BUSI 4609C
March 26th, 2014 Dr. Ian Lee
FINAL CAPSTONE REPORT
Whistler Blackcomb Holdings Inc. - WB
Jessica Lane – 100799095 – [email protected] Julia Lesway – 100792672 – [email protected] Lindsay Crone – 100821607 – [email protected]
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Table of Contents
Executive Summary ...... 4 Introduction ...... 6 Part I – Macro Environment ...... 10 Technology Environment ...... 10 Economic Environment ...... 22 Socio-Cultural Environment ...... 30 Political/Legal Environment ...... 42 Summary of Macro Environment ...... 47 Part II – Industry Analysis ...... 52 Industry Overview ...... 52 Strategic Group Map ...... 53 Five Forces Analysis ...... 55 Rivalry or direct competitors – 8/10 ...... 55 Threat of Entry - 2/10 ...... 60 Substitutes – 3/10 ...... 65 Power of Suppliers – 8/10...... 68 Power of Buyers: Customers and Consumers – 3/10 ...... 71 Five Forces Summary ...... 74 Driving Forces ...... 77 Summary of Industry Analysis ...... 79 Part III – Internal Environment ...... 84 Note on Competitors Analyzed ...... 86 Note on Comparability of Currencies ...... 87 Primary Value Chain Activities ...... 88 Supply Chain Management (Neutral) ...... 88 Operations (Strength) ...... 91
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Distribution (N/A) ...... 101 Marketing and Sales (Strength) ...... 102 Customer Service (Strength) ...... 111 Secondary Value Chain Activities ...... 116 Human Resources Management (Strength) ...... 116 New Product Development (Strength) ...... 123 Corporate Leadership (Strength) ...... 128 Summary of Internal Environment ...... 140 Part IV: Corporate Strategy ...... 146 Preliminary Analysis ...... 146 Vertical Location ...... 150 Horizontal Location ...... 151 Geographic Location ...... 153 General Strategy – Dividend Policy ...... 160 Part V: Business / Functional Strategies ...... 166 Current Strategies ...... 166 Problems / Issues ...... 167 Recommendations ...... 170 Recommendation I: Local and Regional ...... 170 Recommendation II: Target International Customers ...... 177 Conclusion ...... 183 Appendices ...... 186 Statements of Financial Position ...... 186
Statements of Comprehensive Income ...... 189
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Executive Summary Within the North American ski resort industry, technology provides many opportunities through the popularity of ski commerce, the emergence of RFID tags, and improvements to snow making machines. Real GDP and disposable incomes have been increasing. Associations provide a platform for a safe environment while the government entry laws allow tourists the ability to travel easily. There are also many threats affecting the industry including the fluctuating exchange rates and increase in gas prices. Although consumers are travelling for longer periods of time, the overall number of skier visits has been declining due to a lack of recreation spending, consumer participation, and the aging population. With a high threat of rivalry, minimal threat of entry, no threat of substitutes, high supplier power, and low buyer power, the ski resort industry is moderately attractive.
Whistler has many strengths in regards to its value chain activities. Its marketing and sales, customer service, human resource management, and new product development allow the firm to generate above average returns through a competitive advantage. Although its efficient operations produce high returns,
Whistler’s effective ticket price (total revenue per visit) is not at a competitive level. The firm’s experienced top management has financed Whistler adequately in order to be more profitable than competitors; however, due to its generous dividend policy, it is unable to grow significantly in the long term.
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Whistler’s vertical and horizontal positions in the industry have allowed it to focus its efforts and resources into its core business while remaining competitive in the industry; no changes to these strategies have been recommended. The firm is bound to its one geographic location. As its competitors are expanding, Whistler needs to increase its consumer base by acquiring an additional ski area (or resort) to maintain or increase its market share. Additionally, it is predicted that Whistler’s current dividend policy will hinder the firm’s ability to have a competitive advantage in the long run. An adjustment to this policy is suggested to hold a greater amount of cash within the firm for the purpose of generating growth.
Whistler’s focused differentiation strategy has allowed the firm to obtain a competitive advantage through its brand awareness and outstanding customer service while offering lift tickets at competitive prices to local, regional, and international visitors. In order to build a larger consumer base, it is recommended that Whistler target local youth to obtain a life-long consumer by establishing partnerships with local schools to offer organized trips to the resort. It is important to meet the demands of international customers, who produce greater revenues per visit, as well. It is suggested that Whistler host a ski/snowboard competition to attract European guests. By continuing its already successful operations and implementing the suggested strategic alterations, Whistler will be able to hold a sustainable competitive advantage in the North American ski industry.
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Introduction This report will analyze the macro environment and overall industry pertaining to the skiing resort Whistler Blackcomb. Whistler Blackcomb is the only publicly traded skiing facility in Canada and one of a handful in North
America, located in Whistler, British Columbia. We selected this firm to get a full perspective of how the business and industry operates for one of Canada’s favourite winter activities and how it competes within the North American and global market. Whistler Blackcomb offers a variety of outdoor activities for all seasons and operates a resort as well, attracting both local and international patrons.
To complete the research, we will be utilizing various databases and websites including Business Source Complete, Mergent Online, Factiva, GMID,
Conference Board of Canada e-Library, IBIS World, Bloomberg, Forbes, The
Economist, Conference Board, and OECD, among others.
Jessica Lane is a fourth year accounting student who has been actively involved in the Sprott community for the past five years. She has strengths in analysis and financials with both academic and practical experience. Jessica does not have much experience with marketing and thus lacks in-depth knowledge of the application of marketing concepts. Julia Lesway is also a fourth year accounting student; she specializes in developing financial statements with an extensive knowledge of accounting principles; however, she lacks real world
Whistler Blackcomb Holdings Inc. Page 6 application of her knowledge. Lindsay Crone is a fourth year marketing student who is confident in analyzing the strengths and weaknesses within businesses and their industries but lacks the experience of applying marketing concepts to real life situations.
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PART I
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Part I – Macro Environment
Technology Environment
Ski Commerce (Opportunity)
The Internet has evolved over the years; it has transformed consumer behaviour by redefining the way consumers function. Many companies are taking advantage of the opportunities to expand the reach to potential customers. Online shopping has become extremely popular with global sales growing by 211% between 2003 and 2008 hitting a value of US$252.7billion1. The idea of online shopping was transformed into the travel industry, where researching and planning a vacation can all be achieved from the comfort of your home, making it more convenient and efficient as all the information is in one place. By moving away from travel consultants, consumers have more power in their travel plans through online reservation systems which offer bundled packages.
The newest trend for the ski and snowboard resort industry is tapping into the e-travel and e-commerce market by offering advance tickets online or mobile, through the creation of Liftopia – an online and mobile marketplace for lift tickets focusing on North American Ski resorts. Liftopia enables ski resorts the capability
1GMID. 2009. Power to the Consumer: How Web Technology Is Influencing Behaviour. February 12. Accessed January 18, 2014. http://www.portal.euromonitor.com.proxy.library.carleton.ca/Portal/Pages/Analysis/AnalysisPage.aspx.
Whistler Blackcomb Holdings Inc. Page 10 of offering advance date specific tickets, rentals and even lessons2. Resorts maintain the power to choose prices and the quantity available for sale. The main goal is to offer variable priced tickets allowing consumers major discounted ticket prices. From 2006 to 2011, global sales from discounters increased steadily to roughly $340 US million by 2011, a 39% increase since 2006 (see graph below).
Understandably, consumers have been more cautious during and after the recession in regards to their purchases. Therefore, consumers continue to be cautious by shopping at discounters, illustrating demand for discounted items globally3.
Source: http://www.euromonitor.com/
2Liftopia. n.d. We're bringing e-commerce to the ski industry. Accessed January 17, 2014. http://www.liftopia.com/about.page. 3GMID. 2012. Consumer Buying Behaviour in the Recession: Global Online Survey. January 31. Accessed January 18, 2014.http://www.portal.euromonitor.com.proxy.library.carleton.ca/Portal/Pages/Search/SearchResultsList.aspx.
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Of the total ski travellers, 48% book their lift tickets online or through mobile, while 36% use the resort front desk4. Liftopia also offers bundling deals by allowing benefits such as dining credits when purchasing lift tickets, opening up a further channel for which resorts to garner profit. This further led to websites like ski.com and worldonskis.com, which are specifically for planning and booking mountain vacations. They enable consumers to create bundle packages with lift tickets and accommodations, allowing cheaper prices than if booked individually5.
Lifttickets.com is another site following Liftopia’s trend offering discounted lift tickets. Moreover, Lifttickets.com also offers items like VIP vouchers which enables the consumer to pay at the resort or cancel6. This also led to a new trend of giving power to the ski resorts through updating their systems to allow purchases directly from them.
By 2012, 83% of Canadians had access to the internet, which is an increase from 2010 where 79% of the population had access to the internet7. All of the provinces had an increase in internet access from 2010 to 2012, demonstrating growth of internet popularity in Canada. The most popular online purchase in
4Buzbee, Evan. 2013. New Study Reveals Ski Commerce has Tipped to Online &Mobile Platforms. April 18. Accessed January 18, 2014. http://business.transworld.net/127369/news/new-study-reveals-ski-commerce-has-tipped-to- online-mobile-platforms/. 5Higgins, Michelle. 2011. How to Find Lift Tickets for Less. December 7. Accessed January 17, 2014. http://www.nytimes.com/2011/12/11/travel/how-to-get-a-deal-on-lift-tickets.html. 6 Higgins, Michelle. 2011. How to Find Lift Tickets for Less. December 7. Accessed January 17, 2014. http://www.nytimes.com/2011/12/11/travel/how-to-get-a-deal-on-lift-tickets.html. 7Statistics Canada. 2013. Canadian Internet Use Survey, 2012. November 26. Accessed January 16, 2014. http://www.statcan.gc.ca/daily-quotidien/131126/dq131126d-eng.htm.
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Canada in 2012 was travel arrangements with 58% of the online shopper’s population. Travel arrangements include items such as hotel reservations, travel tickets, and rental cars. The second highest purchase was entertainment events with
52% of online shoppers purchasing the tickets, includes items such as concerts, movies, sports8. The increasing popularity of online shopping is clear. Canadians are interested in the convenience and efficiency that online shopping can offer in their busy lives. Given the constant growth of individuals adopting the internet and the drastic growth of online shopping, it is clear that this is an opportunity for the
North American ski resort industry.
Percent of types of goods or services ordered online in Canada, 2012 70 58 60 52
50 42 42 40 35 35 30 24 24 22 22 21 18 Percent 17 15 15 15 20 12 11 7 6
10
0
…
…
Other
Music Music
Clothing
Software
House wares wares House
Videos orDVDs Videos
Toys and and games Toys
Reading Material Reading
Sports equipment Sports
Tickets for events forevents Tickets
Prescription drugs drugs Prescription
Food or beverages orbeverages Food
Gift certificates/gift Gift
Home improvement Home
Computer hardware Computer
Travel arrangements arrangements Travel
Memberships/Registr
Photographic services Photographic Consumer electronics electronics Consumer Product or Service
Source: Made by Julia Lesway using http://www.statcan.gc.ca/start-debut-eng.html
8Statistics Canada. 2013. Electronic commerce, types of goods or services ordered, 2012. October 28. Accessed January 17, 2014. http://www.statcan.gc.ca/daily-quotidien/131028/t131028a001-eng.htm.
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As there is an increasing demand for travel and entertainment purchases online, the ski commerce model seems like an excellent opportunity for all ski and snowboarding resorts in the industry. The sites offer plenty of opportunity for increased revenue, given that the purchases are made in advance. This online format of booking and planning the ski vacations allows for the holiday itself to be less stressful by having everything already booked. For resorts that work with these companies, they are given more exposure by appearing in side-by-side comparisons with other resorts for the consumers. As well, it offers a competitive edge as vacations, especially winter activity holidays, can be rather expensive. By offering discounted ski holidays, the firms can attract people that would potentially head to a different destination, assuming it would be less expensive. There is a large interest in travel and entertainment purchases online, as it was the highest online purchase in Canada in 2012 as mentioned above, as well there is a growing demand for discounted products. So any resort that taps into this model will most likely benefit greatly9.
Radio-Frequency Identification Tags (Opportunity)
Radio-frequency identification (RFID) tags have been around for many years, dating back a few decades. RFID tags use radio waves by transmitting
9Olmsted, Larry. 2013. Skiing's Season Pass Revolution Now Includes Lodging. August 10. Accessed January 18, 2014. http://www.forbes.com/sites/larryolmsted/2013/08/10/skiings-season-pass-revolution-now-includes- lodging/?utm_source=followingimmediate&utm_medium=email&utm_campaign=20130810.
Whistler Blackcomb Holdings Inc. Page 14 information to electronic readers that are specialized to read the information. The tags send a signal only when prompted by the electronic reader using electrons, once prompted the RFID tag transmits the signal aimlessly within a specific range10.
RFID tags in the ski industry are used to replace paper lift tickets at the resorts. Each consumer at the resort purchases a separate pass which is loaded on the tag. The consumer keeps the tag in their pocket; the radio wave can travel through their clothing so each individual must pass through a reader. The reader has an open swinging gate that opens once detected that the user has paid. The tags all have a QR code which allows the specific ticket to be refilled online or through mobile devices. The system allows for the purchaser to buy a specific pass such as a daily, morning, evening, yearly or even a pass with a specific number of rides.
Each ticket purchased is saved in the customer database so that all tags can be tracked. Customers can register their cards, which will allow them discounted rates. Customers have the option to attach a credit card to their pass through loyalty programs which would enable them to purchase food at the cafeteria, shop in the gift shop, or even rent equipment11. It would act as a prepaid card by loading it before use. With the use of large scale RFID scanners, skiers and snowboarders
10Newitz, Annalee. 2006. The RFID Hacking Underground. May. Accessed January 19, 2014. http://www.wired.com/wired/archive/14.05/rfid.html?pg=1&topic=rfid&topic_set=. 11Mountain Pass Systems, LLC. n.d. Fixed and Mobile Lift Ticket Point of Sale System. Accessed January 20, 2014. http://www.mountain-pass-systems.com/ski_resort_solutions.
Whistler Blackcomb Holdings Inc. Page 15 can track which ski lifts they rode and the vertical feet that they covered, as well as different speeds they reached12.
A large amount of time is wasted waiting for chair lifts. Approximately 50% of the day is spent waiting for or on a chair lift. The RFID can reduce wait lines drastically as there is no scanning and it is all automated13. It can also increase revenue by approximately one to two percent per year by reducing lift ticket fraud and the number of employees required to man the lifts by up to 40% once fully adjusted into the system14.
The information offered by the tracking tags and the combination of mobile apps allow people to track their information or update their social media sites which allow for increased marketing exposure for the resorts. There is a huge demand for smartphones demonstrated by the fact that global sales of smartphones increased from under $50 million in 2006 to over $450 million by 201115 (see graph below). It is a great opportunity because resorts offering apps that provide all the RFID tracking information on ski apps so users can open their app on their smartphone to see their personalized daily ski statistics. As well, use social media
12Hayes, Heather. 2013. RFID Tags Get Skiers Back on the Slopes in No Time. May 28. Accessed January 20, 2014. http://www.biztechmagazine.com/article/2013/05/rfid-tags-get-skiers-back-slopes-no-time. 13Anthony, Leslie. 2013. Daily Pow: Those Lift Rides Add Up. November 20. Accessed January 25, 2014. http://www.adventure-journal.com/2013/11/the-daily-pow-those-lift-rides-add-up/. 142011. Ski Resorts Ready RFID Season. June 2. Accessed January 24, 2014. http://www.itnews.com.au/News/259217,ski-resorts-ready-rfid-season.aspx. 15Kasriel-Alexander, Daphne. 2013. Old Smartphones Don’t Die: What is Driving the Boom in “Pre-Loved” Tech? July 3. Accessed January 20, 2014. http://www.portal.euromonitor.com.proxy.library.carleton.ca/Portal/Pages/Search/SearchResultsList.aspx.
Whistler Blackcomb Holdings Inc. Page 16 to post their results or pictures while at the ski resort, with the increase of smartphone purchases more consumers have them and 60% of social media is accessed through smartphones. Moreover, in United States the average American spends 37 minutes a day on social media16. The combination of mobile apps and proliferation of smartphones creates an opportunity for increased exposure for ski resorts, allowing resorts to transition away from traditional forms of advertising.
Source: http://www.euromonitor.com/
16Adler, Emily. 2014. Social Media Engagement: The Surprising Facts About How Much Time People Spend On The Major Social Networks. January 5. Accessed January 25, 2014. http://www.businessinsider.com/social-media- engagement-statistics-2013-12.
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There is a profitable opportunity for ski resorts to reduce wait times for chair lifts. Reducing wait times would mean that they can increase the total number of consumers going the chair lifts, overall increasing the hill’s capacity. Another benefit from this is the automated RFID readers that act as gates, eliminating the need for employees to do it, saving the costs of paying employees, and removing the factor of human error that allows for consumers to get free lifts, generating lost revenue. Additionally, the cards can be reused, eliminating paper ticket costs, and reducing waste17. Finally, lift ticket fraud will become obsolete as the sophisticated machines can track all skiers and snowboarders and automated equipment will not let users without a legitimate pass by. The process of switching over can be costly, as the resort must protect the technology from the winter conditions however; the long-term payoff would be worthwhile.
Automated Snow Making Technology (Opportunity)
One of the most important things for a ski resort is snow, which is why so many ski resorts invest money in keeping up with the latest snowmaking technology. Snowmaking systems are entirely computer controlled with automated software. Updated software can determine the best level of snowmaking through settings on the snow gun nozzle and different areas over the entire mountain. The
17Mt Hood Meadow Ski Resorts . 2013. Mt Hood Meadows Slashes Day Lift Pass Pricing. August 14. Accessed January 23, 2014. http://www.skihood.com/Community-and-News/Meadows- Blog/Categories/RFID?c=130351437699860000.
Whistler Blackcomb Holdings Inc. Page 18 computers monitor the weather and adjust to the proper water pressure levels18.
Improvements continue making new snowmaking products and processes more efficient and effective. Snowmaking automation equipment has been around since
1992; however, it is an ongoing process that is always being improved19.
It is very important to have enough snow all season, which is why snowmaking equipment is so essential to ski resorts. Ski resorts earn 85-100% of their revenue from November to April; weather conditions can greatly jeopardize this revenue20. In Canada, in the 2011/12 season there were warmer temperatures than the yearly average. In British Columbia the average winter temperature was 2 degrees Celsius warmer, 3 degrees warmer in Alberta, and 3 degrees warmer in eastern Quebec and southern Ontario21. This is critical as these locations have the most ski visits in Canada. Some areas in Eastern Canada even reached 20 degrees during February 201222. With unpredictable warm weather, it is necessary to have the best snow making equipment to keep the resort open. In the United States in
2012, average rainfall fell 8.3%, resulting in low snowfall which ultimately
18 IBIS World Where Knowledge is Power. 2013. Ski and Snowboard Resorts in the US. December. Accessed January 17, 2014. http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653. 19SMI Snow Makers. n.d. SMI Company Highlights. Accessed January 26, 2014. http://www.snowmakers.com/smi- highlights.html. 20 IBIS World Where Knowledge is Power. 2013. Ski and Snowboard Resorts in the US. December. Accessed January 17, 2014. http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653. 21Canadian Ski Council. n.d. Canadian Skier and Snowboarder Facts and Stats. Accessed January 20, 2014. http://www.skicanada.org/. 22Canadian Ski Council. n.d. Canadian Skier and Snowboarder Facts and Stats. Accessed January 20, 2014. http://www.skicanada.org/.
Whistler Blackcomb Holdings Inc. Page 19 lowered skier visits by 15.7% over the prior year23. Therefore, snow production is essential so that in seasons with less snowfall resorts will still be able to function.
Source: Ski and Snowboard Facts & Stats Report, from http://www.skicanada.org/
Finally, in North America the amount of land that is covered in snow is decreasing. The average snow cover measured has been decreasing from 1972 to
2012. From 2003 to 2012 the average snow coverage was 3.18 million square miles, which is 4% less than 1972 to 1982 for a total of 132 000 square miles less24. For an industry that relies so heavily on the amount of snowfall in a season, it is crucial to have top of the line snow making equipment to keep the facilities in
23 IBIS World Where Knowledge is Power. 2013. Ski and Snowboard Resorts in the US. December. Accessed January 17, 2014. http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653. 24EPA United States Environmental Protection Agency. 2013. Climate Change Indicators in the United States. August. Accessed January 23, 2014. http://www.epa.gov/climatechange/science/indicators/snow-ice/snow- cover.html.
Whistler Blackcomb Holdings Inc. Page 20 operation. With the decreasing snow coverage and warmer temperatures it is very important for the technology to keep advancing to allow the ski resort industry to continue to operate and adapt to the weather conditions. These sustaining improvements are an important opportunity for the ski resort industry.
Source: http://www.epa.gov/climatechange/science/indicators/snow-ice/snow-cover.html
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Economic Environment
National Gross Domestic Product (GDP) (Opportunity)
Gross domestic product (GDP) is an important economic indicator as it measures the progress or the rate of expansion of the economy's capacity to produce output (goods and services)25. As seen in the graphs below, both the GDP of Canada and the United States fluctuate similarly. Since 2010, both national
GDPs have been increasing, with the United States’ increasing at a greater rate.
Forecasts expect a 1.6% increase in Canadian GDP in 2013 due to domestic factors including a housing correction and low levels of consumer spending followed by an increase of over 2% for 201426. An increase of only 1.8% is expected for the
GDP of the United States in 2013 largely due to government spending cuts27. The overall increase in both nations’ GDP illustrates a strengthening economy, which provides a desirable environment of the ski resort industry.
25 Canadian Industry Statistics. 2012. Gross domestic product (GDP): Canadian Economy (NAICS 11-91) https://www.ic.gc.ca/app/scr/sbms/sbb/cis/gdp.html?code=11-91&lang=eng 26 n.d. Consumer Lifestyles in Canada . Accessed January 25, 2014. www.euromonitor.com. 27 2013. Consumers Lifestyles In The US. August 5. Accessed January 25, 2014. www.euromonitor.com.
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Canada: Real GDP Growth, 2005-2014
Source: Consumer Lifestyles in Canada at http://www.euromonitor.com
US: Real GDP Growth, 2005-2014
Source: Consumer Lifestyles in Canada at http://www.euromonitor.com
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Disposable Income (Opportunity)
Disposable income is the portion of individuals’ total income that they have some discretion on. It is a strong indicator for the retail market, as consumers will spend more on products and services when they have more disposable income. In
Canada, total household income has increased 4.4%, 0%, 3.2%, 4.9%, and 4.3% respectively over the past six years28. Disposable income has increased since 2007 and 2008 where it represented about 71% of total income to about 73% of total income in 2009. This proportion has remained consistent over the last few years. In the United States, total personal income has increased at the following rates since
2007: 3.6%, -2.8%, 2.9%, 6.1%, and 4.2%, respectively29. Disposable income represented approximately 88% of total income in 2007 and 2008. This rate increased to 90% in 2009 and remained at this level to date. This consistency illustrates a reliable source of revenue for ski resorts in North America. The increase in disposable income, alongside the increase in total income, is an opportunity for firms, as consumers will have additional funds to purchase the goods and services offered.
