism development by the end of the 19thcentury, snow began to gain value. If tourism was originally a summer practice, this period paved the way for visitors during the winter season. Snow fields began to be named as such and the practice of skiing emerged slowly. The ski industry expanded from the end of the Second World War along with the development of Fordism in the context of mass production applied to tourism. Resort building and growth relies on heavy investments, especially for ski lift facilities and returns on investment are critical for the economic health of operators. The snow scarcity issue arose simultaneously therefore as the resorts grew: the bigger the resort, the more important it is to operate ski-lifts during the snow season. To mitigate the economic impact and reduce dependency on natural snow (Trawöger 2014), snowmaking was invented around the end of the 90’s. It became progressively an ordinary tool with which to manage snow (Steiger and Mayer, 2008; Spandre et al., 2015). It contributes to the revisiting of the entire snow management process from the beginning to the end of the season. Some public debates about ski resort development focus on snowmaking and the environmental costs of artificially keeping resorts alive even if they encounter a frequent lack of natural snowfall. The context of climate change particularly renews the question (Steiger et al., 2017) of the understanding of how and until what point ski resorts can cope with rises in temperature and snowfall reduction. Research studies on snowpacks extended their conclusion to the economic side of the problem using a simple rule known as the “100 day” rule (Abegg, 1996; Abbeg et al., 2007). This stated that a resort is snow reliable if it has at least 30cm of snow on the ground during, at least, 100 days within the ski season. This approach does not however answer entirely the economic question linked to operating costs and their growth due to climate change which combines an increasing need for snowmaking with the worsening of production conditions (Scott, 2003; Gonseth, 2008). The access to production factors may also prove to be more and more critical. Water availability and access costs for a snowmaking purpose may already prove problematic but could become even more of a crucial issue. The economic opportunity to produce snow should be carefully evaluated, particularly in the context of increasing
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