28 Statistics Canada. 2012. Household income. http://www5.statcan.gc.ca/cansim/a47 29 U.S. Bureau of Economic Analysis. 2013. National Income and Product Accounts Tables http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&910=x&911=0&903=58&904= 2007&905=2013&906=a
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Canadian Household Income and Disposable Income, 2007-2012
Household Income Disposable Income
1,500,000
1,000,000
500,000 $ (in millions)(in $
0 2007 2008 2009 2010 2011 2012
Source: Made by Jessica Lane using Statistics Canada at
http://www5.statcan.gc.ca/cansim/a47
American Personal Income and Disposable Income, 2007-2012
Personal Income Disposable Income 16,000 14,000
12,000 10,000 8,000 6,000 $ (in billions) (in $ 4,000 2,000 0 2007 2008 2009 2010 2011 2012
Source: Made by Jessica Lane using Bureau of Economic Analysis at http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri
=1&910=x&911=0&903=58&904=2007&905=2013&906=a
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USD-CAD dollar foreign exchange rate (Threat)
The foreign exchange rate between Canadian and US dollars plays a factor in the North American tourism industry. Consumers will choose to travel and spend money where they perceive the most benefit per dollar spent. 21.3 million
Canadian overnight travellers went to the United States in 2011, up 7% since
201030. This is advantageous for firms in the United States, but not for firms in
Canada. The exchange rate has not been above par since January 2013 when it was
1.001USD per 1CAD as seen in the graph below. The rate has been at a steady decline throughout 2013, dropping to 0.940USD per 1CAD31. If this continues, an increased number of Canadian consumers will commute to the United States to spend their disposable income rather than spending it in Canada, hindering
Canada’s national GDP. Although this would have a positive effect on American firms, it has the potential to have a significantly worse effect on Canadian firms.
For this reason, the current trend of the USD-CAD exchange rate is a threat for the industry.
30 U.S. Travel Association. 2013. Canada: International Inbound Travel Market Profile (2011) http://www.ustravel.org/sites/default/files/page/2009/09/Canada_Summary_2013.pdf 31 Bank of Canada. 2014. Exchange Rates. http://www.bankofcanada.ca/rates/exchange
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USD/CDN Exchange Rate, 2009-2013 $1 CAD -> $USD 1.2 1.1
1
$USD 0.9 0.8
0.7
01 07 04 07 10 01 04 07 10 01 04 07 10 01 04 10 01 04 07 10
------
2009 2012 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2013 2013 2013 2013 YYYY-MM
Source: Made by Jessica Lane using Bank of Canada at
http://www.bankofcanada.ca/rates/exchange
Gas Prices (Threat)
Due to the nature of the industry, large North American ski resorts are often located outside large urban cities. Therefore, consumers must drive a significant distance for both daily ski trips as well as vacation ski trips. Gasoline prices play a large factor in consumers’ decision to visit a closer, regional resort versus travel a greater distance to visit a larger resort. Average Canadian gas prices have increased significantly since 2009 when the price was an average of $0.83 per litre32. Since reaching the highest average price in April 2012 of $1.34 per litre, prices appear to
32 Statistics Canada. 2013. Average retail prices for gasoline and fuel oil, by urban centre http://www5.statcan.gc.ca/cansim/pick-choisir?lang=eng&p2=33&id=3260009
Whistler Blackcomb Holdings Inc. Page 27 have remained relatively constant, fluctuating between $1.20 per litre and $1.33 per litre. Since July 2013, the gas prices in Canada have been decreasing. In the
United States, there has been a similar trend. Since reaching a high price of $3.90 per gallon in April 2012, the price has been fluctuating between $3.27 and $3.8 per gallon33. The price has decreased over the past few months as seen in Canada.
Although lower gas prices may not incentivize consumers to travel a greater distance to ski resorts, the lower prices will reduce the influence of the gas price on the consumers’ decision. As there are 3.785 litres in one gallon34, the retail gas prices for consumers are significantly less expensive in the United States than in
Canada. This suggests that Americans are likely more willing to drive a greater distance to reach their preferred ski resort than Canadians. The gas prices in both
Canada and the United States show no sign of decreasing to pre-2011 amounts concluding that the retail gas prices remain a threat to the industry.
33 U.S. Energy Information Administration. Dec 2013. Retail Motor Gasoline and On-Highway Diesel Fuel Prices http://www.eia.gov/totalenergy/data/monthly/pdf/sec9_6.pdf 34 ConvertUnits.com. 2014. Convert gallon to litre. http://www.convertunits.com/from/gallon/to/litre
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Average Canadian Retail Gas Price, 2009-2013 1.6
1.4
1.2
1 $ per Litre per $ 0.8
0.6
09 10 11 12 13
09 10 11 12 13
09 10 11 12 13
09 10 11 12 13
- - - - -
- - - - -
- - - - -
- - - - -
Jul Jul Jul Jul Jul
Jan Jan Jan Jan Jan
Oct Oct Oct Oct Oct
Apr Apr Apr Apr Apr
Source: Made by Jessica Lane using Statistics Canada at
http://www5.statcan.gc.ca/cansim/pick-choisir?lang=eng&p2=33&id=3260009
Average American Retail Gas Price, 2009-2013 4.5 4
3.5
3 2.5 2
1.5 $ per Gallon per $ 1 0.5
0
09 10 11 12 13
09 10 11 12 13
09 09 10 10 11 11 12 12 13 13
- - - - -
- - - - -
------
Jul Jul Jul Jul Jul
Jan Jan Jan Jan Jan
Oct Oct Oct Oct Oct
Apr Apr Apr Apr Apr
Source: Made by Jessica Lane using U.S. Energy Information Administration at
http://www.eia.gov/totalenergy/data/monthly/pdf/sec9_6.pdf
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Socio-Cultural Environment
Travel Destinations & Duration (Opportunity)
The percent of Canadians who are choosing to spend their winter vacations in Canada have slightly decreased from October 2012 as the United States increases in popularity35. Combined, the percent of Canadians choosing to vacation in North America have increased since October 2011. Moreover, those Canadians who are vacationing within Canada are choosing to do so for a longer period of time. The largest share of visitors, spending 6 to 14 nights at their destination, represents 54.5% in 2013, up from 52% in 2012. Therefore, although Canadians are choosing to spend their winter vacations more internationally, those who choose to spend it nationally are travelling for longer periods of time. The domestic leisure travels in the United States have been increasing at a declining rate over the past few years36 as shown in the table below. It is forecasted that there will be an increase in this rate for 2014 and 2015, which demonstrates that the domestic travels in the United States are still very relevant. This information portrays the fact that the number of North American consumers who travel for leisure is increasing annually, thus providing an increasing amount of revenues for
35 The Conference Board of Canada. Dec 2013. Travel Exclusive: Key Trands for the Travel Industry September- October 2013 http://www.conferenceboard.ca.proxy.library.carleton.ca/e-library/abstract.aspx?did=5911 36 U.S. Travel Association. Nov 2013. U.S. Travel Forecasts http://www.ustravel.org/sites/default/files/page/2010/12/Public_Forecast_Summary.pdf
Whistler Blackcomb Holdings Inc. Page 30 firms in this industry. The increasing amount of domestic travellers and increasing duration of vacations in Canada provides an opportunity for the ski resort industry.
Source: US Travel Association at http://www.ustravel.org/sites/default/files/page/2010/12/Public_Forecast_Summary.pdf
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Recreation Expenditures (Threat)
Tourism demand in Canada, represented by total expenditures, has increased consistently over the last few years (in exception of 2009) in Canada37. However, the portion of these expenditures in the recreation and entertainment category, in which ski resorts lie, have been decreasing. This is illustrated in both of the graphs below. Although this suggests strong growth for the overall tourism industry, the demand for recreation type tourism, such as ski resorts, is declining. In the United
States there is a similar trend. Although expenditures on recreation have been increasing since 2009, the rate of increase has yet to reach pre-recession rates38.
This is a threat for this industry as it will be more challenging to maintain the same level of annual consumer interest.
37 Statistics Canada. 2012-2013. Tourism Demand in Canada http://www5.statcan.gc.ca/cansim/pick- choisir?lang=eng&p2=33&id=3870001 38IBIS World Where Knowledge is Power. n.d. Total Recreation Expenditure. Accessed January 25, 2014. http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653
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Canadian Tourism Expenditures, 2004-2012 19,000 18,500 18,000
17,500 17,000 16,500 16,000 $ (in millions) (in $ 15,500 15,000 14,500 14,000 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Made by Jessica Lane using Statistics Canada at
http://www5.statcan.gc.ca/cansim/pick-choisir?lang=eng&p2=33&id=3870001
Canadian Recreation & Entertainment Expenditures as % of Tourism Expenditures, 2004-2012 8% 7% 6% 5% 4% 3% 2% 1% 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Made by Jessica Lane using Statistics Canada at
http://www5.statcan.gc.ca/cansim/pick-choisir?lang=eng&p2=33&id=3870001
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US Expenditure on Recreation, 1996-2018
Source: 71392 Ski & Snowboard Industry Report from www.ibisworld.com
Population (Threat)
The North American demographics have changed drastically over the past
40 years as depicted in the graphs below. The 0-17 age group has been continuously decreasing due to a significant decrease in birth rates; the birth rate in
Canada was decreasing for a ten year span from 1991 to 200139. The 18-24 age group in Canada and the United States has remained relatively steady over the past
39 Statistics Canada 2008-2013. Components of population growth, Canda, provinces and territories http://www5.statcan.gc.ca/cansim/pick-choisir?lang=eng&p2=33&id=0510004
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20 years4041; however, due to the decreasing trend of the 0-17 group, this demographic group is expected to decrease in the future. The 25-44 group has been decreasing since 1990 while the 45-64 group has been increasing. The 65 and over group has been increasing as well as the expected lifespan increases. It is expected that this group will increase drastically over the next few years as the baby-boomer generation enter this age category. In 2013, people over 44 represented 44% of total population (see pie chart below) in Canada and 40% in the United States42 – these people are not traditionally the ideal customers of large ski resorts.
Therefore, the target market in the ski resort industry is on the younger, 56% and
60% of the population. As shown in the diagram below, most skiers and snowboarders begin the sport before the age of 24 while the older age groups choose to continue by improving their skills43. The target population for attracting new consumers is the 29% of Canadians and 34% of Americans under the age of
25. Although this age segment tends to have less disposable income, they have a greater amount of time to spend on leisure activities than the older age group44. As the population ages, consumers will have less time to spend at ski resorts, reducing
40 Statistics Canada 2009-2013. Estimates of population, by age group and sex for july 1, Canada, provinces and territories http://www5.statcan.gc.ca/cansim/pick-choisir?lang=eng&p2=33&id=0510001 41 United States Census Bureau. 2012. The 2012 Statistical Abstract: Historical Statistics http://www.census.gov/compendia/statab/hist_stats.html 42 United States Census Bureau. 2000-2010. National Intercensal Estimates https://www.census.gov/popest/data/intercensal/national/nat2010.html 43Snowsports Industries America . 2013. Total Number of Snow Sports Participants . Accessed January 26, 2014. http://www.snowsports.org/Retailers/Research/SnowSportsFactSheet. 44IBIS World Where Knowledge is Power. 2013. Ski and Snowboard Resorts in the US. December. Accessed January 17, 2014. http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653.
Whistler Blackcomb Holdings Inc. Page 35 the potential for industry growth. Therefore, the aging population is a threat to the
North American ski resort industry.
Canadian Demographics, 1973-2013
40%
35% 30% 0 to 17 years 25% 18 to 24 years 20% 15% 25 to 44 years 10% 45 to 64 years
5% 65 years and over Percent of total population total of Percent
0%
1991 1975 1977 1979 1981 1983 1985 1987 1989 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 1973
Source: Made by Jessica Lane using Statistics Canada at
http://www5.statcan.gc.ca/cansim/pick-choisir?lang=eng&p2=33&id=0510001and
http://www5.statcan.gc.ca/cansim/pick-choisir?lang=eng&p2=33&id=0510004
Canadian Demographics in 1973 Canadian Demographics in 2013
0 to 17 years 0 to 17 years
18 to 24 years 18 to 24 years 25 to 44 years 25 to 44 years 45 to 64 years 45 to 64 years 65 years and over 65 years and over
Source: Made by Jessica Lane using Statistics Canada at http://www5.statcan.gc.ca/cansim/pick-choisir?lang=eng&p2=33&id=0510001and
http://www5.statcan.gc.ca/cansim/pick-choisir?lang=eng&p2=33&id=0510004
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United States Demographics, 1973-2009
35%
30% 25% 0-14 20% 15-24 15% 25-44 10% 45-64
5% 65 + Percent of total population total of Percent
0%
1975 2001 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2003 2005 2007 2009 1973
Source: Made by Jessica Lane using US Census Bureau at
http://www.census.gov/compendia/statab/hist_stats.html
Skier Proficiency by Age
Source: http://www.snowsports.org/Retailers/Research/SnowSportsFactSheet
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Number of Visits - Destination vs. Local Consumers (Threat)
Destination visitors to ski resorts are those who travel a larger distance and stay for a larger duration than local visitors. These consumers spend more on other amenities offered such as lodging, equipment, and food and beverage45. Local visitors are those who travel a shorter distance for day trips to the resort. Local consumers tend to purchase multi-day lift tickets and are more likely to be influenced by the changing weather conditions46. As shown in the graph below, skier visits in Canada have remained consistent with around 19 million annual visitors while the visitors in the United States have been lower in the years 2011/12 and 2012/13 than prior years. Overall there has been a significant total increase in
North American visitors in the 2012/13 season compared to the previous year. The number of destination guests has decreased on the past five years; however, they are expected to increase as people’s disposable incomes increase in future periods47. The revenues generated are attributed to 44% of local visitors and 56% of destination visitors as seen in the diagram below. To sum up, the decrease in annual number of visitors, especially the decrease in destination visitors who account for the majority of revenues is a threat to the industry.
45Whistler Blackcomb Holdings . 2013. "Annual Information Form." Whistler Blackcomb. December 20. Accessed January 20, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-reportsannual. 46 IBIS World Where Knowledge is Power. 2013. Ski and Snowboard Resorts in the US. December. Accessed January 17, 2014. http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653. 47 IBIS World Where Knowledge is Power. 2013. Ski and Snowboard Resorts in the US. December. Accessed January 17, 2014. http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653.
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Ski Resort Visits in North America, 2001-2013
Source: Whistler Annual Information Report, from
http://www.whistlerblackcomb.com/
Market Segmentation by Visitor Type in 2013
Source: 71392 Ski & Snowboard Industry Report, from www.ibisworld.com
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Consumer Participation (Threat)
Over the last couple of years there has been an obvious drop in the number of snow sport participants, as shown in the graph below. There has been a 22% drop in total consumers since the 2010/11 season48. While sports and fitness increase in popularity in the United States, snow sports had a drop of 11% in
201249. In Canada, although there is an increase participation in team sports, there is an overall decrease in the number of people who actively participate in sports50.
As seen by the graph below, the majority of snow sport participants are between the ages 25-44. There are minimal participants over the age of 65, which suggests that as the population ages the number of overall snow sport participants will continue to decrease. The downward trend of snow sport participation is a threat to the ski resort industry as a whole.
48 Snowsports Industries America. 2013. Total Number of Snow Sports Participants http://www.snowsports.org/Retailers/Research/SnowSportsFactSheet 49 2013. Consumers Lifestyles In The US. August 5. Accessed January 25, 2014. www.euromonitor.com. 50 n.d. Consumer Lifestyles in Canada . Accessed January 25, 2014. www.euromonitor.com.
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North America: Number of Consumers by Sport
Alpine Snowboarding Cross Country 15
10
5 (millions) 0
Number of Consumers Consumers of Number 2009/10 2010/11 2011/12 2012/13
Source: Made by Jessica Lane using Ski Industry Facts at
http://www.snowsports.org/Retailers/Research/SnowSportsFactSheet
North America: Age of Consumers by Sport
Alpine Snowboard Cross Country 50% 40% 30% 20% 10% 0% 6-17 18-24 25-44 45-64 65 +
Source: Made by Jessica Lane using Ski Industry Facts at
http://www.snowsports.org/Retailers/Research/SnowSportsFactSheet
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Political/Legal Environment
Skiing Associations within Canada (Opportunity)
The skiing industry within Canada is home to various associations that cover the country as well as those that focus on the province. These associations include the National Ski Area Association51, Fédération Internationale de Ski52, Canadian
Ski Instructors’ Alliance53, Canadian Association for Disabled Skiing54, Canadian
Ski Patrol55, Canada West Ski Areas Association56, Canada Ski Council57,
Canadian Association of Snowboard Instructors58 and the Canadian Snow Sports
Association59. All of these associations exist to put into place best practices and guidelines for a consistent and safe skiing experience within Canada. While dealing with and being aware of the number of associations and their requirements may be a cumbersome task for a skiing facility, the associations are an opportunity for skiing facilities. These associations hold the industry to a high standard, ensuring that all competitors are following the same regulations. Industry recommended practices created through these associations allow for a streamlined and productive management system for skiing facilities.
51 https://www.nsaa.org/ 52 http://www.fis-ski.com 53 http://www.snowpro.com/index.php/en 54 http://disabledskiing.ca 55 http://www.csps.ca 56 http://www.cwsaa.org 57 http://www.skicanada.org 58 www.casi-acms.com 59 http://www.canadiansnowsports.com/
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Requirements of entry for visitors to North America (Opportunity)
Destination skiers from abroad have to deal with entry requirements to
Canada. These requirements present an opportunity because of how simple Canada is to visit, as there are few restrictions to destination skiers looking to ski within
Canada. Citizenship and Immigration Canada does require some countries to have a visa60. International Experience Canada is further working towards making it easier for individuals from other countries to visit and work in Canada61. When comparing Canada’s relaxed practices of entering and leaving the country to those of the United States, where most of their mountain resort competition is home to, dealing with the United State’s Transportation Security Administration has been called excessive and unpleasant62 which could hinder international travel visits.
However, travel to the United States from Canada is significantly simpler. This provides a further opportunity for the ski resorts in Canada.
Mountain Resort Associations Act (Opportunity)
The Mountain Resort Associations Act is British Columbia’s act to allow mountain resorts in the province to facilitate their operations and management.
60 Internaitional Experience Canada. 2013. For Non-Canadians – Travel and Work in Canada http://www.international.gc.ca/experience/intro_incoming-intro_entrant.aspx 61 Whistler Blackcomb. 2013. Entry Requirements for Canada. http://www.whistlerblackcomb.com/plan- your-trip/getting-here/about-vancouver/entering-canada.aspx 62 The Wall Street Journal. July 2009. Is Tougher Airport Security Going Too Far? http://online.wsj.com/news/articles/SB10001424052970204556804574261940842372518
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This act is an opportunity because of the unique legal powers it grants to resorts.
British Columbia has recognized that mountain resorts are a key and growing part of their local economy and have created this act to give mountain resorts increased autonomy. The Resort Municipality is responsible for the zoning regulations and approval requirements for real estate development63. The table below also shows which level of ‘resort status’ will give the resorts additional tools.
TOOLS AVAILABLE UNDER THE MOUNTAIN RESORT STATUS RESORT ASSOCIATION ACT Local Governance and Services: - regional district service area - mountain resort improvement district New or expanded mountain resort - future mountain resort municipality development in a remote area Business Promotion: - mountain resort business improvement area - mountain resort association Local Governance and Services: - municipal boundary extension - mountain resort area designation with expanded New or expanded mountain resort municipal powers development adjacent to an existing municipality Business Promotion: - mountain resort business improvement area - mountain resort association Local Governance and Services: - regional district service area Existing resort development at some distance from an existing municipality Business Promotion: - mountain resort business improvement area - mountain resort association Local Governance and Services: - mountain resort area designation with expanded municipal powers Existing resort development within an established municipality Business Promotion: - mountain resort business improvement area - mountain resort association Source: A Guide to British Columbia’s Mountain Resort Associations Act
63Whistler Blackcomb Holdings . 2013. "Annual Information Form." Whistler Blackcomb. December 20. Accessed January 20, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-reportsannual.
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Developmental Agreement and First Nation Claims (Threat)
The Development Agreement with the province of British Columbia allows skiing facilities and resorts to operate on Crown Land (managed by the Ministry of
Forests, Lands and Natural Resource Operations64). After signing an agreement, the firm has a renewal period in which they can also work to change the agreement. The Agreement currently requires firms to pay royalties to the province of 2% of their gross revenue earned from the use of lifts and other mountain recreational improvements65. This fee can be assessed for an increase every ten years by up to 1%. This renewal period has also opened up the process of consultation with First Nations. For example, the Squamish First Nation and the
Lil’wat First Nation can currently hold firms in the British Columbia area to consultation and accommodation requirements in their renewal period66. This poses a threat as the First Nations are interested in asserting aboriginal title to the land and may be interested in changing the Developmental Agreement.
64 Ministry of Forests, Lands and Natural Resource Operations. Crown Land Uses (Program Areas) http://www.for.gov.bc.ca/land_tenures/crown_land_application_information/program_areas.html 65Whistler Blackcomb Holdings . 2013. "Annual Information Form." Whistler Blackcomb. December 20. Accessed January 20, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-reportsannual. 66Whistler Blackcomb Holdings . 2013. "Annual Information Form." Whistler Blackcomb. December 20. Accessed January 20, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-reportsannual.
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Liquor Laws & Regulations (Threat)
The Canada West Ski Areas Association has identified the British Columbia liquor laws and regulations as a threat to the ski resorts in British Columbia67.
While this has no bearing on local or national patrons who are accustomed to the province’s drinking age of 19 and the hours allowing alcoholic beverages to be served, this does not align with other countries’ cultural norms around the consumption of alcohol. British Columbia’s liquor regulations require minors to leave any establishment that serves alcohol by 8:00pm68 which is an unappealing factor to international families who are choosing their vacation destination.
Similarly, since the drinking age in the United States is 21 years of age, international tourists – including those from Canada – would be hesitant about visiting a resort in the United States if they were looking to consume alcohol during their trip. Liquor laws also contain the consumption of alcohol to a small number of designated areas. This restricts the freedom that resorts have in hosting outdoor events on their property in which they can serve alcohol. Furthermore, liquor laws and regulations come with bureaucracy that is time consuming for the business to deal with.
67 CWSAA. 2013. CWSAA Presentation to: The BC Liquor Policy Review Committee. http://engage.gov.bc.ca/liquorpolicyreview/files/2013/10/Canada-West-Ski-Areas-Association.pdf 68 Ministry of Justice. Liquor Control and Licensing Branch. http://www.pssg.gov.bc.ca/lclb/
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Summary of Macro Environment
Opportunities
In the technological environment, there is a growing interest in online purchases for travel and entertainment tickets within Canada, which provides a sales channel for the ski resort industry. RFID lift tickets offer to reduce chairlift wait times, eliminate paper waste, and connect customers through their smartphone to the resorts. Automated snowmaking technology enables resorts to have enough snow to generate revenue, even with the growing climate change such as warmer winters and less annual snow coverage. In the economic environment, growing national gross domestic product in both Canada and United States demonstrates a strengthening economy. The increase in disposable income in North America illustrates a reliable source of revenue for the industry as consumers will have more funds to spend at ski resorts. In the socio-cultural environment, the duration of vacations in Canada are increasing and the number of consumers who travel for leisure in United States is increasing, providing an increase in revenue for the industry. Finally, in the political and legal environment there are various skiing associations within Canada that put into place best practices and guidelines for a safe ski experience as well as ensure that all competitors follow the same regulations. Canada has relaxed requirements of entry for visitors, making it easier for destination travelers to come to Canada to ski. It is also quite simple for tourists
Whistler Blackcomb Holdings Inc. Page 47 to travel across the Canada-United States border. Additionally, Mountain Resort
Associations Act grants mountain resorts unique legal powers.
Threats
In the economic environment, the CAD dollar continues to decrease in value compared to the US dollar. Canadian consumers will be more likely to spend their disposable income in United States where they can get more out of their money.
Gas prices are not decreasing, rather hovering around similar rates, this impacts consumer’s decision to be less likely to travel to large ski resorts for ski vacations.
In the socio-cultural environment, recreation and entertainment expenditures have been decreasing in North America. The population is aging at an increasing rate and the younger population is decreasing; therefore, there are fewer consumers in the ski resort target market. There is a decrease in destination visitors to ski resorts, which could significantly impact firms’ profit, especially since this classification of visitors contributes a larger portion of revenue over local visitors. The consumer participation in snow sports has been decreasing in North America. In the political and legal environment, the Developmental Agreement gives First Nation claims to the crown land in British Columbia and there is threat that they may be interested in changing the Development Agreement Act for their best interest. National liquor laws in both Canada and the United States, which have a higher minimum drinking age than some other countries, limit children and young adults from certain
Whistler Blackcomb Holdings Inc. Page 48 establishments after 8pm which can be unappealing to international destination travellers. These threats in economic, socio-cultural and political, legal can potentially have a negative impact on the ski resort industry.
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PART II
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Part II – Industry Analysis
Industry Overview
The skiing facilities industry (NAICS 71392) was home to 224 facilities in
Canada as of the end of 201269. It is therefore mostly made up of smaller facilities that are privately owned, with skiing facilities that aim to cater to regional guests.
With a total of 18,528,000 skier visits across Canada, British Columbia accounts for 35% of them. The total operating revenue for the industry in 2011 was
$967,100,00070, an 8.2% increase from 2010.
The revenue within the US skiing facilities industry was $2,615,600,00071 in
2013, which was a 2.5% increase from the previous year and it is projected to continue growing over the next few years (as shown in the graph below), a trend which Canada will likely follow.
69 Canadian Industry Statistics. Dec 2012. Establishments: Skiing Facilities (NAICS 71392) https://www.ic.gc.ca/app/scr/sbms/sbb/cis/establishments.html?code=71392&lang=eng 70 Statistics Canada. 2009-2011. Summary statistics for the amusement and recreation industry, Canada http://www.statcan.gc.ca/pub/63-248-x/2013001/t001-eng.htm 71 IBIS World Where Knowledge is Power. 2013. Ski and Snowboard Resorts in the US. December. Accessed January 17, 2014. http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653.
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Ski & Snowboard Industry Revenue in the United States, 2011-2015 2,850.00 2,800.00
2,750.00
2,700.00 2,650.00 2,600.00
2,550.00 Revenue ($m) Revenue 2,500.00 2,450.00 2,400.00 2011 2012 2013 2014 2015 Years
Source: Made by Lindsay Crone using the 71392 Ski & Snowboard Industry
Report, from www.ibisworld.com
Strategic Group Map
The strategic map shows skiing facilities, classified in the NAICS as 713920
(skiing facilities) and 721113 (resorts). They are divided into Canadian and
American resorts, those that pose competition for destination travelers. They have been plotted by price of their daily ticket and skiable acres. These variables are important to determine whether consumers will find value in the cost of admission to determine which ski resorts are most competitive for their price.
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As shown through the map above, American ski resorts generally are more expensive per skiable acre. The facilities are still closely competitive throughout both regions with their price and skiable acreage as these facilities would find their competitive advantage in offering additional activities or high quality resorts. Their main offerings, however, have to be comparable to their competitors in order to survive within the market.
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Five Forces Analysis
Rivalry or direct competitors – 8/10
Firm Concentration
There are approximately 760 ski resort locations in North America72 with
477 in the United States and the remaining in Canada73. Competition between ski resorts is based on various factors including the quality of skiing available, the range of services offered, weather conditions, proximity to transport networks and population centers, and pricing74. Ski resorts compete for both domestic and destination visitors. In the United States, four of the five states with the highest number of ski resorts are Colorado, New York, Michigan and Vermont75. The breakdown of visitors in the United States by region is shown below. The largest ski resorts in the United States that compete on the North American level for high quality resorts are Vail Resorts, Boyne Resorts, Intrawest Corporation, and
POWDR Corporation. Together, they account for 54.5% of the US ski resort revenues76. All four of these competitors envelope many ski resort locations across
72 Vail Resorts. n.d. "Annual Reports." 2013 Proxy and Form 10-K. Accessed January 27, 2014. http://investors.vailresorts.com/annuals.cfm. 73 IBIS World Where Knowledge is Power. 2013. Ski and Snowboard Resorts in the US. December. Accessed January 17, 2014. http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653. 74 IBIS World Where Knowledge is Power. 2013. Ski and Snowboard Resorts in the US. December. Accessed January 17, 2014. http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653. 75 IBIS World Where Knowledge is Power. 2013. Ski and Snowboard Resorts in the US. December. Accessed January 17, 2014. http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653. 76 IBIS World Where Knowledge is Power. 2013. Ski and Snowboard Resorts in the US. December. Accessed January 17, 2014. http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653.
Whistler Blackcomb Holdings Inc. Page 55 the United States and a few in Canada. The Canadian ski resort market is mainly made up of privately held firms. Whistler Ski Resort, however, is public and represents 2.6% of total visitors in North America77. The size of the provincial markets is illustrated in the graph below. As shown, Ontario, Quebec, and British
Columbia represent the majority of the Canadian market78. Top competitors in
Canada also include Lake Louise Resort and Revelstoke Resort. Although there are few firms in North America, they are concentrated in areas where the climate and geography are ideal. For this reason, there is a high amount of competition.
There has been a trend of decreasing competition. The United States had 735 ski resorts across the country in 1983 and only 477 in 201379. This is largely due to firms acquiring additional ski resorts in order to obtain economies of scale. This tactic is also used to diversify in order to mitigate the many risks in this industry, including the unpredictable climate.
77Whistler Blackcomb Holdings . 2013. "Annual Information Form." Whistler Blackcomb. December 20. Accessed January 20, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-reportsannual. 78Canadian Ski Council. n.d. Canadian Skier and Snowboarder Facts and Stats. Accessed January 20, 2014. http://www.skicanada.org/. 79 IBIS World Where Knowledge is Power. 2013. Ski and Snowboard Resorts in the US. December. Accessed January 17, 2014. http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653.
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Source: 71392 Ski & Snowboard Industry Report, from www.ibisworld.com
Source: 71392 Ski & Snowboard Industry Report, from www.ibisworld.com
Size of Provincial Markets in Canada
Source: Facts and Stats Report, from http://www.skicanada.org/
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Foreign Competition
Skiers and snowboarders who are looking to travel to a ski resort may also look at resorts in Europe as potential destinations. The most popular are in France,
Austria, Switzerland, and Italy80. This kind of trip will usually be much more costly and require a longer time commitment so this would only represent a very small portion of visitors of North American resorts. It is possible for European firms to acquire smaller sized ski resorts in Canada or the United States which would cause them to compete more directly with the North American firms.
Therefore, there is a small threat of foreign competition.
Industry Growth
The ski resort industry, included in the amusement and recreation industry represented by the NAICS number 71300, was greatly affected in 2008 and 2009 by the economic crash in Canada and the United States, as shown in the graph below. In Canada, national GDP has continued to show growth from 2007 to
201181; however, the industry only had a growth rate of -1.8% and 1.3% in 2010 and 2011 respectively82. In the United States, while national GDP decreased by 2%
80 On The Snow. 2014. Skiing the big four: France, Austria, Switzerland & Italy http://www.onthesnow.ca/europe/ski-resorts.html 81 Statistics Canada. 2007-2011. National GDP http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=3840038&paSer=&pattern=&stByVal=1&p1= 1&p2=50&tabMode=dataTable&csid= Table 384-0038 82 Statistics Canada. 2010-2011 http://www5.statcan.gc.ca/cansim/a47 Table 379-0031
Whistler Blackcomb Holdings Inc. Page 58 in 200983, the industry GDP dropped by almost 6%84. The amusement and recreation industry GDP has continued to grow, but at a slower growth rate than the national GDP.
Annual National and Industry GDP Growth, 2008-2011 Note: Industry represented by NAICS 71300 Amusement & Recreation
USA GDP USA Industry CAN GDP CAN Industry 6%
4%
2%
0% 2008 2009 2010 2011 -2%
-4%
-6%
Source:Made by Jessica using Statistics Canada at http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=3840038&paSer=&
pattern=&stByVal=1&p1=1&p2=50&tabMode=dataTable&csid
and Bureau of Economic Analysis at http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&91
0=x&911=0&903=5&904=2007&905=2013&906=a
83 U.S. Bureau of Economic Analysis, 2008-2009. http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&910=x&911=0&903=5&904=2 007&905=2013&906=a 84U.S. Bureau of Economic Analysis. 1998-2012. GDP by Industry Data http://www.bea.gov/industry/gdpbyind_data.htm
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Capacity
If a ski resort wishes to increase its capacity, it must install additional chair lifts. A resort’s capacity is also dependent on the amount of mountain surface available. Chair lifts can increase a resort’s capacity by 500-3600 people per hour depending on the type and length of the lift85. The cost of these lifts is quite substantial and often includes a significant amount of installation and maintenance costs. The process of installing a new chair lift, thus increasing capacity, can be lengthy as well due to the amount of work needed to install the large pieces of equipment. Furthermore, additional time is also needed after installation in order to conduct the necessary safety and legal procedures before the chair lift can be used by the resort visitors.
Threat of Entry - 2/10
The threat of entry within the ski resort industry is very low. The cost to develop untouched mountains into skiing facilities is very high, requiring a large amount of capital. There are also many bureaucratic barriers when trying to purchase the land required from the government.
85 SkiResort. 2013-2014. New lifts and cable cars North America http://www.skiresort.info/ski-lifts/new-ski- lifts/north-america/
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Resort Development Regulations
To build a completely new resort within British Columbia, for example, there are many steps to take and the prospective builder must apply through the
Ministry of Forests, Lands and Natural Resource Operations. The application process requires a master plan, management plan, and fees of up to $15,00086 payable to the province. Master Development Agreements have a minimum required security of $50,00087. The company must comply with the Land Act88 and the Resort Timber Administration Act89 getting through environmental and other regulations. Annually, resorts must pay the province either a percent of their land value, rate against revenues, royalties, or a fixed amount90.
The regulations and fees surrounding a greenfield development of a ski resort require a substantial amount of cash and planning upfront. Having a ski resort large enough to compete in the North American market is very unlikely.
86 Government of British Columbia. April 2013. Land Tenure Purpose and Application Fees http://www.for.gov.bc.ca/Land_Tenures/documents/cabinet/fees-land.pdf 87 Government of British Columbia. Jan 2013. Land Use Operational Policy All Seasons Resort http://www.for.gov.bc.ca/ftp/mountain_resorts/external/!publish/web/asr/ASR_Policy.pdf 88 Government of British Columbia. 1996. Land Act http://www.bclaws.ca/Recon/document/ID/freeside/00_96245_01 89 Government of British Columbia. 2006. Resort Timber Administration Act http://www.bclaws.ca/Recon/document/ID/freeside/00_06030_01 90 Government of British Columbia. 2011. Land Policy Pricing. http://www.for.gov.bc.ca/Land_Tenures/documents/policies/pricing.pdf
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Capital Intensive
The skiing resort industry is one that is very capital intensive. The industry requires these resorts to be equipped with large and expensive pieces of equipment that are required to withstand the cold temperatures they will inhabit. This can include ski lifts, which to attract consumers has to be competitive in their number of occupants and total height, it also includes machines for snow creation, which would ideally cover the entirety of the resorts’ main hills. Furthermore, as a resort many buildings for such things as lodging and dinning are required which require a substantial investment to build or rent. To demonstrate the capital investments required from firms in this industry, a table showing the capital expenditures as percent of revenue is shown below. This table includes two publicly traded ski resorts in North America. As shown, capital expenditures account for a large percent of revenue because these firms rely on their capital to remain up and running and competitive.
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Capital Expenditures as % of Revenue, 2012 and 2013
Whistler91 Vail Resorts92 2013: Revenue 240,780,000 1,120,797,000 Expenditures* 24,656,000 94,946,000
Capital Expenditures 10.2% 11.8% as a % of Revenue 2012: Revenue 236,372,000 1,024,394,000 Expenditures* 10,617,000 132,625,000
Capital Expenditures 4.5% 12.9% as a % of Revenue *(on property, buildings, equipment and intangibles)
The assets pertaining to the property and equipment of a skiing resort are also very high. As shown in the table below, Whistler Blackcomb’s property, plant and equipment assets are 38% of its total assets and Vail Resorts’ property, plant and equipment assets are even greater at 51.4% of its total assets. These assets have been built up and acquired over a number of years so for a new entrant to compete at the same calibre as Whistler Blackcomb and Vail Resorts it would require an immense amount of starting capital. A new entrant would pose little risk to the well established ski resorts within North America.
91 Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed Januay 27, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1 92 Vail Resorts Reports Fiscal 2013 Fourth Quarter and Full Year Results and Provides 2014 Outlook http://investors.vailresorts.com/releasedetail.cfm?ReleaseID=793621
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Capital Assets Whistler Vail Resorts93 2013: Property, plant and equipment 322,316,000 1,169,288,000 Total assets 846,453,000 2,275,422,000 Capital assets % of total assets 38.0% 51.4% 2012: Property, plant and equipment 328,414,000 1,049,207,000 Total assets 864,602,000 1,927,614,000 Capital assets % of total assets 37.9% 54.4%
The assets required for operating a skiing resort also require a large investment and do not have an unlimited lifespan, as shown below by Whistler
Blackcomb’s expected useful lives of its assets. Thus, a large investment is required to update or replace the assets when required.
The expected useful lives are as follows: Asset category Years Buildings and building improvements 5 – 40 Ski lifts and lifts maintenance 5 – 30 Area improvements 5 – 20 Automotive, furniture and other equipment 3 – 10
According to the Western Canadian Ski Industry, 42% of Western Canadian
Ski Resorts were not profitable in 200894. This could be due to the capital intensive nature of the industry; if companies are unable to spend enough on their capital expenditures it may hurt their revenue. The large chance of being unprofitable is also a deterrent for new firms considering entering the market.
93 Vail Resorts Stockholders Proxy Statement. 2013. http://files.shareholder.com/downloads/MTN/0x0x700349/AA1325D7-E507-4B79-9BC8- 4E2F5395C900/2013_Proxy_Statement_and_10-K_Wrap.pdf 94 CWSAA. 2013. CWSAA Presentation to: The BC Liquor Policy Review Committee. http://engage.gov.bc.ca/liquorpolicyreview/files/2013/10/Canada-West-Ski-Areas-Association.pdf
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Source: http://engage.gov.bc.ca/liquorpolicyreview/files/2013/10/Canada-West- Ski-Areas-Association.pdf Substitutes – 3/10
The skiing resort industry faces few direct substitutes; however, there are other industries in which consumers may choose to spend a vacation or leisure time. There is no substitute for a skiing resort that can offer travellers accommodations as well as a high intensity activity. There are few experiences similar to skiing/snowboarding available in other industries within North America.
Skiing resort prices are not dictated by substitutes so much as they are dictated by the number of competitors within the industry. Substitutes for skiing facilities appeal to consumers who are looking for recreation that is closer to home and inexpensive.
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NAICS codes for related industries to ski resorts:
72 - Accommodation and food services
721 - Accommodation services
7211 - Traveller accommodation
72111 - Hotels (except casino hotels) and motels
721113 - Resorts
71 - Arts, entertainment and recreation
713 - Amusement, gambling and recreation industries
7139 - Other amusement and recreation industries
71392 - Skiing facilities
The closest substitutes for skiing facilities would be other amusement and recreation industries. To determine their threat, one would look at consumer spending to view their respective popularity – illustrated below through operating income of firms in these industries.
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Source: Statistics Canada at http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/arts60a-eng.htm Between 2009 and 2011, skiing facilities saw a 1% increase in operating revenue95. The closest substitute, golf courses and country clubs (because they can offer lodging similar to ski resorts) saw a 1% decrease in operating revenue. There are few switching costs for consumers choosing between these two recreations.
The main costs for consumers to compare for these activities are the lift cost for the ski lift against the cost of a game of golf as well as the cost of ski/snowboarding equipment against the cost of golf clubs (both of which can be rented).
95 Statistics Canada. 2009-2011. Amusement and recreation, summary statistics http://www.statcan.gc.ca/tables- tableaux/sum-som/l01/cst01/arts60a-eng.htm
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Similar activities to skiing/snowboarding include biking, kayaking, hiking, snowmobiling, and team sports. These activities alone however do not boast resorts or lodgings and thus lack some appeal to consumers looking to go on a destination vacation. For those consumers solely looking for local recreation, these activities can pose a threat to the regional consumers as they are convenient substitutes.
Power of Suppliers – 8/10
The most essential thing to a ski resort is the land it operates on; ski resorts could not operate without the mountains they are built on. So, important suppliers in the ski industry are the federal government both Canada and the United States.
In Canada, 89% of the land is crown land owned by the government – 48% by the provincial government and 41% by the federal government96. The amount of land in a given province ranges in percent owned by federal verses provincial government. In British Columbia, which had the highest number of skier visits at
35% of the total in 2011/12, the provincial government owns 94% of the land97. In the United States, the Rockies, Northwest, and Pacific had the highest skier visits; they also have the high concentration of government owned land. Colorado has
36.6% state land owned by the government, which translates into roughly 90% of
96V.P.Neimanis. 2013. Crown Land. December 15. Accessed January 25, 2014. http://www.thecanadianencyclopedia.com/en/article/crown-land/. 97British Columbia Government. 2010. Ministry of Forests, Lands and Natural Resource Operations . November 29. Accessed January 24, 2014. http://www.for.gov.bc.ca/mountain_resorts/crown_land/index.htm.
Whistler Blackcomb Holdings Inc. Page 68 the skiable acres on government land98. As the graph below depicts, the top ten states with the highest percent of government owned land are all located in western
United States99. The two governments in North America own large portions of the land that many ski resorts operate on; therefore, the supply of land is highly concentrated.
States with highest % of Government Land
90 84.5 80 69.1 70 57.4 60 53.1 50.2 48.1 45.3 50 42.3 41.8 36.6 40 30 20 10
0 % total% landowned by Gov't
Top 10 States
Source: Made by Julia Lesway using the website
http://strangemaps.wordpress.com/2008/06/17/291-federal-lands-in-the-us/
Ski resorts request special permit orders allowing them use of the land for the purpose of ski facilities. In the United States, these permits are managed by the
98Denver Business Journal . 2013. Will the federal shutdown affect Colorado ski areas? . October 1. Accessed January 23, 2014. http://www.bizjournals.com/denver/news/2013/10/01/will-the-federal-shutdown-affect.html. 99n.d. 291-Federal Lands in the US. Accessed January 25, 2014. http://strangemaps.wordpress.com/2008/06/17/291-federal-lands-in-the-us/.
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U.S. Forest Service100 and in Canada, individual provinces manage the crown land and issue the special purpose permits. In both countries the managing authority enters into a tenure agreement for a specific purpose and set period of time101. The permits limit the company’s operations on the land. In United States one type of permit can be terminated upon a 30 day warning if it is determined that the public interest requires it to be, the other allows permits to be terminated at any point.
Because there are no substitutes for the land, the government is essentially a “price maker” in terms of the lease fees for the land. In Canada, ski resorts may pay royalties on gross revenue generated from lift operations102. Ski resorts are so dependent on the land and the continued ability to have access to enough water sources to make snow so they must function under different laws, permits, licenses and contractual agreements103. Due to the dependability on the government as a supplier of land, the power of suppliers is quite high.
100IBIS World Where Knowledge is Power. 2013. Ski and Snowboard Resorts in the US. December. Accessed January 17, 2014. http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653 101British Columbia Government. 2010. Ministry of Forests, Lands and Natural Resource Operations . November 29. Accessed January 24, 2014. http://www.for.gov.bc.ca/mountain_resorts/crown_land/index.htm. 102Whistler Blackcomb Holdings . 2013. "Annual Information Form." Whistler Blackcomb. December 20. Accessed January 20, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-reportsannual. 103 IBIS World Where Knowledge is Power. 2013. Ski and Snowboard Resorts in the US. December. Accessed January 17, 2014. http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653
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Power of Buyers: Customers and Consumers – 3/10
Customers
In the ski resort industry there are no distributors or retailer customers.
Consumers come to the ski resorts to use the facilities offered without the help of corporate buyers. As consumers go directly to the source to purchase their ski lift tickets backward integration is not an issue.
Consumers
Ski industry buyers consist of final end buyers measured by ski visits.
Specifically, a ski visit is calculated by the number of ski tickets or ski passes used in a ski season. In Canada and the United States in the 2012/13 ski season the total number of buyers was 75.6 million people104. The number of buyers has been relatively similar for the last 12 years as shown below.
104Whistler Blackcomb Holdings . 2013. "Annual Information Form." Whistler Blackcomb. December 20. Accessed January 20, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-reportsannual.
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Ski Resort Visits in North America: 2001-2013
Source: Whistler Annual Information Report, from
http://www.whistlerblackcomb.com/
The buyers for the ski industry are fragmented – 44% is from local visitors, referring to people that live close enough to make a day trip, and 56% of revenue comes from destination travellers, referring to consumers out of the province/state or international travelers. Ski resorts in the United States are concentrated to four regions which account for 68.2% of total ski resorts: the Rocky Mountains, New
England, Mid-Atlantic and the Great Lakes Region105. As a result, consumer options are limited to those regions, lowering their buyer power. Since ski resorts are concentrated to specific areas and consumers can use the same equipment at any ski resort, the switching costs are low. Differences of ski resorts are
105IBIS World Where Knowledge is Power. 2013. Ski and Snowboard Resorts in the US. December. Accessed January 17, 2014. http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653.
Whistler Blackcomb Holdings Inc. Page 72 determined though quality of skiing available, facilities, services offered and weather conditions. However, buyers have some power as 54.4% of ski revenue in
2012/13 came just from the ski facilities themselves, meaning the revenue generated from lift tickets is a significant amount of firm’s total revenue106.
Mountain Revenue Services offered in the Ski Industry
Source: 71392 Ski & Snowboard Industry Report, from www.ibisworld.com
Ski resorts set their own prices as they are “price makers”; these prices have been increasing over time. The ski resort industry consists of a wide range of resorts from small to large. The ticket yield, which is calculated by dividing total ski related lift ticket revenue by the total number of skier visits have been increasing. From the 2001/02 ski season to the 2012/13 season, the average ticket yield of skier visits grew by an annual rate of 3.7% (see graph below). In the
2012/13, the average ticket yield per ski visit in the United States was the highest
106IBIS World Where Knowledge is Power. 2013. Ski and Snowboard Resorts in the US. December. Accessed January 17, 2014 http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653.
Whistler Blackcomb Holdings Inc. Page 73 to date at US$42.28107. Ski resorts have control over their prices as they have been increasing them for the 12 years. Thus, the power of buyers is relatively low.
Industry Effective Ticket Price, 2001-2013
Source: Whistler Annual Information Report, from
http://www.whistlerblackcomb.com/
Five Forces Summary
The Porter Five Forces analysis helps to determine how attractive the ski resort industry is. The analysis done allows an examination into the industry and offers a ranking for each category out of ten to determine the intensity of each force. As a whole the industry received a score of 4.8/10 (see table below) indicating that it is somewhat an attractive industry. In 2013, the industry in United
107 Whistler Blackcomb Holdings . 2013. "Annual Information Form." Whistler Blackcomb. December 20. Accessed January 20, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-reportsannual.
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States had a 2.5% increase in revenue from the year before with anticipated growth to continue next year. However, ski resorts are still estimated to be performing below pre-recession levels by an average rate of 0.5%.
Porter's Forces /10 Rivalry Or Direct Competitors 8 Threat of Entry 2 Substitutes 3 Power of Suppliers 8 Power of Buyers 3 Average Rating of the Industry 4.8
Rivalry or direct competitors are fairly intense so it was given a score of
8/10. Ski resorts are highly concentrated in North America to areas where the climate and geography are ideal. The large ski resorts in Unites States dominate the market share by offering a higher level of quality resorts. The biggest firms, Vail
Resorts, Boyne Resorts, Intrawest Corporation and POWDR Corporation account for 54.4% of the US ski resort revenue. Thus, illustrating how highly competitive the industry is.
Threat of entry was ranked 2/10 because there is a low risk of new entrants.
The cost to develop untouched mountains and the land around them is extremely
Whistler Blackcomb Holdings Inc. Page 75 expensive and it is capital intensive once developed. As well, there are numerous regulations and environmental aspects that must be met.
Substitutes were ranked 3/10 because the intensity is low. There are no direct substitutes for skiing and snowboarding; however, local consumers can choose other winter sports as a replacement. Destination travellers can go to a different vacation destination such as a beach resort.
The power of suppliers was ranked 8/10. In North America, the government owns the majority of the land with which ski resorts operate on. Ski resorts depend on the approval of special purpose permits, in order to lease the land, giving the government a lot of power. The government has say in all aspects of the development and use of the land, which demonstrates the intensity of the suppliers.
The power of buyers is ranked 3/10 because it is relatively low. Consumers are limited to the regions in North America that the ski resorts are concentrated which limits their power. Prices for lift tickets have been increasing over the past few years which demonstrate the control resorts have over setting them.
Consumers in the ski resort industry are “price takers”.
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Driving Forces
Shifting Demographics
The socio-culture trend which is negatively affecting the ski resort industry is that of the increasing age of the North American population. The 0-17 age group has been decreasing while the 45-64 and 65+ age groups have been increasing.
This is a threat to the industry as the former group is the ideal age to attract consumers to skiing and snowboarding. The latter group is the age in which skiers and snowboarders typically retire from the sport. With a decrease in the target market, the industry will be challenged to effectively grow its consumer base and may require significant changes to cope with this shift.
Innovations in Online Commerce and RFID
The new ski commerce is increasing the buying power of consumers. They are able to easily compare rates and deals from ski resorts and facilities and make increasingly informed decisions. With the continuously growing popularity of e- commerce, utilizing online platforms to sell tickets and share pricing information is a vital step for firms looking to stay competitive in today’s market. Through the implementation of e-commerce, as well as the utilization of RFID chips in lieu of paper passes, firms within the industry are able to cut costs. By implementing
RFID chips, firms are able to reduce wait times for their ski lifts and can increase
Whistler Blackcomb Holdings Inc. Page 77 their overall capacity. However, reducing the wait in lines also creates a competitive advantage for skiing facilities, as currently it is estimated that when skiing customers spend about half of their time waiting or on a chair lift. Overall, the new technologies entering the industry are creating opportunities for firms to become increasingly competitive at lower costs to themselves.
Gasoline Price Increase
A decrease in local visitors and a shift to recreational activities closer to home may be in part caused by the price of gasoline. For regional visitors, to go to skiing facilities cars are their easiest mode of transportation; however, the mountains are typically a good distance from cities and therefore a few hours to drive to get to the ski hill may seem like an inefficient use of the consumers’ time and money on gasoline. This is increasing the threat of recreational substitutes for those local consumers looking for physical activity that is closer to home and less expensive and time consuming than taking a trip to go skiing or snowboarding.
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Summary of Industry Analysis Suppliers and Low threats buyers have from strong substitutes positions
High High barriers competition to entry in North Attractive America Industry
After thorough analysis of the ski resort industry using specific factors such as the five forces analysis, industry growth rate, and the driving forces, it is concluded that overall the industry is moderately attractive. There is moderate profit potential within the industry. While there are high barriers to entry there is market that is growing, consumer spending on skiing facilities in Canada has increased 1% from 2010 to 2011108 and the revenue outlook within the United
States skiing market is projected to continue to increase by 1.7% in 2014109.
There are a large number of ski resorts and facilities across North America, which competes for domestic and international consumers. Even though
108 Statistics Canada. 2012-2013. Tourism Demand in Canada http://www5.statcan.gc.ca/cansim/pick- choisir?lang=eng&p2=33&id=3870001 109 IBIS World. Industry Outlook – Revenue Outlook http://clients1.ibisworld.com/reports/us/industry/industryoutlook.aspx?entid=1653#IO
Whistler Blackcomb Holdings Inc. Page 79 competition is high, the growth makes for an attractive industry, as there are opportunities for profit. There are also opportunities to be purchased by a larger resort who may be interested in increasing its economies of scale.
The existence of resort development regulations that come with high fees and the inherent need for a large investment in capital makes the industry difficult to enter. This however would only be a barrier for those businesses lacking capital; for those with the assets to enter the industry there is potential for profit.
Further increasing the industry’s attractiveness is the lack of direct substitutes. Destination travelers may be open to different vacations, such as warm weather resorts, but for the majority of domestic consumers there are few substitutes to skiing or snowboarding. This is balanced with the power that suppliers and buyers have in the industry. Because the land skiing facilities need to operate on are owned by their respective province or state, those governments have the power to regulate and price their land to what they dictate. Buyers also have significant power because of the aforementioned high level of competition within the industry. Forces such as e-commerce websites allowing direct comparisons of ski resort offering and pricing is further giving the buyer increased power.
Technology is giving ski resorts and facilities a new and less expensive way to compete.
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PART III
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Part III – Internal Environment
Whistler Blackcomb, located 125km north of Vancouver, British Columbia, is North America’s largest and most visited mountain ski resort destination and one of the world’s premier mountain resort destinations110. The resort is comprised of two adjacent and integrated mountains, Whistler Mountain and Blackcomb
Mountain, with a total of over 200 runs, 8,171 acres of skiable terrain and the highest lift capacity in North America111. One of its most notable features is its mile-high vertical drop. After hosting the 2010 winter Olympic and Paralympic
Games, Whistler Blackcomb offered its IPO on the TSX in 2010.
It was fishing that first drew tourists to Whistler – they travelled to Rainbow
Lodge on Alta Lake to cast for trout with legendary guides Alex and Myrtle
Philip112. Rainbow Lodge s became a very popular summer vacation spot by the early 1920s. In 1960, a group of Vancouver businessmen, led by Franz
Wilhelmsen, formed Garibaldi Lifts Limited to develop an alpine ski area on
London Mountain (soon renamed to Whistler Mountain) which opened February
1966. Blackcomb Mountain (owned by Intrawest Corporation) opened for business in 1980 and became Whistler’s largest competition until March 1997 when
110 Whistler Blackcomb. n.d. "2013 Press Releasess." MD&A Report 2013. Accessed January 31, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-news&nyo=1 111 Whistler Blackcomb. n.d. "2013 Press Releasess." MD&A Report 2013. Accessed January 31, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-news&nyo=1 112 Whistler Blackcomb. n.d. History From Fishing to Freeskiing. Accessed January 31, 2014. http://www.whistlerblackcomb.com/about-us/history.aspx.
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Whistler Mountain Ski Corporation and Intrawest Corporation merged to create one of the biggest mountain resort companies in the world. Since 2000, Whistler
Blackcomb has invested heavily in growing the ski resort, both on the mountain and in the village at the base of the two mountains. Intrawest Corporation eventually sold its shares in Whistler Blackcomb with the last being sold in 2012.
Whistler Blackcomb has over 2.5 million visits a year from regional guests in the Vancouver area as well as tourists from across North America113. Over the last ten years, the firm has averaged approximately 11% of the market share of skier visits in Canada and approximately 2.7% of the skier visits in the North
American market114. Due to the fact that there are minimal publicly traded ski resort firms in North America, the market share of total industry revenue is not something that is readily available. In 2013, Whistler Blackcomb had total revenues of $240.8 million, which was an increase of 1.9% from 2012 with a net income of $13.3 million115. The company currently has 470 full time employees and, due to the nature of the ski industry, significantly more seasonal employees at
3,200116.
113 Whistler Blackcomb. n.d. "2013 Press Releasess." MD&A Report 2013. Accessed January 31, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-news&nyo=1. 114 Whistler Blackcomb. n.d. "2013 Press Releasess." MD&A Report 2013. Accessed January 31, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-news&nyo=1. 115 Whistler Blackcomb. n.d. "2013 Press Releasess." MD&A Report 2013. Accessed January 31, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-news&nyo=1. 116 Whistler Blackcomb Holdings . 2013. "Annual Information Form." Whistler Blackcomb. December 20. Accessed January 20, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-reportsannual.
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Note on Competitors Analyzed
Vail Resorts Incorporated (“Vail”) operates eight ski resorts across the
United States including its flagship location, Vail Mountain, which accounts for the most skier visits in the country. The company went public in 1997 on the New
York Stock Exchange under the symbol MTN. Vail Resorts is arguably the largest ski resort firm in the North American industry and therefore is one of Whistler’s largest competitors. Vail operates the following ski hill locations:
. Vail . Heavenly . Beaver Creek . Northstar California . Breckenridge . Kirkwood . Keystone
Intrawest Corporation (“Intrawest”) has also been selected as a direct competitor. Intrawest operates seven ski resorts in both Canada and the United
States. The company was listed on the Toronto Stock Exchange and the New York
Stock Exchange until 1996 when it acquired a private firm; however, in November
2013, it filled an initial public offering on the New York Stock Exchange under the symbol SNOW. Because this firm operates large resorts in both Canada and the
United States, it is a strong competitor to Whistler. Since the company has just recently gone public, there is limited information available. However, since there are no other public firms in the ski industry across North America, we have chosen to analyze this company using the information that is available and using our
Whistler Blackcomb Holdings Inc. Page 86 professional judgement when needed. On January 30, 2014, Intrawest Corporation filed an S-1 Form to the United States Securities and Exchange Commission which provides financial and other information regarding the firms operations. Intrawest operates the following ski hill locations:
. Steamboat . Snowshoe . Mont Tremblant . Blue Mountain . Stratton
Note on Comparability of Currencies
Whistler states its financial reports in Canadian dollars while the other two firms being analyzed report them in US dollars. The financials have been left in their currency as stated in the corresponding annual reports as ratios, percentages, and trends can be analyzed in this state. However, when comparing actual dollar amounts, the financials of Whistler have been translated to US dollars using the following table:
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Primary Value Chain Activities
Supply Chain Management (Neutral)
Whistler’s supply chain consists of the procurement of general supplies, food and equipment. These assets are then sold or rented directly to the consumers or they are used elsewhere in the value chain. Whistler’s supply chain is not vertically integrated; it is the provider of the end service sold to consumers but it relies on suppliers and manufacturers to provide it with the necessary tools and supplies to create its value chain. It is proficient at providing an experience but has little expertise in controlling other parts of the supply chain.
The firm’s required labour is internalized as it does not outsource its workforce. Required labour includes those employees who work within the offices to those who deal with snowmaking and grooming and building maintenance.
Whistler employs staff for a wide range of other positions including lift attendants, technical shop staff, and hotel and restaurant staff.
Aside from large capital assets, the organization requires the procurement of many smaller items and supplies for day-to-day operations. Offices require hardware, software, office supplies and furniture. Lodgings require furnishings, cleaning products, electronics and maintenance. Retail requires goods for sale as well as the hardware and software to complete transactions. Additionally, the many
Whistler Blackcomb Holdings Inc. Page 88 bar and restaurant locations require the necessary goods for that aspect of operations.
Each resort has an inventory of skis and snowboards for its customers to rent. The following table shows the brands of demo skis and snowboards that the resorts have for rental. Many brands are carried by more than one the resorts presented; therefore, there is little advantage in the differences of the retail and rental inventory.
Ski and Snowboard Brands Salomon Head Dynastar Atomic Rossignol Blizzard Kastle Lange K2 Whistler117 Vail118 Steamboat119 (Intrawest) Source: Made by Lindsay Cone using Whistler Blackcomb, Vail, and Steamboat
Resort Websites
As per the chart below, Whistler’s average days of inventory turnover was lower than Vail’s in both 2013 and 2012. Because Whistler’s inventory turnover is faster than Vial’s it shows that it has a higher potential for generating revenue as it can properly manage its inventory and turn it into revenue at a faster rate.
117 Whistler Blackcomb. n.d. Ski Rentals. Accessed February 9, 2014. http://www.whistlerblackcomb.com/lessons- and-rentals/rentals/ski-rentals.aspx 118 Vail Like Nothing Before. n.d. Shopping Details. Accessed February 9, 2014. http://www.vail.com/storedetail/Vail+-+Vail+Sports+Vail+21.axd. 119 Steamboat. n.d. Steamboat Ski & Sport. Accessed February 8, 2014. http://www.steamboat.com/lessons-and- rentals/ski-and-snowboard-rentals/steamboat-ski-and-sport.aspx.
Whistler Blackcomb Holdings Inc. Page 89
Average Days of Inventory Turnover, 2013-2012
2012 2013 300
250
200
150 Days
100
50
0 Whistler Vail
Source: Made by Lindsay Crone using Whistler Annual Reports and Vail Annual Reports
There is little information available for Whistler, Vail and Intrawest about their procurement operations, inventory, or the companies they receive their supplies from. As such, an analysis to compare their supply chain management is not able to be completed. It will be assumed that all have equal capabilities in effectively acquiring the necessary products, leaving this part of the value chain as neither a strength nor a weakness for Whistler.
Whistler Blackcomb Holdings Inc. Page 90
Operations (Strength)
Whistler Blackcomb is located in Whistler, British Columbia, where its operations take place. Whistler’s average snowfall is 1174cm a year120. Whistler
Blackcomb is the largest ski resort in North America121 with its 8,174 acres of skiable terrain; as well, it has over 200 trails and 37 lifts to the mountain peaks122.
Breakeven Point
Ski resorts incur large operating expenses, so it is important to generate enough revenue to cover those costs to make a profit. Ski resorts that do not have to sell as many tickets to break even can generate profit quicker. By measuring total mountain operating expenses divided by the effective ticket price123, the number of tickets that must be sold to cover the operating expenses can be determined. A lower number means that the operating expense can be recovered faster; similarly, a high number means that it will take longer to recover the operating expenses. Moreover, this will demonstrate how effective Whistler is at managing its operating expenses. However, this measure is strictly mountain
120Whistler Blackcomb Holdings . 2013. "Annual Information Form." Whistler Blackcomb. December 20. Accessed January 20, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-reportsannual. 121Vertical.com. n.d. The Largest Ski Resorts: Best Skiing in US/Canada. Accessed February 2, 2014. http://mountainvertical.com/. 122Whistler Blackcomb Holdings . 2013. "Annual Information Form." Whistler Blackcomb. December 20. Accessed January 20, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-reportsannual. 123 Effective ticket price (ETP) is a metric used in the ski industry and is calculated as total mountain revenue divided by number of skier visits
Whistler Blackcomb Holdings Inc. Page 91 operating expenses as it does not take into consideration the other expenses the company incurs.
Company Comparison of Breakeven Point, 2011-2013
Whistler Vail Intrawest
3500 2907 3000 2546 2490 2444 2500 2303 2378 2000
1500 1142 1103 1020 1000
# OF OF LIFT TICKETS # 500 0 2011 2012 2013
*Vail and Intrawest is an average for the ski resorts they own
Source: Made by Julia Lesway using Whistler Annual Reports, Vail Annual
Reports and Intrawest Form S-1
As shown above, the number of tickets Whistler must sell to breakeven is much higher than Vail for all three years and a little higher than Intrawest for 2012 and 2013. Whistler had to sell 2490 tickets using the effective ticket price to cover its operating costs in 2013. Both competitors, Vail and Intrawest, had to sell 1142 and 2444 tickets, respectively to breakeven in 2013. To conclude, Whistler is at a disadvantage as it must sell far more tickets than its competitors to maintain profitable mountain operations. Given that it is the effective ticket price metric is
Whistler Blackcomb Holdings Inc. Page 92 used and only operating expenses are considered, for simplicity purposes, these figures are presented to illustrate the comparisons only.
Mountain Operating Costs to Revenue
Whistler attempts to lower its operating costs to generate a higher return – the lower the operating costs the higher the profit earned will be. Given the industry, this is particularly difficult as ski resorts consume a lot of energy in order to power all the snowmaking equipment, which makes it the second highest cost124.
The operating costs show how much it costs the firm in order to produce that specific amount of revenue. In order to evaluate how Whistler is doing in comparison to its competitors, the chart below shows the percent of mountain generated expenses to total mountain revenue. Ultimately, every company wants to lower operating costs and have higher revenue.
124Dunfee, Ryab. 2013. Gun Control: How Ski Areas Are Tackling Snowmaking 2013. February 11. Accessed Fenruary 1, 2014. http://www.powdermag.com/first-chair/gun-control/.
Whistler Blackcomb Holdings Inc. Page 93
Mountain Operating Costs as % of Mountain Revenue, 2011-2013
Whistler Vail Intrawest 100%
80%
60%
40%
20%
0% 2011 2012 2013
Source: Made by Julia Lesway using Whistler Annual Reports, Vail Annual
Reports and Intrawest Form S-1
Whistler’s operating costs are roughly 50% of its revenue which is significantly lower than Vail and Intrawest. Intrawest’s operating costs are much higher, almost 90% of its revenue. Whistler has an increased advantage over its competitors, resulting in a strength by having lower operating costs. Whistler’s low operating costs are likely due to its energy efficient project started in 2005 with BC
Hydro, which focuses on new ways to become energy efficient and reduce costs125.
125BC Hydro. 2012. Whistler Blackcomb saving 5 Million Kilowatt Hours a Year. November 14. Accessed January 31, 2014. http://www.bchydro.com/news/conservation/2012/whistler_blackcomb.html.
Whistler Blackcomb Holdings Inc. Page 94
Revenue to Lift Capacity
Whistler has 37 lifts which enables a large carrying capacity; therefore, an important measure is how efficient Whistler is at using its lift capacity to produce revenue. To measure average revenue per available skier seat, total lift ticket revenue is divided by total lift capacity available. This metric can help determine
Whistler’s revenue success by combining revenue dollars and utilization of available capacity in the same metric126 compared to Vail and Intrawest. By having higher average revenue per available capacity, it would demonstrate better use of the lift resources. The lift capacity is somewhat subjective as it is an estimate formed by the ski resorts, but it still allows for an affective measure of efficiency.
Company Comparison of Revenue to Lift Capacity, 2011-2013
Whistler Vail Intrawest
2000
1500 1000
500 $ PER LIFT SEAT LIFT PER $ 0 2011 2012 2013
*all amounts are in US dollars
Source: Made by Julia Lesway using Whistler Annual Reports, Vail Annual
Reports and Intrawest Form S-1
126Belin, Dave. 2010. Translating RevPAR to Ski Resorts. June 29. Accessed Fenruary 2, 2013. http://www.hotelnewsnow.com/Article/3583.
Whistler Blackcomb Holdings Inc. Page 95
Whistler has excelled over Vail and Intrawest at utilizing its available lift capacity. For the past three years Whistler has continued to earn 1.5-2 times what its competitors earn per available seat. This strength for Whistler demonstrates its efficiency at exploiting the use of chair lifts in relation to its competitors.
Mountain Revenue in Percent
Whistler maintains different services offered within its mountain operations.
Its secondary services offered are just as important as its primary revenue from lift tickets. To determine Whistler’s mountain revenue breakdown, its mountain revenue is split up by service type and compared to Vail, Intrawest, and the industry illustrated in the graph below. It is important to receive a large portion of mountain revenue from lift operations as it is the most important service offered at the resort. For the past three years, Whistler’s primary revenue source has been from lift tickets with over 50% generated from it, just slightly behind the industry average; whereas Vail and Intrawest received less than 50% of their revenue from lift operations. As consumers’ main purpose to visit ski resorts is for lift tickets, it should be a main source of revenue; this puts both Vail and Intrawest at a disadvantage. Whistler’s other services such as rental, ski school, and food fall similar to the industry average. Overall, this is a strength for Whistler.
Whistler Blackcomb Holdings Inc. Page 96
COMPANY COMPARISON OF TOTAL MOUNTAIN REVENUE BREAKDOWN, 2011-2013 Lift Retail and rental Snow school Food and beverage Other
9% 9% 11% 9% 11% 12% 12% 13% 14% 13% 10% 13% 13% 13% 9% 9% 9% 14% 14% 15% 10% 10% 11% 11% 11% 11% 11% 9% 9% 9% 15% 16% 17% 17% 23% 24% 23% 15% 15% 15%
54% 52% 51% 51% 46% 45% 45% 49% 48% 49%
2013 2011 2012 2013 2011 2012 2013 2011 2012 2013 INDUSTRY WHISTLER VAIL INTRAWEST
Source: Made by Julia Lesway using Whistler Annual Reports, Vail Annual
Reports and Intrawest Form S-1
Effective Ticket Price
To measure the performance of Whistler and its competitors, an important measure is the skier visits – referring to anyone that uses a ski ticket or ski pass, includes paid or complimentary, for any part of a day. The effective ticket price is total ski related lift ticket revenue divided by total skier visits. In order to determine how well Whistler is doing for lift ticket revenue per skier visit, the effective ticket price can be used. This takes into consideration discounted passes and regular priced tickets to give an average number of lift revenue per skier
Whistler Blackcomb Holdings Inc. Page 97 visit127. Whistler and its competitors attempt to maximize lift revenue per skier visit each year, so a high effective ticket price is better for the firm.
Company Comparison of Effective Ticket Price (ETP), 2011-2013
Whistler Vail Intrawest Industry 60 55.75 56.02 50.88 48.99 48.79 47.65 50 47.53 45.92 43.34 41.87 42.28
40 38.49
30
US DOLLAS US 20
10
0 2011 2012 2013
*all amounts are in US dollars
Source: Made by Julia Lesway using Whistler Annual Reports, Vail Annual
Reports and Intrawest Form S-1
Whistler for the past three years 2011, 2012 and 2013 has stayed in the same relative position with its competitors128. Vail has dominated in generating more lift revenue per skier visits with its highest amount in 2013 of US$56.02 per skier
127Whistler Blackcomb Holdings . 2013. "Annual Information Form." Whistler Blackcomb. December 20. Accessed January 20, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-reportsannual.
128 Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed February 1, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1
Whistler Blackcomb Holdings Inc. Page 98 visit129. Whistler is still ahead of the industry and its competitor Intrawest130 and has continued to earn more revenue per skier visit each year. Generally, destination guests produce higher returns than local guests because they purchase day tickets or multi day passes. Local visitors use loyalty offers, such as frequency cards or season passes, generating a lower ETP131. Given that Whistler it not earning the highest ticket yield this is considered a weakness; however, Whistler is still surpassing a large competitor in Intrawest and the industry average.
Amount of Total Mountain Revenue per Skier Visit
Mountain revenue comes from lift tickets, rental, snow school and food and beverage, so it is important to maximize each revenue source per skier visit. As consumers come to ski resorts to purchase lift tickets as the primary product additional revenue can be earned through the secondary sources like rentals, ski school and food, especially by destination travellers132. The more revenue that is earned outside of lift tickets, the more profit each firm can make from one consumer. To determine how efficiently Whistler is at producing revenue through
129 Vail Resorts. n.d. "Annual Reports." 2013 Proxy and Form 10-K. Accessed February 8, 2014. http://investors.vailresorts.com/annuals.cfm. 130 NASDAQ. n.d. INTRAWEST RESORTS HOLDINGS, INC SNOW IPO. Accessed February 2014, 2014. http://www.nasdaq.com/markets/ipos/company/intrawest-resorts-holdings-inc-919851-73927?tab=financials. 131Whistler Blackcomb Holdings . 2013. "Annual Information Form." Whistler Blackcomb. December 20. Accessed January 20, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-reportsannual. 132IBIS World Where Knowledge is Power. 2013. Ski and Snowboard Resorts in the US. December. Accessed January 17,2014.http://clients1.ibisworld.com.proxy.library.carleton.ca/reports/us/industry/default.aspx?entid=1653.
Whistler Blackcomb Holdings Inc. Page 99 all services offered, the total mountain revenue per skier visit is calculated which provides the average revenue per skier visit earned. Whistler and its competitors,
Vail and Intrawest, attempt to maximize profits by producing a higher ratio.
Company Comparison of Total Mountain Revenue per Skier Visit, 2011-2013
Whistler Vail Intrawest 140
120
100
80
60 $ SPENT $
40
PER SKIER VISIT SKIER PER
20 0 2011 2012 2013
*all amounts are in US dollars
Source: Made by Julia Lesway using Whistler Annual Reports, Vail Annual
Reports and Intrawest Form S-1
Vail earned the most mountain revenue per skier visit for the past three years. In 2011, Whistler, Vail and Intrawest all earned similar amounts within a dollar or two, with Vail making slightly more. By 2013, Vail earned the most per skier, slightly higher than $120 per skier visit. Whistler is slowly catching up to
Vail, and its amount earned per skier has increased each year, where Vail stayed
Whistler Blackcomb Holdings Inc. Page 100 the same from 2012 to 2013. Whistler earns less per skier visit than Vail which results in a weakness for Whistler.
Summary:
Distribution (N/A)
Whistler is in the service industry and therefore does not distribute its products down the supply chain to the end consumer. Lift tickets are sold on the ski resort at the ticket booths as well as on the company’s website. Ski resorts sell their mountain lift tickets directly to their customers and the services are rendered virtually immediately. For this reason, this section will be skipped over.
Whistler Blackcomb Holdings Inc. Page 101
Marketing and Sales (Strength)
Whistler offers various recreational activities in addition to resort facilities.
The many offerings available cater to two types of consumers – local and destination. Over the past two years, 38% of Whistler Blackcomb’s ski lift tickets have been sold to local guests133. It is important for Whistler to market to both types of consumers; however, as a part of the organization, Tourism Whistler, there is additional potential for marketing to destination skiers.
The marketing expenses are included in the selling, general and administrative line item in the financial statements rather than on its own. The selling, general and administrative expenses of Whistler represent 10% of its overall resort revenue in 2011, and remained 11% of resort revenue in 2012 and
2013134. The general and administrative expenses for Vail constituted 10.7% in
2011, 10.5% in 2012 and 8.8% in 2013135. This is shown in the following graph.
133 Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed February 1, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1 134 Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed February 1, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1 135 Vail Resorts. n.d. "Annual Reports." 2013 Proxy and Form 10-K. Accessed February 8, 2014. http://investors.vailresorts.com/annuals.cfm.
Whistler Blackcomb Holdings Inc. Page 102
Selling, General and Aministrative expense as a % of Resort Revenue, 2011-2013
Whistler Blackcomb Vail Resorts Inc 15%
10%
5%
0% 2011 2012 2013
Source: Made by Lindsay Crone using Whistler Annual Reports, Vail Annual
Reports and Intrawest Form S-1
In 2012, Whistler had a 31% growth in its selling, general and administrative expenses and had an 11% growth in its resort revenue, shown below. In 2013,
Whistler’s selling, general and administrative expenses grew only 3% and its resort revenue grew by 2%. In the following chart, Vail’s growth in revenue is compared with its growth in selling, general and administrative expenses. In 2012, the firm saw a 12% decrease in revenue from 2011 but it had a 5% growth in selling, general and administrative expenditures. This shows that although marketing expenditures may have some impact on the revenues for the resort, there are clearly other factors that impact this more heavily.
Whistler Blackcomb Holdings Inc. Page 103
Whistler: % Growth in Revenue vs % Growth in SGA Expenses, 2011-2013
% Growth of Revenue % Growth of SGA Expenses 35% 30% 25% 20% 15% 10% 5% 0% 2011 / 2012 2012 / 2013
Source: Made by Lindsay Crone using Whistler Annual Reports
Vail: % Growth in Revenue vs % Growth in SGA Expenses, 2011-2013
% Growth of Revenue % Growth of SGA Expenses 15%
10%
5%
0% 2011 / 2012 2012 / 2013 -5%
-10%
-15%
Source: Made by Lindsay Crone using Vail Annual Reports
Whistler Blackcomb Holdings Inc. Page 104
Product
Whistler’s product can be broken down into various services purchasable by consumers; these include lift tickets, retail and rental services, snow school and food and beverage sales. As per the chart below, lift tickets are the most profitable, accounting for approximately 50% of the resort revenue each year, similar to its competitors.
COMPANY COMPARISON OF TOTAL MOUNTAIN REVENUE BREAKDOWN, 2011-2013
Lift Retail and rental Snow school Food and beverage Other
11% 9% 9% 9% 11% 12% 12% 13% 14% 13% 10% 13% 13% 13% 9% 9% 9% 14% 14% 15% 10% 10% 11% 11% 11% 11% 11% 9% 9% 9% 15% 16% 17% 17% 23% 24% 23% 15% 15% 15%
54% 52% 51% 51% 46% 45% 45% 49% 48% 49%
2013 2011 2012 2013 2011 2012 2013 2011 2012 2013 INDUSTRY WHISTLER VAIL INTRAWEST
Source: Made by Julia Lesway using Whistler Annual Reports, Vail Annual
Reports and Intrawest Form S-1
Whistler has an advantage of a strong brand image known globally. This is mostly due to the 2010 Winter Olympics where 3.5 billion people were exposed to
Whistler Blackcomb Holdings Inc. Page 105 the brand136. In an industry with many competitors, it is important to have a recognized and well known brand so that when consumers are making their decision of which service to choose, Whistler’s brand will be in the evoked set of ski resorts. Having brand awareness as well as likeability is a great advantage for any brand. On the website OnTheSnow.com, out of 50 listed Canadian ski resorts,
Whistler is rated second with 96 user reviews and a total of 4.3 out of 5 stars137. In
Ski Net’s 2013 North American Resort Guide138, Whistler came in first; this is one of many online lists that rank Whistler at the top of North American ski resorts.
Whistler has a lot of positive press and ratings online which is advantageous when consumers are heading to online opinions and reviews to see which facilities offer the best experience.
Place
All ski resorts are bound by their location; this can be a determinate of what types of consumers frequent their facilities as well as the popularity of their services. Whistler is located in Whistler, British Columbia. Unlike its competition,
Vail and Intrawest, it has not purchased competing hills or resorts so its location
136 Whistler Blackcomb Holdings . 2013. "Annual Information Form." Whistler Blackcomb. December 20. Accessed January 20, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-reportsannual. 137 On The Snow. n.d. British Columbia Top Rated. Accessed February 7, 2014. http://www.onthesnow.ca/british- columbia/reviews.html. 138 SKINET. n.d. Resort Guide 2013: West. Accessed February 7, 2014. http://www.skinet.com/ski/galleries/resort- guide-2013-west.
Whistler Blackcomb Holdings Inc. Page 106 and services are restrained to the Whistler and Blackcomb mountains. The fact that
Whistler only operates one resort is not a hindrance as it still has 2.7% of the North
American market share as of 2013. Vail had 33.2% of the market share with eight ski resorts; assuming equal distribution, each have 4.15% of market share.
Intrawest had 7.2% with and seven ski resorts; assuming equal distribution again, each have 1.03% of market share. For a single location, Whistler is successfully competing against two firms that own multiple locations; however, it does trail
Vail in terms of skier market share.
Price
The prices that Whistler offers are competitive within the industry. Because of the high concentration of both local slopes as well as destination resorts, the prices have a larger weight on the consumers’ decision criteria when deciding on a ski resort as prices can easily be compared. Customers of Whistler, while paying prices that are competitive within the industry, are receiving access to over 8,000 acres of skiable land as well as world class facilities. In this, Whistler has an advantage as consumers will perceive increased value for their ticket.
The price available for customers will vary depending on the time of year they purchase for, the age of the customer, and membership status. A single day ticket for adults is within $11 for the three resorts, with Whistler having the lowest
Whistler Blackcomb Holdings Inc. Page 107 price of $108 (see graph below). Whistler also offers the largest discount for children compared to the other two resorts. For season passes, Whistler’s price is
12% less than Vail’s, but 37% more than Steamboat’s. This could be due to the size and quality of Whistler’s hill; however, Whistler offers a larger discount than both competitors with 45% off for seniors and 70% off for children. This is compared to Vail and Steamboat which offer 22% and 50% off for seniors and
58% and 60% off for children, respectively. Offering larger discounts can offer greater incentives for customers looking to purchase tickets for groups or families.
Price of Daily Lift Ticket
Whistler Vail Steamboat (Intrawest) $140 $120 $100 $80 $60 $40 $20 $0 Adult Senior Child
Whistler Blackcomb Holdings Inc. Page 108
Price of Season Pass
Whistler Vail Steamboat (Intrawest) 2500 2000 1500 1000 500 0 Adult Senior Child
*Whistler prices changed to USD, used average exchange rate of January 2014 from the Bank of Canada which was 1.09419091139
Source: Made by Lindsay Crone using Whistler Blackcomb website, Vail Resort
website, Steamboat website
Promotion
Whistler utilizes traditional marketing media such as television and print media as well as social media. It utilizes strategic partnerships with Tourism
Whistler, branded hotels (Four Seasons, Fairmont, the Westin, Pan Pacific and
Hilton) and others to broaden the reach and effectiveness of its message. Finally, it also uses sponsorship initiatives for promotional means.
Whistler’s use of social media platforms is beneficial as it allows consumers to be engaged and interact directly with the company. This takes advantage of a
139 Bank of Canada. n.d. Monthly Average of Exchange Rates. Accessed February 7, 2014. http://www.bankofcanada.ca/stats/assets/pdf/nrma-2014-01.pdf .
Whistler Blackcomb Holdings Inc. Page 109
‘pull’ marketing strategy. With 70% of Whistler’s guests under the age of 45140, social media is an effective way to engage an active community of skiers and snowboarders who often post and share photos and videos of their alpine activities.
Event marketing is also an important part of Whistler’s strategy. Because of its large capacity and diverse amount of offerings, it is able to host various events such as mountain bike festivals and ski and snowboard festivals. The investments that were made into its facilities after the 2010 Winter Olympics have given
Whistler world class race venues, half pipes and sliding centres. These allow for marketing towards groups, instead of individuals, who want to travel to participate in festivals, competitions or conventions, or to act as spectators.
Summary:
140 Whistler Blackcomb Holdings . 2013. "Annual Information Form." Whistler Blackcomb. December 20. Accessed January 20, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-reportsannual.
Whistler Blackcomb Holdings Inc. Page 110
Customer Service (Strength)
Customer service, especially follow up service, is a value chain activity that can increase the overall experience for the consumer; therefore, understanding
Whistler’s follow up support is an important area to analyze. Purchased lift tickets at Whistler are not transferable, not refundable, and not for resale. Season passes are not refundable or transferable, but in case of a medical emergency, a mountain credit can be issued which is similar to a voucher, but admin fees will be applied.
Ski rentals and ski school lessons can be cancelled up to 48 hours before for no fee, and cancelled within the 48 hours with applicable fees141.
Whistler offers a lowest price guarantee; this includes accommodation, lift tickets, rental, and ski school. It offers a refund of the difference or complete cancellation of the reservation if the customer finds a lower price142. Also, Whistler offers entire vacation planning and specific discounts on hotels, flights, cars, and other activities with its partners, when purchased through Whistler’s central reservation system; on its website or by phone. Whistler customer care focuses on making it simpler to personalize each individual’s vacation or trip to Whistler by
141Whistler Blackcomb. n.d. Cancellation Policies . Accessed January 30, 2014. http://www.whistlerblackcomb.com/estore/policy.aspx. 142Whistler Blackcomb. n.d. Why Book through Central Reservations for Whistler Blackcomb? Accessed January 30, 2014. http://www.whistlerblackcomb.com/plan-your-trip/accommodations/why-book-with- whistlerblackcomb/index.aspx.
Whistler Blackcomb Holdings Inc. Page 111 offering personal support143. By offering discounts for all the necessities needed and advanced personal assistance, they are simplifying the vacation process.
Whistler offers assistance throughout the planning, booking, and actual vacation to
Whistler. Whistler’s guest relations offers general information, answers general inquiries, how to get to Whistler, brochures and village and trail maps. As well,
Whistler can assist customers in setting up snow school, and or equipment rentals.
As a first time visitor to Whistler, it can be challenging given the large scale of the resort. Whistler’s guest relations, snow school and rental, all offer phone numbers to contact for any information needed, these include toll free numbers for North
America, The United Kingdom, Australia, and all other international locations144.
Another feature of support that Whistler offers is a snow report with phone numbers to get updates and ski patrol services with emergency and non-emergency phones numbers to ensure safer visits to the resort.
Finally, Whistler offers a discount card which is similar to a loyalty program; return users can get the Edge card which offers them large savings for lift tickets, lodging, shopping, food, rentals, and lessons. The edge card can offer an
143 Whistler Blackcomb. n.d. Why Book through Central Reservations for Whistler Blackcomb? Accessed January 30, 2014. http://www.whistlerblackcomb.com/plan-your-trip/accommodations/why-book-with- whistlerblackcomb/index.aspx. 144Whistler Blackcomb. n.d. Contact Details. Accessed February 1, 2014. http://www.whistlerblackcomb.com/about-us/contact-us/numbers.aspx.
Whistler Blackcomb Holdings Inc. Page 112 adult aged 19 to 64, as much as $31 off a daily lift ticket purchased at the window145 as well as different discounts for shopping, dining, rentals and lodging.
To determine how successful Whistler’s customer support services are, customer satisfaction, using consumer ratings, can be compared to its competitors.
Overall, Whistler has been highly ranked in customer satisfaction as shown in the chart below. Whistler beat both competitors with its smart rating, which takes into consideration industry awards, services and features at each resort. As well,
Whistler tied with Vail for overall customer satisfaction rating and Intrawest was slightly behind.
Source: http://www.onthesnow.ca/ and http://ski-resorts.findthebest.com/
Whistler was awarded the #1 Overall Ski Resort in North America by SKI
Magazine’s Resort Guide for last year146 which consists of 20,000 respondents, and
145Whistler Blackcomb. n.d. Reload your EDGE Card. Accessed January 31, 2014. http://www.whistlerblackcomb.com/tickets-and-passes/discount-cards/edge-load/index.aspx
146Enjoy Whistler . n.d. Whistler Blackcomb. Accessed February 4, 2014. http://www.enjoywhistler.com/articles/whistler-blackcomb-ranked-first-again/.
Whistler Blackcomb Holdings Inc. Page 113 is the longest running and most detailed survey of its kind147. In the chart below,
Whistler and its competitor’s average ratings for the past three years by SKI
Magazine for Overall Ski Resort are listed. Whistler surpassed both its competitors with a better ranking. As well, CN Traveller magazine ranks the top 20 ski resorts from users ratings submitted from 20,000 respondents148, the average for the past three years is in the chart below. Whistler’s average three year consumer rating was 96.1 out of a 100, and average three year ranking was second place, significantly ahead of its competitors. In 2012, Whistler was awarded top customer experience by the Canadian Ski Council149. As well, the highest rated resort in the world for Customer Satisfaction and Performance, and also Resort People Would
Recommend by Spike Marketing through its ski base survey with 18,000 respondents150. Finally, Whistler’s customer service is a strength as it has been named number one of customer service in the world and has many positive customer reviews.
147Whistler Blackcomb Names NO.1 Ski Area in North America by Ski Magazine Readers . Accessed February 6, 2014. http://www.theskichannel.com/news/featured/20121016/whistler-blackcomb-named-no-1-ski-area-in- north-america-by-ski-magazine-readers/. 148Hwu, Kelly. 2013. Top 20 Ski Areas in the U.S. and Canada. December. Accessed February 8, 2014. http://www.cntraveler.com/ski-areas/2013/12/best-ski-resorts-north-america. 149Atkinson, Cathryn. 2012. Whistler Blackcomb recognized for "top customer experience" by Canadian Ski Council. August 2. Accessed February 7, 2014. http://www.piquenewsmagazine.com/whistler/whistler-blackcomb- recognized-for-top-customer-experience-by-canadian-ski-council/Content?oid=2311808. 150Whistler Hotels. n.d. Whistler Blackcomb Honoured in the Annual Resort Rankings. Accessed February 6, 2014. http://whistlerhotels.com/blog/whistler-blackcomb-honoured-with-six-best-overall-recognitions-in-the-annual- resort-rankings/.
Whistler Blackcomb Holdings Inc. Page 114
*Average of its ski resorts that made the ranking consistently for the three years
Left : Source: 2010-2013; http://www.skinet.com/ski/galleries/2010-2011-resort-
rankings
Right : Source: 2010-2013, http://www.cntraveler.com/ski-areas/polls/2012/best-
places-to-ski-and-stay-2012
Note: In both charts, due to the industry, these are all subjective measures with variances in available info of specific companies. Not all Companies owned by
Vail and Intrawest are considered in the average because they did not make the top rated.
Summary:
Whistler Blackcomb Holdings Inc. Page 115
Secondary Value Chain Activities
Human Resources Management (Strength)
Revenue per Employee
Due to the seasonality of the ski industry, all firms tend to have a significantly higher amount of seasonal employees than full-time employees.
Understandably, both Vail and Intrawest have substantially more employees than
Whistler as they operate a number of ski resorts compared to just the one Whistler resort. Over the past three years, there is a trend of increasing both full-time and seasonal employees by Whistler and Vail (see table below). Although this is likely true for Intrawest as well, it is not known for sure as the number of employees for
2011 and 2012 are not available; therefore, the number of employees in 2013 has been assumed to be constant over the past three years for simplicity purposes.
Source: Made by Jessica Lane using Whistler Annual Reports, Vail Annual
Reports and Intrawest Form S-1
Whistler Blackcomb Holdings Inc. Page 116
Revenue per full-time employee (FTE) is a great measure to compare firms’ productivity levels. As calculated below, and shown on the following graph, this ratio has been increasing over the past three years for Whistler, but has been decreasing for Vail. Intrawest’s revenue per FTE decreased in 2012 but had a slight increase in 2013. Moreover, Whistler has continually had the highest revenue per FTE of the three companies analysed. This illustrates that Whistler is more productive overall and increasingly more productive, than its competitors.
Source: Made by Jessica Lane using Whistler Annual Reports, Vail Annual
Reports and Intrawest Form S-1
Whistler Blackcomb Holdings Inc. Page 117
Company Comparison of Revenue per FTE, 2011-2013
Whistler Vail Intrawest $140
$120 $100 $80 $60 $40
USD $ (thousands) $ USD $20 $- 2011 2012 2013
Source: Made by Jessica Lane using Whistler Annual Reports, Vail Annual
Reports and Intrawest Form S-1
Employee Education Level
Whistler is a four-season resort that offers many products and services.
Therefore, there is a vast variety of employment opportunities available. Whistler separates its positions into six divisions: affinity sports, food and beverage, guest services, information technology, operations, and sales and marketing151. The qualifications for positions in all of the areas do not include a specific education level; however, there is an emphasis on knowledge in that area as well as experience. For some positions, additional training is required which Whistler provides for its staff. For example, a food station attendant is required to have
151 Whistler Blackcomb. n.d. Jobs at Whistler Blackcomb. Accessed February 5, 2014. http://www.whistlerblackcomb.com/employment/jobs-at-whistler-blackcomb/index.aspx.
Whistler Blackcomb Holdings Inc. Page 118 some prior experience in the area and must complete a food and safety course that is provided to them. The sous chef, a relatively higher level position, is required to have at least four years experience in a kitchen environment with two of those in a management position152. Vail appears to focus more on education level in its job requirements. For example, the sous chef position at Breckenridge resort lists a culinary degree or certificate as a necessary qualification in addition to two years experience153. In comparison, a sous chef at Steamboat Springs (operated by
Intrawest) is only required to have a high school diploma and two years experience154. All three resorts put a high focus and importance on the appearance and attitude of their employees, as is standard in the tourism industry. As described, Whistler puts a higher weight on candidates’ expertise and prior experience than on education levels. This has the potential for Whistler to obtain a larger number of qualified applicants and to have a more experienced workforce with less need for training.
152 Whistler Blackcomb. n.d. Current Job Postings. Accessed January 30, 2014. https://secure.whistlerblackcomb.com/ats/currentjobs.aspx. 153 Keystone. 2014. Career Opportunities: Sous Chef at One Ski Hill Place. January 30. Accessed January 31, 2014. https://career4.successfactors.com/career?career_ns=job_listing&company=Vail&navBarLevel=JOB_SEARCH&rcm _site_locale=en_US&career_job_req_id=56289&selected_lang=en_US&jobAlertController_jobAlertId=&jobAlertCo ntroller_jobAlertName=&_s.crb=CwSYrGmRyq94X%2b9E. 154 Steamboat Springs. n.d. Sous Chef. Accessed January 31, 2014. http://www.brainhunter.com/frontoffice/seekerViewJobDetailAction.do?sitecode=pl405&jobId=1893603&page=s earch&external=.
Whistler Blackcomb Holdings Inc. Page 119
Employee Benefits
As previously mentioned, firms in the ski industry rely heavily on seasonal workers. These employees are not entitled to many of the traditional types of benefits such as medical insurance or retirement plans. All three of the firms analyzed offer very similar benefits to their seasonal employees. Assumingly one of the most valued of these benefits is a season pass to the mountain. Season passes have a value of $1,899, $2,350 and $1,300 for Whistler155, Vail156 and Steamboat157
(one of Intrawest’s mountains), respectively. Employee discounts for a variety of products and services offered on the resorts are given to all employees. This discount ranges from 20%-50% off regular priced items at Whistler Resort158 and is assumed to be valued relatively similar at the other resorts. All three resorts also offer subsidized housing for their seasonal employees. Whistler has 1,100 beds in affordable housing reserved specifically for employees159 while both Vail and
Intrawest have significantly more due to the number of resorts they operate.
Because all three of these firms compete to attain quality staff, regionally as well
155 Whistler Blackcomb. n.d. Season Passes 2013.14. Accessed February 5, 2014. http://www.whistlerblackcomb.com/tickets-and-passes/season-passes/index.aspx. 156 Vail Like Nothing on Earth. n.d. Season Passes. Accessed February 5, 2014. http://www.vail.com/plan-your- trip/season-passes/season-passes-explorer.aspx. 157 Steamboat. n.d. 2013-14 Steamboart Season Passes. Accessed February 5, 2014. http://www.steamboat.com/tickets-and-passes/season-passes/season-pass.aspx. 158 Whistler Blackcomb. n.d. Employee Experience . Accessed February 5, 2014. http://www.whistlerblackcomb.com/employment/internships-practicums-and-youth-programs/employee- experience.aspx. 159 Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed February 1, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1
Whistler Blackcomb Holdings Inc. Page 120 as internationally, it is important that they offer benefits that this type of seasonal workers value. All three of these firms offer very similar benefit packages for the seasonal workforce which illustrates that Whistler is matching the competition for qualified staff of the larger firms in the industry.
Employee Salaries
Whistler does not disclose details about its employee’s salaries. It does, however, state the line item ‘labour and benefits’. In order to compare how
Whistler and Vail compensate their employees, this expense160 is divided by the number of FTE (full time employees computed earlier in this section). It is clear that Whistler, on average, compensates its employees significantly more than Vail does. Vail’s compensation has remained steady at about $17,000 per FTE over the past three years161 while Whistler’s compensation has increased from $30,000 in
2011 to $35,000 in 2013162. Although, it is possible that this calculation may be skewed due to high executive compensation, the large variance between the two firms is clear. In addition to paying its employees double what Vail pays its
160 Whistler’s expense was translated to USD for comparability purposes 161 Vail Resorts. n.d. "Annual Reports." 2013 Proxy and Form 10-K. Accessed February 8, 2014. http://investors.vailresorts.com/annuals.cfm. 162 Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed February 1, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1
Whistler Blackcomb Holdings Inc. Page 121 employees, Whistler spends only 31% of its revenues on it163. This is also much lower than Vail’s 37% of revenues spent on labour and benefits in 2013164. This comparison is summarized in the table below. Whistler has a clear advantage in attracting and retaining employees when comparing the salaries offered.
Furthermore, by spending a lower percentage of annual revenues on this expense,
Whistler is able to keep that advantage over its competitors.
Company Comparison of Labour Expense per FTE, 2011-2013
Whistler Vail
$40,000
$30,000
$20,000 US $ US $10,000
$- 2011 2012 2013
Labour & Benefits as % of Revenue 2011 2012 2013 Whistler 28% 30% 31% Vail 37% 36% 37%
Source: Made by Jessica Lane using Whistler Annual Reports, Vail Annual
Reports and Intrawest Form S-1
163 Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed February 1, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1 164 Vail Resorts. n.d. "Annual Reports." 2013 Proxy and Form 10-K. Accessed February 8, 2014. http://investors.vailresorts.com/annuals.cfm.
Whistler Blackcomb Holdings Inc. Page 122
Summary:
New Product Development (Strength)
The product development within the ski resort industry is one in which no new products have revolutionized business practices. The industry remains fundamentally unchanged since its inception, however new product development is important for the industry to continue to grow and become more efficient.
Continuous improvements to equipment such as ski lifts and snowmaking machines are vital for ski resorts to increase capacity, quality and maintain the highest level of safety. With an increase in demand it is important for Whistler to maintain their equipment and update them when required.
Whistler Blackcomb Holdings Inc. Page 123
Ski Lifts
While change to the design of ski lifts is slow, a recent trend has been to change from fixed-grip ski lifts, which are slower but can last 40-50 years, to detachable ski lifts that are faster but come with increased maintenance and a shorter life span165. The new lifts often come with loading gates and a conveyor system that have been shown to reduce the number of lift stops and slows166.
In 2013, Whistler replaced two ski lifts. The new lifts were able to increase the amount of skiable acres as well as the overall guest capacity of the serviced hills. It upgraded a Harmony high-speed which allows for 4 people per lift to a
Doppelmayr high-speed which allows for 6 people per lift. This update to ski lifts allowed Whistler a 65% increase in carrying capacity167, which translates to 2,400 skiers per hour. Whistler had an overall lift capacity of 69,680 people per hour in
2013168, which adds an extra 3.5% to the total number of guests Whistler can accommodate per hour. The second ski lift replacement increased the uphill capacity by 1,200 people per hour, increasing the facility’s overall capacity by another 1.7%. Vail has also been replacing its aged ski lifts in favour for newer and
165 Thompson, Caroline. n.d. How Do Detachacble Charilifts Work? Accessed February 6, 2014. http://traveltips.usatoday.com/detachable-chairlifts-work-52404.html. 166 Vail. 2013. Lift Upgrades For the 2013/14 Season. June 30. Accessed February 7, 2014. http://blog.vail.com/vail- lift-upgrades/. 167 Roche, Jeremy. n.d. Whistler Blackcomb Announces Major $18 Million Capital Expansion for 2013.2014. Accessed Fenruary 6, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- newsArticle&ID=1776178&highlight 168 Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed February 1, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1
Whistler Blackcomb Holdings Inc. Page 124 faster ones. In 2013, it replaced a ski lift that had been in use since 1985 with a
Doppelmayr high-speed six passenger, increasing the capacity of that lift by 33% to 3,600 people per hour. Vail’s lift capacity is 59,092169 so this new lift increases the facility’s overall people per hour by 2%.
If ski resorts want to continue growing, often times purchasing more land is not an option, updating to the fastest and most efficient ski lifts is a viable way to increase capacity. Whistler has an advantage in a higher number of people its lifts can accommodate per hour, and it will remain an advantage by continuing to update its equipment when necessary.
Snowmaking Machines
These machines are necessary for ski resorts to function in unfavourable weather, and they allow the resorts to maintain a stable availability to customers instead of relying on the natural occurrence of ideal skiing conditions. Whistler has an advantage as it has one of the highest amounts of snowmaking acres, meaning it has more skiable acres available in otherwise unfavourable weather.
169 Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed February 1, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1
Whistler Blackcomb Holdings Inc. Page 125
Comparison of Snowmaking Acres in 2013 800 700 600 500 400
Acres 300 200 100 0
Source: Made by Lindsay Crone using Whistler Annual Information Report
However, these snowmaking acres only account for a small percentage of
Whistler’s overall skiable acres, so a lot of their hills are not serviced by the snowmaking machines.
Comparison of Snowmaking Acres as % of Total Skiable Acres in 2013 35
30 25 20 15 10 Percentage 5 0
Source: Made by Lindsay Crone using Whistler Annual Information Report
Whistler Blackcomb Holdings Inc. Page 126
With such a large fleet of snowmaking machines, product improvements are critical. The addition of computer control of snowmaking machines has greatly improved ski hills’ efficiency and cost effectiveness in terms of snowmaking.
Computer control removes the need for employees to do the manual labour themselves and improves precision. Furthermore, IDE Technologies Ltd. recently came out with an all weather snowmaker, allowing for snow in any conditions170.
This will allow for ski resorts to have skiing available year round and compete with warmer weather resorts.
Summary:
170 IDE Technologies. n.d. IDE’s All Weather Snowmaker Never Too Warm for Snowmaking . Accessed February 7, 2014. http://www.ide-snowmaker.com/.
Whistler Blackcomb Holdings Inc. Page 127
Corporate Leadership (Strength)
Executive Management
Whistler offers many career advancement opportunities to its current employees171 with the hopes of maintaining its corporate culture throughout the organization. Many of the company’s senior managers and executives have moved vertically up in the organization over the course of their careers. As shown in the table below, three of the five top executives listed have been with the company for over ten years. This is compared to only one and zero out of five executives for the competing firms Vail and Intrawest (see below). Furthermore, the average length that the executives have been in their current position is 7.6 years at Whistler, significantly higher than the 3.4 and 2.25 years at Vail and Intrawest, respectfully.
In general, CEO turnover has increased by 5.3% as at August 2013172 further illustrating the importance of having a strong executive team. Senior management that have been with the company for a longer period of time inherently communicate the firm’s values throughout the company. This is very important for companies when attempting to retain lower-level employees which have become increasingly more critical as 91% of millennials are expected to stay in a job for
171 Whistler Blackcomb. n.d. Jobs at Whistler Blackcomb. Accessed February 6, 2014. http://www.whistlerblackcomb.com/employment/jobs-at-whistler-blackcomb/index.aspx. 172 Tedesco, Theresa. 2013. CEO turnover highest in three years,says report. August 7. Accessed February 6, 2014. http://business.financialpost.com/2013/08/07/ceo-turnover-highest-in-three-years-says-report/.
Whistler Blackcomb Holdings Inc. Page 128 only three years or less173. Moreover, it is important to identify the fact that the top executives responsible for mountain operations at Whistler and Vail have been with the company, holding various positions for over 35 years. It is clear that these two individuals have the experience and knowledge that is essential when competing in the industry.
Source: Whistler Annual Report 2013, http://www.whistlerblackcomb.com/
173 Meister, Jeanne. 2012. Job Hopping Is the 'New Normal' for Millennials: Three Ways to Prevent a Human Resource Nightmare. August 8. Accessed February 5, 2014. http://www.forbes.com/sites/jeannemeister/2012/08/14/job-hopping-is-the-new-normal-for-millennials-three- ways-to-prevent-a-human-resource-nightmare/.
Whistler Blackcomb Holdings Inc. Page 129
Source: Vail Annual Report 2013, http://www.vail.com/
Source: Intrawest S-1 Report, http://www.intrawest.com/
Share Price/Market Capitalization
The market capitalization has been calculated for both Whistler and Vail. As previously noted, Intrawest just recently issued its IPO; therefore, its market
Whistler Blackcomb Holdings Inc. Page 130 capitalization was not able to be calculated. Due to the size of Vail in comparison to Whistler, the market capitalization of Vail of $2.46 billion is much larger than
Whistler’s of $521 million174 (see graph below). Both companies have increased the number of shares issued over the past year at a rate of approximately
0.16%175176 which contributed slightly to the overall increase in market capitalization.
Company Comparison of Market Capitalization, 2011-2013
Whistler Vail
3,000
2,000
1,000 Dollars (Millions) Dollars - 2011 2012 2013
Source: Made by Jessica Lane using Whistler Annual Reports, Vail Annual
Reports
The stock prices of Whistler and Vail have also been increasing overall since
2011, as shown in the graphs below. The share price of Whistler was $13.71 in
174 Market capitalization calculation: # shares outstanding x share price, at firm year end date 175 Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed February 1, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1 176 Vail Resorts. n.d. "Annual Reports." 2013 Proxy and Form 10-K. Accessed February 8, 2014. http://investors.vailresorts.com/annuals.cfm.
Whistler Blackcomb Holdings Inc. Page 131
2013, up from $10.47 in 2011177. The share price of Vail was $66.98 in 2013, an increase from the price of $45.25 in 2011178. Both the increase in shares and the increase in share price contributed to the 18.9% and 35.2% increase in market capitalization for Whistler and Vail, respectively. The large variance in market capitalization sizes illustrates that Whistler is a riskier investment; largely due to the fact that it is a smaller, growing firm.
Source: www.tmxmoney.com
Vail Resorts Inc.
Source: www.nasdaq.com
177 TMX Money . 9. Whistler Blackcomb Holdings . February 2014. Accessed February 2014, 9. http://web.tmxmoney.com/charting.php?qm_page=46182&qm_symbol=WB. 178 NASDAQ. n.d. Vail Resorts, Inc. Stock Quote & Summary Data. Accessed February 6, 2014. http://www.nasdaq.com/symbol/mtn.
Whistler Blackcomb Holdings Inc. Page 132
Dividend Policy
Whistler has offered its common shareholders an annual dividend of $0.975 per share consistently over the past three years179. When a company declares dividends, it is important that it is able to maintain its current ratio, by not draining its current assets. Issuing dividends sends a positive signal to investors and similarly, a reduction or elimination of dividends sends a strong negative signal.
Over the past three years, Whistler has been able to maintain a constant dividend while holding a current ratio of 1.19, 1.35, and 1.23 in 2011, 2012, and 2013 respectively180. The dividends issued as a percentage of cash flow generated from operations for Whistler has decreased since 2011 (see graph below), as sales increased. In 2013, the ratio was 57%181 which is very high; this illustrates that the company does not reinvest the majority of its earnings from operations into its potential growth. Whistler must issue additional debt or equity in the long run in order to continue issuing a constant dividend. Intrawest has not issued dividends and does not intend to in the foreseeable future182; therefore, Vail will be the sole comparison. Vail’s dividends as a percent of cash flow from operations has
179 Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed February 1, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1 180 Current ratio = Current assets / Current liabilities; Information gathered from Whistler Annual Reports 181 Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed February 1, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1 182 NASDAQ. n.d. INTRAWEST RESORTS HOLDINGS, INC SNOW IPO. Accessed February 2014, 2014. http://www.nasdaq.com/markets/ipos/company/intrawest-resorts-holdings-inc-919851-73927?tab=financials.
Whistler Blackcomb Holdings Inc. Page 133 increased since 2011, due to its significant increase in dividends in 2012. Its dividends of $0.15, $0.675, and $0.79 have produced ratios of 2%, 13%, and 13% in 2011, 2012, and 2013 respectively (see graph below)183. Both firm’s current ratios are above the industry average of 0.5184 which implies that both firms are currently in a good position to issue dividends. The fact that Whistler’s ratio is so much greater than that of Vail, it threatens the long-term sustainability of
Whistler’s dividend policy. Whistler is not capable of growing as quickly as Vail because the majority of its cash generated from operations is flowing through the company to the shareholders. In the short run, because Whistler’s current ratio has increased since 2011 while maintaining the annual dividend, it appears as though the firm is able to continue its positive signal to its investors. In the long run, however, it will likely see the negative results of not retaining the cash within the company to generate further growth.
183 Vail Resorts. n.d. "Annual Reports." 2013 Proxy and Form 10-K. Accessed February 8, 2014. http://investors.vailresorts.com/annuals.cfm. 184 S&P CAPITAL IQ. n.d. Skiing >Key Stats & Ratios. Accessed February 5, 2014. https://www.capitaliq.com/home.aspx.
Whistler Blackcomb Holdings Inc. Page 134
Company Comparison: Dividends as % of Cash Flow from Operations, 2011-2013
Whistler Vail 70% 60% 50% 40% 30% 20% 10% 0% 2011 2012 2013
Source: Made by Jessica Lane using Whistler and Vail Annual Reports
Profitability and Growth
As shown in the graph below, Whistler has proven to perform better than the industry average and its direct competitors in terms of its EBITDA. Whistler’s
EBITDA as a percent of revenues has remained at approximately 36% over the past two years185, significantly higher than the industry average of 21.8% in
2013186. Furthermore, the industry average has been at a steady decline over the last five years187. Both Vail and Intrawest’s figures have increased over the past
185 Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed February 1, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1 186 S&P CAPITAL IQ. n.d. Skiing >Key Stats & Ratios. Accessed February 5, 2014. https://www.capitaliq.com/home.aspx. 187 S&P CAPITAL IQ. n.d. Skiing >Key Stats & Ratios. Accessed February 5, 2014. https://www.capitaliq.com/home.aspx.
Whistler Blackcomb Holdings Inc. Page 135 three years. Although a poor 2012 season ceased growth, Vail’s EBITDA as a percentage of revenue increased to 20.7% in 2013 from 18.5% in 2011188.
Intrawest has seen similar results with a percent of 20% in 2013, up from 16.9% in
2011189. The trend appears to show that in the next few years, Vail and Intrawest will be performing better than the industry average in this area. Moreover, because
Whistler has such a higher percentage, it shows that it is able to be relatively more profitable currently and in the future.
Company Comparison of EBITDA as % of Revenue, 2011-2013
Whistler Vail Intrawest Industry Avg 50%
40%
30%
20%
10%
0% 2011 2012 2013
Source: Made by Jessica Lane using Whistler Annual Reports, Vail Annual
Reports and Intrawest Form S-1
188 Vail Resorts. n.d. "Annual Reports." 2013 Proxy and Form 10-K. Accessed February 8, 2014. http://investors.vailresorts.com/annuals.cfm. 189 NASDAQ. n.d. INTRAWEST RESORTS HOLDINGS, INC SNOW IPO. Accessed February 2014, 2014. http://www.nasdaq.com/markets/ipos/company/intrawest-resorts-holdings-inc-919851-73927?tab=financials.
Whistler Blackcomb Holdings Inc. Page 136
In 2011, both Whistler and Vail had a return on invested capital (ROIC) higher than the industry average (see graph below). In 2013, the industry average increased to 4.8%190 while Whistler dropped to 3.7%191. In 2011 and 2012,
Whistler had a higher ratio than Vail; however, in 2013 Vail surpassed Whistler with 4.1% return192. This demonstrates that although Whistler showed large growth potential in 2011, it appears that the firm has struggled to produce competitive growth.
Company Comparison of Return on Invested Capital (ROIC), 2011-2013
Industry Avg Whistler Vail 8.0%
6.0%
4.0%
2.0%
0.0% 2011 2012 2013
Source: Made by Jessica Lane using Capital IQ at
https://www.capitaliq.com/home.aspx
190 S&P CAPITAL IQ. n.d. Skiing >Key Stats & Ratios. Accessed February 5, 2014. https://www.capitaliq.com/home.aspx. 191 S&P CAPITAL IQ. n.d. Whistler Blackcomb Holdings Inc. Accessed February 7, 2014. https://www.capitaliq.com/home.aspx. 192 S&P CAPITAL IQ. n.d. Vail Resorts Inc. (NYSE:MTN). Accessed Februay 6, 2014. https://www.capitaliq.com/home.aspx.
Whistler Blackcomb Holdings Inc. Page 137
Whistler currently has an advantage in terms of profitability over its competitors, but, due to the increase in profitability and growth of Vail and
Whistler’s lack thereof, this advantage will not continue for long.
Financing Strategy
The debt to equity ratio of Whistler was 0.54, 0.83, and 0.91 in 2011, 2012, and 2013 respectively. This increase illustrates that the firm has been heavily financing future growths for the resort. A similar trend is seen with Vail as its debt to equity ratio increases from 1.3 in 2011 to 1.7 in 2013193. Intrawest, on the other hand, had a debt to equity ratio of -2.1 in 2013, improving from -2.85 in 2012194.
This exemplifies how a company can leverage itself too much, resulting in a struggle to produce profits due to its high interest costs. The average firm in the industry had about an equal amount of debt and equity with a ratio of 1.02 in
2012195 – an increase from 2010 and 2011. As analyzed, Whistler has a debt to equity ratio just below the industry average; however, it is increasing illustrating future growth. Vail’s debt to equity has been consistently higher than Whistler’s.
By taking on an increased amount of debt, Vail adopts a riskier strategy which could produce greater growth if the firm is able to manage its debt level properly.
193 Vail Resorts. n.d. "Annual Reports." 2013 Proxy and Form 10-K. Accessed February 8, 2014. http://investors.vailresorts.com/annuals.cfm. 194 NASDAQ. n.d. INTRAWEST RESORTS HOLDINGS, INC SNOW IPO. Accessed February 2014, 2014. http://www.nasdaq.com/markets/ipos/company/intrawest-resorts-holdings-inc-919851-73927?tab=financials. 195 S&P CAPITAL IQ. n.d. Skiing >Key Stats & Ratios. Accessed February 5, 2014. https://www.capitaliq.com/home.aspx.
Whistler Blackcomb Holdings Inc. Page 138
In sum, Whistler’s current level of debt and equity is such that it is able to seek additional debt for further growth while remaining in a relatively low risky financial position.
Company Comparison of Debt to Equity Ratio, 2011-2013
Whistler Vail Intrawest 2.0 1.0 0.0 2011 2012 2013 -1.0 -2.0 -3.0 -4.0
Source: Made by Jessica Lane using Whistler Annual Reports, Vail Annual
Reports and Intrawest Form S-1
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Summary:
Summary of Internal Environment
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Whistler’s supply chain management is effective enough for it to procure the necessary supplies and equipment to provide consumers with a consistent experience. Whistler’s strengths lie within the following parts of the value chain.
While Whistler has to sell more tickets to break even than its competitors and earns less per skier visit, it has various advantages that make its operations a strength for the firm. Its operating expenses are only 50% of its revenue, which is better than competitors Vail and Intrawest. Additionally, Whistler does a better job of earning revenue per available seat on chair lifts. The firm’s main source of revenue comes from lift tickets which show its focus on its primary means of value creation.
Whistler’s expenditures on marketing, shown through selling, general and administrative expenses, do not appear to have a great impact on resort revenue; this is similar with its largest competitor Vail. Whistler benefits greatly from a strong brand image and high ratings from consumers, which indicates likeability higher than the rest of the industry. Its prices are kept competitive against other ski resorts and it takes advantage of various means of promotion such as strategic partnerships and event marketing. Customer service is another strength for
Whistler. It has a user friendly and simple reservation system that also offers discounts. There is a discount card for local guests who visit frequently. Whistler boasts high online ratings and rankings and has also won various awards for its outstanding service. Revenue per full time employee suggests Whistler is more
Whistler Blackcomb Holdings Inc. Page 141 productive than its competitors making human resource management a strength as well. Whistler also offers good employee benefits, which include discounts on season passes, staying in parity with the competition. The new product development in the industry is a strength for Whistler because upgrading its ski lifts and increasing number of snowmaking machines allows it to remain highly competitive. The new product development is, however, available for the whole industry and any firms with enough capital can easily compete and also stay current with product improvements. Corporate leadership is strong within Whistler.
The CEO has been with Whistler for a long period of time, allowing the firm to retain important knowledge and expertise. A consistent annual dividend signals a strong financial position to its investors; however, this could pose a threat to the company in the long run. Steady and higher EBITDA than the industry average shows that Whistler has the potential to continue to be profitable.
Whistler’s most important value chain activities include its operations as well as its corporate leadership. The firm’s operations allow it to maintain a strong and profitable overall value chain, with a temporary competitive advantage and average/above average returns. A ski resort is made up of many different facilities
(mountain, retail, lodging, and restaurants); as such, Whistler’s advantage in operations acts as a strong backbone to the firm. The corporate leadership is also an essential value chain activity for Whistler. With past growth in earnings and the
Whistler Blackcomb Holdings Inc. Page 142 invaluable expertise of its executives, Whistler is a firm that currently operates efficiently and successfully in comparison with its competitors.
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PART IV
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Part IV: Corporate Strategy
Preliminary Analysis
Market Capitalization
As stated previously, Whistler has a significantly lower market capitalization than its main competitor Vail. This is due to the sheer size of Vail. In 2013,
Whistler’s market capitalization was $521 million compared to Vail’s $2.46 billion
(shown in graph below). Furthermore, although the two firm’s growth in 2012 was about the same, Vail’s increase in market capitalization in 2013 was significantly higher than Whistler’s (see graph below).
Market Capitalization, 2011-2013
Whistler Vail
3,000
2,500 2,000 1,500 1,000
500 Dollars (Millions) Dollars - 2011 2012 2013
Source: Made by Jessica Lane using Whistler Annual Reports and Vail Annual
Reports
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Market Capitalization Growth, 2011-2013
Whistler Vail 40% 30% 20% 10% 0% 2012 2013
Source: Made by Jessica Lane using Whistler Annual Reports and Vail Annual
Reports
The difference in market capitalization and difference in its growth is mainly due to the activity of the share prices of the two firms. As the graphs below show,
Vail’s share price was almost five times larger than Whistler’s in 2013.
Whistler Share Price, 2011-2013
Source: Toronto Stock Exchange at
http://web.tmxmoney.com/charting.php?qm_page=46182&qm_symbol=WB
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Vail Share Price, 2011-2013
Source: Nasdaq Stock Exchange at http://www.nasdaq.com/symbol/mtn/stock- chart?intraday=off&timeframe=3y&splits=off&earnings=off&movingaverage=No
ne&lowerstudy=volume&comparison=off&index=&drilldown=off
The market capitalization as a percent of annual revenues for the two firms appears to be very similar as seen below. This demonstrates that although Vail has a significantly larger market capitalization than Whistler, Whistler is remaining competitive considering its much smaller size.
Market Capitalization as % of Revenue, 2011-2013
Whistler Vail 300%
200%
100%
0% 2011 2012 2013
Source: Made by Jessica Lane using Whistler Annual Reports and Vail Annual
Reports
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Return on Invested Capital (ROIC)
In 2011, the return on invested capital was more favourable than both Vail and the industry average as shown in the graph below. However, over the past three years this has declined dramatically. This demonstrates that Whistler has unable to produce competitive returns from its invested capital (both equity and debt).
Return on Invested Capital (ROIC), 2011-2013
Industry Avg Whistler Vail 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2011 2012 2013
Source: Made by Jessica Lane using Capital IQ at
https://www.capitaliq.com/home.aspx
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Vertical Location
Current Strategies
Whistler currently sells directly to its consumers. It purchases its inputs from national and international suppliers. Purchased inputs include ski lifts, snow making machines, products for resale, food and beverage items, various supplies, and supplies used in maintenance of the mountain. Whistler does not own any of its supplier companies; therefore, it is not vertically integrated.
Problems / Issues
In general, one of the benefits of being vertically integrated for a firm is to obtain economies of scale. For Whistler, however, purchasing a supplier would not benefit it in that manner. Because the firm only purchases one ski lift or snow making machine at a time, there would not be much, if any, cost savings compared to if the firm purchased multiple units at once. Therefore, Whistler’s decision to solely sell to consumers rather than vertically integrating allows the firm to focus on its core business competencies.
Recommendations
It is believed that Whistler’s current level of vertical integration is ideal for generating firm wealth in the ski resort industry. Whistler is able to target its
Whistler Blackcomb Holdings Inc. Page 150 energy on its core business of selling mountain lift tickets to consumers. Any purchase of a supplier would distract the firm from this and would not result in cost savings for the firm. Hence, it is recommended that Whistler remain at the same level of vertical integration.
Horizontal Location
Current Strategies
Whistler is a relatively prestigious ski resort which offers a variety of services and goods for its customers. It falls under two specific NAICS codes:
71392 – Skiing facilities and 721113 – Resorts. Its core business is operating the mountains for skiers and snowboarders; this represents over 70% of the firm’s revenues. For this reason, Whistler operates at a low level of horizontal diversification. Other revenue is earned through royalties from lodging on the resort as well as food and beverage sales. Whistler does not own the hotels on the resort as this is operated by a third party, but it does receive a percentage royalty of those revenues. This allows Whistler to focus on its core business of the actual mountain rather than the business of running hotels. Therefore, its primary industry is skiing facilities, but because the resort also includes many hotels and restaurants, it overlaps into the resorts industry as well.
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Problems / Issues
As stated above, Whistler primarily exerts its efforts in operating the ski mountain, although some revenues are received from hotels and food and beverage. The firm has clearly separated itself from the operations of the hotels by solely receiving royalties from the third party. After analysis of the company’s horizontal strategy, it is determined that Whistler’s strategy has been successful and is assumed to continue to allow it to remain competitive in the ski industry.
Recommendations
As there are no perceived problems or issues with Whistler’s current strategy, there are no recommendations for the company in this respect. It is believed that the company has positioned itself properly within the two main industries (skiing facilities and resorts) to obtain synergies resulting in a competitive advantage.
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Geographic Location
Current Strategies
Whistler operates its resort in Whistler, British Columbia. This location was chosen originally due to the geological aspects of the area which include the physical mountains and the nearby lake (which is necessary for the snowmaking machines to produce snow). The location is also ideal due to the weather conditions in this part of the country compared to eastern Canada. This allows the resort to have about a month longer season than other firms competing in the same market both in Canada and the United States.
Problems / Issues
Although the firm competes with other ski resorts across North America, it is limited to consumers living in the Whistler area and those willing to travel to the west coast of Canada. Over the past few years, Vail has made several acquisitions in the industry; in October 2010 the company purchased 100% of the capital stock of Northstar Resort in North Lake Tahoe, in April 2012 it purchased the assets of
Kirkwood Mountain Resort in Lake Tahoe, and in December 2012 it acquired the assets of two smaller ski areas in the Midwest United States196. Furthermore, in
May 2013 Vail purchased the operating rights of Canyon Resorts in Park City,
196Vail Resorts. n.d. "Annual Reports." 2013 Proxy and Form 10-K. Accessed February 8, 2014. http://investors.vailresorts.com/annuals.cfm.
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Utah197. Similarly, Whistler’s other large competitor, Intrawest, operates seven ski resorts in both Canada and the United States. By being confined to the one location, Whistler limits itself to the number of consumers it can attract, thus limiting its revenue. Additionally, it does not allow the firm to grow as much as its competitors who are gaining market share and market power by acquiring numerous locations. It is also likely that Whistler is not able to obtain economies of scale with regards to its resort inputs. Therefore, Whistler’s largest problem with operating only one location is the fact that it is not capable of growing at the rate of its competitors reducing its competitive advantages in the long term.
Recommendations
It is recommended that Whistler acquire another ski resort location in order to increase its revenues by growing its consumer base. Another location would increase the firm’s market share in the industry as well as give the opportunity to achieve economies of scale. Firms that wish to increase its market power by operating another location can do so in two ways: through a greenfield investment or an acquisition of an existing firm. Due to the high costs of entry in the ski resort industry as well as the difficulty of obtaining a mountainside suitable for the sport, an acquisition is really the only option for Whistler.
197 Vail Resorts. n.d. News Releases . Accessed February 19, 2014. http://investors.vailresorts.com/releases.cfm?Year=&ReleasesType=&PageNum=1
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Since Whistler should aim to gain market share in its current industry, the
North American ski industry, the acquisition should be within either Canada or the
United States. This acquisition would be classified as a related acquisition as it is a purchase of a firm in the same industry of its current operations. One of the largest goals with regards to this purchase is increasing the firm’s value creation through synergies to not only remain competitive, but to grow in the industry. The easiest way to share resources and capabilities between two ski resorts is to be located close to each other. By physically being near to each other, Whistler and its newly purchased resort can share human resources in terms of employees. The firm can also purchase supplies in larger quantities which should reduce operating costs. A downside to having two ski resorts located close to each other is that their consumer based will likely overlap which could mean that Whistler would not be reaching its maximum revenue potential as a whole. However, since Whistler is a larger ski resort that attracts more experienced skiers and the hill to be purchased would be significantly smaller, attracting beginner to intermediate visitors, it is expected that this would not be a disadvantage for the firm. A map displaying some of the nearby ski resorts is shown below.
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Ski Resorts & Ski Areas in British Columbia
Source: http://skiittobelieveit.com/bc-ski-map/
The listed ski resorts above are all smaller sized resorts that could potentially be a good acquisition for Whistler. Cypress Mountain and Crystal Mountain, however, are owned by Boyne Resorts which operates 12 ski resorts across North
America198 so it is unlikely that it would be willing to sell to Whistler as one of its biggest competitors. Ultimately it is Whistler’s decision as to which resort it chooses to purchase; in addition to financial information not being publicly available, it is out of the scope of this report to perform adequate due diligence on
198Boynes Rresorts . n.d. History. Accessed February 18, 2014. https://www.boyneresorts.com/.
Whistler Blackcomb Holdings Inc. Page 156 the resorts. The business strategies recommended will be virtually identical no matter which resort is chosen.
Since acquisitions can be a huge financial burden, it is essential that Whistler structure itself properly in order to reap the full benefits of the second resort. Even though there have been numerous acquisitions within the industry, most of these have been done through privately owned companies. Vail purchased two ski areas in 2012, as previously mentioned, for a combined cost of $20 million199. These two resorts have 430 skiable acres combined200201. A sample of the possible ski resort acquisitions for Whistler with their corresponding skiable acres are listed below:
Ski Location Skiable Acres Mount Seymour 200202 Manning Park 140203 Mount Washington Resort 1700204 Apex Mountain Resort 1112205 Sun Peaks Resort 3678206
199Vail Resorts. n.d. "Annual Reports." 2013 Proxy and Form 10-K. Accessed February 8, 2014. http://investors.vailresorts.com/annuals.cfm. 200Afton Alps . n.d. Epic Transformaton. Accessed February 19, 2014. http://www.aftonalps.com/about-afton- alps/about-afton-alps/about-afton-alps. 201Brighton . n.d. Epic Transformation . Accessed February 19, 2014. http://www.mtbrighton.com/about-mt- brighton/about-mt-brighton/about-mt-brighton. 202 Mt Seymour. n.d. Trail Map & Stats . Accessed February 19, 2014. http://www.mountseymour.com/trailmap. 203Manning Park Resort . n.d. Trail Maps . Accessed February 19, 2014. https://www.manningpark.com/?q=node/249. 204Mount Washinton . n.d. Mountain Stats. Accessed February 19, 2014. http://www.mountwashington.ca/index.php/mountain-stats.html. 205 Apex Mountain Resort . n.d. Accessed Feburary 20, 2014. http://www.apexresort.com/the-mountain/. 206Sun Peaks Resort . n.d. Mountain Stats . Accessed February 20, 2014. http://www.sunpeaksresort.com/winter/mountain-stats.
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Using Vail’s purchase cost of $20 million for 430 skiable acres, it is projected that a purchase of a smaller ski area with roughly 200 skiable acres will cost about $12 million, assuming a small premium since this purchase would be in
Canadian dollars. In order to purchase a larger ski resort with approximately 1500 skiable acres, it is estimated that it would cost about $100 million; this is taking into consideration the increased amount of skiable acres as well as the other amenities offered at the location.
Whistler is able to finance the purchase of either a small ski area or a ski resort by acquiring additional debt. As shown below, even with $100 million of debt undertaken to purchase a ski resort, Whistler is able to maintain a low debt to equity ratio. This indicates that the firm is very capable of taking on additional debt without assuming too much risk. Compared to the debt to equity ratio of Vail of
1.7 (as previously discussed), Whistler is still in a much more competitive position in this aspect.
Furthermore, by investing in an additional ski location, Whistler will be able to produce an increased amount of revenue, while obtaining economies of scale
Whistler Blackcomb Holdings Inc. Page 158 resulting in increased firm growth. This is expected to increase the firm’s current
ROIC ratio of 3.7% to match, and hopefully surpass, Vail at 4.1% and the industry average at 4.8%207.
In the future, once Whistler has been operating the two ski locations for one or two seasons, it can decide if has achieved the targeted synergies and growth desired. If so, it can discuss the opportunities available to acquire additional locations to further gain market share and market power. Whistler must find a balance between acquiring ski areas quickly while not attempting to grow too rapidly by taking on an unmanageable amount of risk. The sooner this is established, the better chance Whistler has in becoming more competitive in the industry.
207S&P CAPITAL IQ. n.d. Vail Resorts Inc. (NYSE:MTN). Accessed Februay 6, 2014. https://www.capitaliq.com/home.aspx.
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General Strategy – Dividend Policy
Current Strategies
Since incorporation, Whistler has issued annual dividends of $0.975 per share and paid quarterly208. Issuing dividends is a strong signal to a firm’s shareholders and potential investors. The annual declaration of this high dividend implies a firm’s confidence in being capable of continuing to pay out this cash in the future. Whistler’s investors see this dividend as a positive figure as it forecasts future growth and success of the firm.
Problems / Issues
In general, issuing a dividend has many benefits for a firm as it is arguably the strongest positive signal to its investors; however, it is also the strongest negative signal if a firm ceases to issue the dividend for whatever reason.
Therefore, a firm must be very careful and strategic when it decides to first declare dividends. As seen with Whistler thus far, the firm has managed to continue paying its shareholders the dividends while maintaining its level of cash and current assets over the last three years209. Although, this current strategy is successful at the
208Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed February 1, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1. 209Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed February 1, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1.
Whistler Blackcomb Holdings Inc. Page 160 moment, because its dividends issued as a percent of cash generated from operations is extremely high– 57% in 2013210, it cannot be sustainable in the long- term. Whistler’s liabilities have increased a total of 30% since 2011211, largely due to a loan from a related party in 2012. It is assumed that a large portion of this cash was used to pay the promised annual dividends to its shareholders rather than investing in profitable endeavours. Because issuing these dividends is sucking cash from the corporation, Whistler is unable to finance long-term investments to produce the growth needed to compete in the industry.
Recommendations
It would be unreasonable to suggest that Whistler decrease or eliminate its annual dividend. This would be disastrous as it would signal financial instability to its investors and potentially decrease consumer confidence in the sustainability of the resort. Hence, it is recommended that Whistler continue to issue the same dollar value of dividends, but rather than declaring a 100% cash dividend, it can distribute the dividend in shares – or a portion of it in shares. This will allow the firm to reserve its cash to fund the operations of the newly acquired ski area.
210Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed February 1, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1. 211Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed February 1, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1.
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To mitigate the risk of this announcement having a negative impact on the firm, in terms of the public’s reaction, management should ensure sufficient communication. The management of Whistler should publish a memo to its shareholders and potential investors explaining the reasoning for this change (to invest in an additional ski resort with high return expectations). It is expected that the communication of management’s confidence will reassure investors that the firm is still a solid investment. Moreover, a perfect communication would also signal future returns and growth with the acquisition of another location.
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PART V
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Part V: Business / Functional Strategies
Current Strategies
Whistler’s business strategy is that of focused differentiation. Whistler is one of many ski resorts in the North American skiing industry that has many competitors offering similarly priced services. However, Whistler is a dominant and well known player within the industry and has differentiated itself appropriately. Whistler offers more for the price of its ski ticket, including more skiable acres and new technology – such as faster ski lifts and RFID tickets, overall offering more value to the customers than its competitors can provide. Whistler has been able to differentiate itself further with strong customer service, garnering the company numerous awards and high ratings, as well as with an internationally recognized brand. Whistler has created a sustainable perception of quality, offering increased service and more options than its similarly priced competitors. In addition, Whistler’s strong performance in its operations and human resource management allows it to maintain the differentiation. Whistler markets to both regional visitors and destination guests from across the globe, so its current strategies take into account the various needs of these two groups.
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Problems / Issues
A summary of the current problems/issues affecting Whistler, designated to each of its value-chain activities, are outlined below:
Supply Chain Management
Ski resorts depend fully on the government for use of the land and natural
resources (i.e. water) which makes power of suppliers a threat to Whistler
Developmental Agreement gives First Nation claims to the crown land in
British Columbia and there is a threat that they may be interested in
changing the Development Agreement Act for their best interest
National liquor laws in both Canada and the United States, which have a
higher minimum drinking age than some other countries, limit children and
young adults from certain establishments after 8pm which can be
unappealing to international destination travellers
Operations
Revenue generated from lift tickets is a weaknesses to Whistler, as Whistler
earns less lift revenue than Vail per skier visit using the effective ticket
price, which is the average ticket revenue per skier
Breakeven point is a weakness as a higher number of tickets are needed to
cover expenses compared to Vail as a result of the lower lift ticket revenue
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Whistler earns less mountain revenue than Vail per skier visit, which
includes a combination of lift ticket, rental equipment, food and ski school
revenue; it is a weakness to Whistler
Marketing and Sales
Gas prices are increasing in both Canada and US; additionally, the gas prices
in the US are significantly lower than in Canada which is a threat to Whistler
Disposable income in Canada and the US is increasing, which is an
opportunity for Whistler to earn more revenue
Tourism as a whole is increasing but recreation and entertainment activities,
the category Whistler fits in, is decreasing
The population is increasingly aging and is less likely to spend time at ski
resorts causing a threat to the ski resort industry
Decreased skier participation by consumers, while there is an increase in
sports and fitness; this is potentially related to the aging consumer base
There has been a decreasing number of visits – especially destination guests
who tend to produce more revenue per visit
Corporate Leadership
Canadian dollar is weaker compared to the US dollar which incentivizes
consumers to go to the US instead of Canada to get more value for their
money; this is a threat to Whistler
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Share price is increasing at a slower rate than Vail; Whistler needs to
increase market cap by issuing more shares or by increasing share price
Company is currently in a good position but it is not sustainable. Whistler is
increasing long-term debt for the purpose of maintaining its high dividends.
There is a high risk of losing too much cash and be forced to stop dividends
which would be detrimental; as a result, this is a large threat to Whistler
ROIC is lower than competitor Vail because the debt taken on by Whistler is
being used to fund dividends; therefore, there is a need to grow to remain
competitive and generate higher returns
Ski resorts are highly concentrated and industry growth is less than overall
tourism growth resulting in the high intensity of competition and rivalry
To sum up, Whistler uses the focused differentiation business strategy; it is then important for Whistler to complete primary and support value chain functions at a competitive level to continue to sustain a competitive advantage. As a result, the summarized value chains activities listed above can be narrowed down into two most prevalent issues: lack of revenue generated from skier visits and decrease in participation by consumers which is linked to an aging population. Whistler has already developed itself into its differentiation strategy by offering a service that is not found at other similarly priced ski resorts; however, given the growing threats
Whistler Blackcomb Holdings Inc. Page 169 to the industry and specific issues at Whistler, it is important to grow this recognition and attract more consumers to sustain its competitive advantage. This implies that a function strategy that focuses on marketing and sales to eliminate the threats and increase brand loyalty can overall assist in strengthening other value chain issues within operations and corporate leadership. Overall, more revenue from consumers can help improve breakeven, ROIC, revenue per skier visit and number of skier visits per year. Share price and market cap can be increased by generating more revenue which increases shareholders confidence. Moreover, the threat from decline in snow sport participation, the aging population, and number of skier visits can be improved by attracting more consumers locally and internationally. To conclude, Whistler needs to generate more revenue so it is important to attract more skiers. Given the two market segmentations used by
Whistler – regional skiers and destination guests, each much be addressed differently to solve these problems.
Recommendations
Recommendation I: Local and Regional
There is a large threat with the aging population, as a large portion of the population is over 44 years of age; this demographic is not the ideal consumers for ski resorts. As it has been determined, more people learn the sport before the age of
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24 and continue to improve their skills afterwards212. Therefore, it has already been determined that the target population to promote and attract to Whistler is 24 or under. As well, the decreasing participation in snow sports is a large threat to
Whistler. With the 22% decrease in total consumers since the 2010/11 ski season213 and limited number of customers being over the age of 65, there is a clear correlation between the two. This means that it is essential to attract younger consumers to keep up with the rate at which the aging population increases. But, given the decrease in participation in winter sports that has occurred, it appears that this has not been happening in the industry. If Whistler can effectively enhance its already successful marketing and sales value chain function to promote and motivate more consumers under 24, it will have an advantage over its competitors.
This recommendation focuses on the local and regional skiers by attracting a new consumer base and increasing participation in winter sports. The focus is on attracting youth enabling a core consumer group and retaining them so they can grow with the resort. As well, it allows them to turn into lifelong consumers. As shown below, if a child learns to ski at the age of 10, they can improve their skill for the next 20 years until their skills and participation start to decline in their 50’s.
212Snowsports Industries America . 2013. Total Number of Snow Sports Participants . Accessed January 26, 2014. http://www.snowsports.org/Retailers/Research/SnowSportsFactSheet. 213 Snowsports Industries America . 2013. Total Number of Snow Sports Participants . Accessed January 26, 2014. http://www.snowsports.org/Retailers/Research/SnowSportsFactSheet.
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This offers Whistler roughly 40 years of the consumer’s life to generate revenue from them.
Age and Skill Level of Skiers and Snowboarders
Source: http://www.snowsports.org/Retailers/Research/SnowSportsFactSheet
Whistler has positioned itself in a strong competitive position with its business strategy and developing its brand name but must resolve the growing issues within the industry to effectively generate enough revenue to maintain a competitive advantage. As Whistler already offers more value for its customers through quality factors such as vast amounts of skiable acres, excellent customer service and other various services provided offered by a solid differentiation strategy, it is important for Whistler to maintain this advantage by improving its consumer issues through marketing. The purpose is to build strong positive relationships in order for the focused differentiation strategy to continue to work for Whistler; hence, investing in promotion is very important given the issues identified above.
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It is recommended that Whistler participate with local schools, both elementary and high schools, to create a program that offers students weekly visits to Whistler; this would include rentals (if needed), ski or snowboard lessons, transportation, and lift tickets. A bundle price for the entire program would be established. By offering an after school program that caters to all levels of skiers and snowboarders, this program would be very flexible and catered individually to each schools’ needs in order to properly service the children. Another aspect for schools located a greater distance from the mountain would be promotional packages for the schools for a weekend trip, with a similar bundled package that also includes lodging. Whistler is able to open the market at an early stage in a consumer’s life with this strategy. Below is a graph of school districts in southern
British Columba to provide an insight into the different school boards Whistler can partner with. Whistler is located in district 48 with 16 schools214 located nearby.
Whistler should start in district 48 and expand outward to surrounding districts depending on the success.
214School District No 48 (Sea to Sky). n.d. Our Schools. Accessed February 20, 2014. http://sd48seatosky.org/district-contacts/our-schools-3/.
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Regional School Districts
Source: https://www.bced.gov.bc.ca/schools/bcmap.htm
As disposable income among Canadians is increasing, Whistler can exploit that opportunity as its young consumer base gets older, by having already developed their brand loyalty through the school programs. Gas prices are increasing in Canada so by offering transportation services included in the bundle price, it relieves parents from having to pay the extra costs to transport their children. It also eliminates the threat of parents not being able to afford to pay the increasing gas costs. In addition, the more visitors at a ski resort, the higher the likelihood that tourists will book a longer ski package, resulting in people spending
Whistler Blackcomb Holdings Inc. Page 174 more on lift tickets, food, rentals and ski school, generating a higher earnings per visit. Therefore, increasing local visits will drive the revenue growth for
Whistler215.
Finally, ski resorts including Whistler have high fixed costs; thus, once skier visits reach a specified number, it benefits from a high profit margin216. As determined, Whistlers operating costs as a proportion of revenue are already lower than Vail and Intrawest making it easier to earn the high profit margins. Also, the local and regional customer base provides a more stable winter visitation that is more consistent than destination guests217. Overall, Whistler is provided with the revenue stability by local and regional guests offered by this solution which provides for a large increase in revenue and mitigates the risk from the aging population. Furthermore, this allows Whistler to sustain its competitive advantage through its differentiation strategy developed through quality of skiing available, skiable acres offered, facilities, services offered and excellent customer service by illuminating the consumer threats that jeopardized revenue. As well, with the increased revenue from local visitors, it will help improve other weaknesses such as the breakeven point, revenue per skier visit and overall increase skier visits a
215Snowsports Industries America . 2013. Total Number of Snow Sports Participants . Accessed January 26, 2014. http://www.snowsports.org/Retailers/Research/SnowSportsFactSheet. 216Snowsports Industries America . 2013. Total Number of Snow Sports Participants . Accessed January 26, 2014. http://www.snowsports.org/Retailers/Research/SnowSportsFactSheet. 217Whistler Blackcomb Holdings . 2013. "Annual Information Form." Whistler Blackcomb. December 20. Accessed January 20, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol-reportsannual.
Whistler Blackcomb Holdings Inc. Page 175 year. This increase in revenue will increase share price and the market cap by increasing shareholders confidence.
Implementation
To implement this recommendation, Whistler will have to create the programs and packages to find the optimal level of price per student against estimated participants. In order to establish the details of the program, the school board(s) and the transportation companies will have to be contacted to discuss the feasibility and costs of the program. It is expected that there will be ongoing communication with the school board(s) throughout the program creation process as it requires a consensus between the two parties. It is important for Whistler to deal with these external organizations in a friendly and professional manner so that the partnership relationship will remain strong so the program will be able to be implemented on an annual basis. It is recommended that a small task force be created from existing employees to complete this project on a part time basis throughout the summer months. Once the details of the school program have been finalized, Whistler can create brochures to distribute to the school children starting in September, when the children return to school after the summer break. It is expected that the first school trip will be set for late November (as soon as the ski season begins). After implementation of the first full season, the success of this program should be
Whistler Blackcomb Holdings Inc. Page 176 analyzed, including the appropriateness of the prices and the costs. Whistler can then decide whether this program is successful enough to expand to other schools.
A depiction of the estimated timeline for the implementation of this project is below
Recommendation II: Target International Customers
Recreation and entertainment expenditures in Canada are decreasing. This threat to Whistler can be subdued by focusing on increasing destination skier visits.
These destination customers visit Whistler for the full resort experience, more so than just the sport aspect that local customers enjoy. Destination guests only accounted for 38% of Whistler’s total skier visits in 2013218; however, these guests generate higher total revenue per skier visit than the local guests as they require
218Whistler Blackcomb. n.d. "Press Releases 2013." December 2013 Year Ended Audited Financial Statesments. Accessed February 1, 2014. http://www.whistlerblackcombholdings.com/phoenix.zhtml?c=240837&p=irol- news&nyo=1.
Whistler Blackcomb Holdings Inc. Page 177 additional services such as lodging, rentals, and food and beverages. Whistler’s local and regional guests make up its consistent visitor base; however, with the socio-cultural threats, it is also important to focus on the destination customers.
The goal of this strategy recommendation is to generate a more consistent international visitation to create a larger stable income from customers who generate more revenue per visit. A focus on international visitors will aid Whistler in establishing a consumer base that has a higher effective ticket price, increasing
Whistler’s focus on competing against international ski resorts rather than smaller, local ski areas. With Whistler’s strong brand name and quality infrastructure, this is a recommendation that Whistler has the means to accomplish.
Skier Visits by Country (in millions), 2000-2012
Source: http://www.vanat.ch/RM-world-report-2013.pdf
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As shown in the graph above, countries within Europe, such as Austria,
France and Italy, account for many more skier visits than Canada, demonstrating that there is a large market for Whistler to draw destination guests from.
Furthermore, as shown in the chart below, America is second only to the Alps in terms of worldwide skier visits, showing that Canada is able to successfully compete for international destination skiers.
Reparation of Skier Visits Worldwide, 2013
14% Asia & Pacific America 44% 22% East Europe Alps 9% 11%
Source: Made by Lindsay Crone using http://www.vanat.ch/RM-world-report-
2013.pdf
Finally, the graph below shows that Europe has 27% of worldwide skiers that ski abroad. This demonstrates the willingness that European skiers have to travel for their skiing experience which is an opportunity for Whistler.
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Distribution of skiers by region of origin
1% Asia & Pacific 20% 20% America East Europe 19% Alps 27% Various 13%
Source: Made by Lindsay Crone using http://www.vanat.ch/RM-world-report-
2013.pdf
It is recommended that Whistler makes international marketing a priority to increase the potential for destination visits. While it is clear that Europe is the perfect place for Whistler to focus its efforts, it is important to determine an appropriate vehicle to increase Whistler’s visibility throughout Europe. To do this it is recommended that Whistler host its own competitions for skiing and snowboarding on an international level. Currently, Whistler hosts various recreational competitions and will host the 2014 SportChek Canadian Alpine
Championships; however, these are primarily for youth and regional athletes219. By creating its own competitions and inviting international athletes to compete at its
219Alpine Canada. n.d. Latest News. Accessed February 23, 2014. http://www.alpinecanada.org/news/2013/whistler-host-sport-chek-alpine-canadian-championships.
Whistler Blackcomb Holdings Inc. Page 180 facilities, it will increase international brand awareness; increase international group purchases (for teams); and ensure that after the 2010 Olympic Games that
Whistler remains an internationally recognized ski resort. Because of the infrastructure created at Whistler for the 2010 Olympics, Whistler currently has high enough quality facilities as well as skiable acres to host various competitions throughout the year.
Implementation
Implementing this recommendation requires various steps and multiple divisions of Whistler’s employees to work in tandem. It is recommended that
Whistler hire an employee dedicated to the planning of competitions and create a project team from the various divisions to work under the project manager. The first step will fall to the operations and maintenance divisions who would be responsible for building and maintaining the required slopes, stands and other necessary additional facilities.
Sales and marketing will be responsible for promoting the competitions and
Whistler as a resort throughout the chosen European countries. It is important for the countries competing to be aware of its athletes’ participation in the competition to increase engagement from the international market. The marketing channels best suited to this task will be more traditional media such as commercials on European sports networks, both broadcasted and online, as well as social media networks that
Whistler Blackcomb Holdings Inc. Page 181 will facilitate the sharing of pictures, videos and the experience of Whistler. The benefit of a social media campaign is that those guests and athletes at the competition can participate directly and their content is immediately seen by their followers which are the target market (those who participate in skiing and snowboarding). Guest services will be responsible for assisting the customers book travel plans and create deals for groups that will help encourage family, friends and fans to travel to see the competition and stay at the lodging provided on the resort.
This recommendation does not specify which month the competition should take place; however, it is assumed to be expected that it will take place during the next mid-season. Planning and preparation, however, should begin immediately as there is much work involved in attracting athletes and raising awareness of the event. Ideally, a commitment for the majority of athletes’ participation is desired for early summer. Promotional advertisements should run throughout late summer when international consumers begin to consider travel plans for the winter months; promotion levels should increase as the competition date gets closer to ensure the maximum number of visitors. The social media campaign will start about a month before the competition so athletes and fans can express their excitement for the event to begin and will continue after the competition until consumer participation fades. Management should then discuss with the project team the execution of the event and the returns generated. Although the benefits of the competition –
Whistler Blackcomb Holdings Inc. Page 182 increased international destination guests through increased international awareness, are not expected to be reaped immediately, revenues generated compared with the costs associated with the event can be analyzed.
Conclusion
It has been recommended that Whistler expand geographically, acquiring another ski area or resort to develop new opportunities for revenue and an increased consumer base. The recommended business strategies focus mostly on marketing to increase Whistler’s current target markets – both regional and destination guests, to deal with the socio-cultural threats. With Whistler’s many strengths, it is important to take further steps to continue its successful growth within the North American and International ski resort industry.
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APPENDICES
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Appendices
Statements of Financial Position Whistler Whistler Whistler CAD $ (thousands) CAD $ (thousands) CAD $ (thousands) 2013 % 2012 % 2011 % ASSETS Current assets: Cash and cash equivalents $ 41,353 5% $ 43,634 5% $ 30,023 3% Restricted cash Accounts receivable $ 3,323 0% $ 3,481 0% $ 3,204 0% Income taxes receivable $ - 0% $ 240 0% $ - 0% Inventory $ 15,856 2% $ 13,788 2% $ 13,314 2% Prepaid expenses $ 2,727 0% $ 3,104 0% $ 3,922 0% Notes receivable $ 10,311 1% $ 303 0% $ 296 0% Deferred Income tax Other Current Assets $ 63,570 8% $ 64,550 7% $ 50,759 6% Notes receivable $ 2,636 0% $ 2,792 0% $ 2,946 0% Property, buildings and equipment $ 322,316 38% $ 328,414 38% $ 343,108 39% Property held for development $ 9,244 1% $ 9,244 1% $ 9,244 1% Real Estate helf for sale and investment Deferred charges and other Equity investments Intangible assets $ 311,428 37% $ 324,028 37% $ 337,933 38% Goodwill $ 137,259 16% $ 135,574 16% $ 135,574 15% $ 846,453 100% $ 864,602 100% $ 879,564 100% LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 24,927 3% $ 24,060 3% $ 20,642 2% Income taxes payable $ 1,645 0% $ 153 0% $ 603 0% Provisions $ 2,858 0% $ 2,903 0% $ 2,710 0% Deferred revenue $ 22,347 3% $ 20,718 2% $ 18,804 2% $ 51,777 6% $ 47,834 6% $ 42,759 5% Long‐term debt $ 258,042 30% $ 256,800 30% $ 255,812 29% Notes payable to affiliates Other long term liabilties Deferred income tax liability $ 20,690 2% $ 15,489 2% $ 10,225 1% Limited Partner’s interest $ 72,796 9% $ 72,796 8% $ - 0% Total liabilities $ 403,305 48% $ 392,919 45% $ 308,796 35% Equity Common shares $ 442,080 52% $ 441,476 51% $ 440,994 50% Additional paid‐in capital $ 913 0% $ 721 0% $ 654 0% Accumulated OCI Retained Earnings $ (54,781) -6% $ (31,887) -4% $ (10,613) -1% Treasury stock Equity attributable to company $ 388,212 46% $ 410,310 47% $ 431,035 49% Equity attributable to non‐controlling interest$ 54,936 6% $ 61,373 7% $ 139,733 16% $ 443,148 52% $ 471,683 55% $ 570,768 65% $ 846,453 100% $ 864,602 100% $ 879,564 100% Whistler Blackcomb Holdings Inc. Page 186
Vail Vail Vail US $ (thousands) US $ (thousands) US $ (thousands) 2013 % 2012 % 2011 % ASSETS Current assets: Cash and cash equivalents $ 138,604 6% $ 46,053 2% $ 70,143 4% Restricted cash $ 12,624 1% $ 14,284 1% $ 12,438 1% Accounts receivable $ 79,037 3% $ 65,743 3% $ 58,529 3% Income taxes receivable 0% Inventory $ 68,318 3% $ 65,873 3% $ 54,007 3% Prepaid expenses Notes receivable Deferred Income tax $ 25,190 1% $ 24,458 1% $ 29,167 1% Other Current Assets $ 19,696 1% $ 15,959 1% $ 21,340 1% $ 343,469 15% $ 232,370 12% $ 245,624 13% Notes receivable Property, buildings and equipment $ 1,169,288 51% $ 1,049,207 54% $ 1,021,736 52% Property held for development Real Estate helf for sale and investment $ 195,230 9% $ 237,668 12% $ 273,663 14% Deferred charges and other $ 97,267 4% $ 46,530 2% $ 46,057 2% Equity investments Intangible assets $ 121,344 5% $ 92,070 5% $ 91,098 5% Goodwill $ 348,824 15% $ 269,769 14% $ 268,058 14% $ 2,275,422 100% $ 1,927,614 100% $ 1,946,236 100% LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 270,513 12% $ 228,528 12% $ 222,404 11% Income taxes payable $ 42,822 2% $ 20,721 1% $ 20,778 1% Provisions Deferred revenue $ 313,335 14% $ 249,249 13% $ 243,182 12% Long‐term debt $ 795,928 35% $ 489,775 25% $ 490,698 25% Notes payable to affiliates Other long term liabilties $ 242,906 11% $ 232,869 12% $ 235,429 12% Deferred income tax liability $ 85,384 4% $ 139,393 7% $ 133,208 7% Limited Partner’s interest Total liabilities $ 1,437,553 63% $ 1,111,286 58% $ 1,102,517 57% Equity Common shares $ 409 0% $ 405 0% $ 403 0% Additional paid‐in capital $ 598,675 26% $ 586,691 30% $ 575,689 30% Accumulated OCI $ (67) 0% $ (255) 0% 0% Retained Earnings $ 418,043 18% $ 408,662 21% $ 416,458 21% Treasury stock $ (193,192) -8% $ (193,192) -10% $ (162,827) -8% Equity attributable to company $ 823,868 36% $ 802,311 42% $ 829,723 43% Equity attributable to non‐controlling interest$ 14,001 1% $ 14,017 1% $ 13,996 1% $ 837,869 37% $ 816,328 42% $ 843,719 43% $ 2,275,422 100% $ 1,927,614 100% $ 1,946,236 100%
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Intrawest Intrawest Intrawest US $ (thousands) US $ (thousands) US $ 2013 % 2012 % 2011 ASSETS Current assets: Cash and cash equivalents $73,460 7% $118,046 9% Not available Restricted cash Accounts receivable 38,377 3% 38,836 3% Income taxes receivable 0% 0% Inventory 29,151 3% 34,256 3% Prepaid expenses 20,759 2% 22,365 2% Notes receivable 0% 0% Deferred Income tax Other Current Assets $161,747 14% $213,503 16% Notes receivable 44,041 4% 50,242 4% Property, buildings and equipment 475,856 42% 510,178 38% Property held for development 164,916 15% 193,806 14% Real Estate helf for sale and investment Deferred charges and other 28,584 3% 10,272 1% Equity investments 86,344 8% 196,627 15% Intangible assets 65,503 6% 73,554 5% Goodwill 94,609 8% 94,611 7% $ 1,121,600 100% $ 1,342,793 100% LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $70,397 6% $77,521 6% Income taxes payable 0% 0% Provisions 0% 0% Deferred revenue 52,110 5% 43,216 3% $ 122,507 11% $ 120,737 9% Long‐term debt 659,113 59% 811,133 60% Notes payable to affiliates 1,358,695 121% 1,109,005 83% Other long term liabilties Deferred income tax liability 31 0% 26,199 2% Limited Partner’s interest Total liabilities $ 2,140,346 191% $ 2,067,074 154% Equity Common shares $ (1,166,797) -104% $ (877,879) -65% Additional paid‐in capital 0% 0% Accumulated OCI $ 148,805 $ 153,598 Retained Earnings Treasury stock Equity attributable to company $ (1,017,992) -91% $ (724,281) -54% Equity attributable to non‐controlling interest$ (754) 0% 0% $ (1,018,746) -91% $ (724,281) -54% $ 1,121,600 100% $ 1,342,793 100%
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Statements of Comprehensive Income
Whistler Whistler Whistler CAD $ (thousands) CAD $ (thousands) CAD $ (thousands) 2013 % 2012 % 2011 %
Resort revenue $ 240,780 100% $ 236,372 100% $ 212,065 100% Operating expenses $ 126,673 53% $ 124,225 53% $ 109,459 52% Depreciation and amortization $ 40,249 17% $ 38,803 16% $ 38,969 18% Selling, general and administrative $ 27,673 11% $ 26,938 11% $ 20,527 10% Gain onsale of property Impairment of long-lived assets Impairment of goodwill Impairment of real estate 0% 0% $ 1,070 1% Acquisition-related costs $ 194,595 81% $ 189,966 80% $ 170,025 80% Earnings from operations $ 46,185 19% $ 46,406 20% $ 42,040 20% Disposal losses $ (1,257) -1% $ (26) 0% $ 56 0% Investment Income Interest expense on 3rd party debt Interest expense on N/P to affiliates Earnings (loss) from equity investments Gain on disposal of equity investments Loss on extinguishment of debt Other income (expense) Finance expense, long term debt $ (16,750) -7% $ (17,458) -7% $ (15,700) -7% Finance expense, Limited Partner’s interest $ (7,600) -3% $ (7,500) -3% 0% Net earnings before income tax $ 20,578 9% $ 21,422 9% $ 26,396 12% Loss on discontinued operations Foreign currencry translation adjustments Income tax expense $ (7,248) -3% $ (5,560) -2% $ (5,704) -3% Net earnings and comprehensive income $ 13,330 6% $ 15,862 7% $ 20,692 10% Net earnings and comprehensive income: Attributable to company $ 14,101 $ 15,676 $ 13,161 Attributable to non‐controlling interest $ (771) $ 186 $ 7,531 $ 13,330 $ 15,862 $ 20,692
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Vail Vail Vail US $ (thousands) US $ (thousands) US $ (thousands) 2013 % 2012 % 2011 %
Resort revenue $ 1,120,797 100% $1,024,394 100% $ 1,167,046 100% Operating expenses $ 896,609 80% $ 836,018 82% $ 951,501 82% Depreciation and amortization $ 132,688 12% $ 127,581 12% $ 117,957 10% Selling, general and administrative Gain onsale of property $ 6,675 1% Impairment of long-lived assets $ 2,561 0% Impairment of goodwill Impairment of real estate Acquisition-related costs $ 1,022,622 91% $ 963,599 94% $ 1,072,019 92% Earnings from operations $ 98,175 9% $ 60,795 6% $ 95,027 8% Disposal losses $ 1,222 0% $ 1,464 0% $ 555 0% Investment Income $ 351 0% $ 469 0% $ 719 0% Interest expense on 3rd party debt $ (38,966) -3% $ (33,586) -3% $ (33,641) -3% Interest expense on N/P to affiliates Earnings (loss) from equity investments $ 891 0% $ 878 0% $ 1,342 0% Gain on disposal of equity investments Loss on extinguishment of debt $ (7,372) -1% Other income (expense) Finance expense, long term debt Finance expense, Limited Partner’s interest Net earnings before income tax $ 61,673 6% $ 30,020 3% $ 56,630 5% Loss on discontinued operations 0% Foreign currencry translation adjustments $ 188 0% $ (255) 0% Income tax expense $ (21,619) -2% $ (10,701) -1% $ (21,098) -2% Net earnings and comprehensive income $ 40,242 4% $ 19,064 2% $ 35,532 3% Net earnings and comprehensive income: Attributable to company $ 37,931 $ 16,198 $ 34,489 Attributable to non‐controlling interest $ (133) $ (62) $ (67) $ 37,798 $ 16,136 $ 34,422
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Intrawest Intrawest Intrawest US $ (thousands) US $ (thousands) US $ (thousands) 2013 % 2012 % 2011 %
Resort revenue $ 524,407 100% $ 513,447 100% $ 559,523 100% Operating expenses $ 448,944 86% $ 453,187 88% $ 504,005 90% Depreciation and amortization $ 58,342 11% $ 57,655 11% $ 76,371 14% Selling, general and administrative 0% 0% 0% Gain onsale of property $ 143 0% $ 782 0% $ 12,140 2% Impairment of long-lived assets $ - 0% $ 3,575 1% $ 64,097 11% Impairment of goodwill $ 1,052 0% $ 8,137 2% $ 73,230 13% Impairment of real estate 0% 0% 0% Acquisition-related costs $ 508,481 97% $ 523,336 102% $ 729,843 130% Earnings from operations $ 15,926 3% $ (9,889) -2% $ (170,320) -30% Disposal losses $ (5,818) -1% $ (1,976) 0% $ (17,034) -3% Investment Income Interest expense on 3rd party debt $ (98,437) -19% $ (135,929) -26% $ (143,463) -26% Interest expense on N/P to affiliates $ (236,598) -45% $ (195,842) -38% $ (160,943) -29% Earnings (loss) from equity investments $ (5,147) -1% $ 538 0% $ 8,299 1% Gain on disposal of equity investments $ 18,923 4% $ - 0% $ - 0% Loss on extinguishment of debt $ (11,152) -2% $ - 0% $ - 0% Other income (expense) $ 1,973 0% $ 1,199 0% $ (2,021) 0% Finance expense, long term debt 0% 0% 0% Finance expense, Limited Partner’s interest 0% 0% 0% Net earnings before income tax $ (320,330) -61% $ (341,899) -67% $ (485,482) -87% Loss on discontinued operations 0% 0% $ (6,469) -1% Foreign currencry translation adjustments Income tax expense $ 23,616 5% $ 5,836 1% $ (6,555) -1% Net earnings and comprehensive income $ (296,714) -57% $ (336,063) -65% $ (498,506) -89% Net earnings and comprehensive income: Attributable to company $ (295,957) $ (336,063) $ (498,867) Attributable to non‐controlling interest $ (757) $ - $ 361 $ (296,714) $ (336,063) $ (498,506)
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