Ski Operations Managers’ Decision Making Under Uncertainty By Denise Keltie A thesis presented to the University of Waterloo in fulfillment of the thesis requirements for the degree of Master of Arts in Recreation and Leisure Studies - Tourism Policy and Planning Waterloo, Ontario, Canada, 2007 ©Denise Keltie 2007 Author’s Declaration for Electronic Submission of a Thesis I hereby declare that I am the sole author of this thesis. This is a true copy of the thesis, including any required final revisions, as accepted by my examiners. I understand that my thesis may be made electronically available to the public. ii Abstract This study explores decision making amongst ski area management. In particular, it examined how ski area managers are challenged by the risk and uncertainty as a result of weather and visitor activity patterns. Prospect theory suggests that response to uncertain conditions may not result from the application of rational thought processes (Tversky & Kahneman, 2000). Instead, decision makers may fall victim to any number of seemingly arbitrary rules or processes as they attempt to deal with uncertainty. Ski operations in southern British Columbia were chosen for study because of the importance of ski operations to the economy of this region as well as the challenging and variable weather events they have recently experienced. For example, this area hosts international and regional visitors as well as major events like the Vancouver 2010 Olympics and Paralympic Games events. As a result, there is considerable interest in creating ski conditions that are of international calibre. However, the Vancouver and the Coast Mountains faced a weather anomaly of warm, wet weather in January 2005. Nearby regions experienced equally problematic weather conditions the following December. The task here was to discover how ski area managers were coping with the uncertainty created by variable weather patterns. This study utilized qualitative methods. In total, 16 ski area managers participated in semi-structured interviews between the months of November 2006 and March 2007. Interviews were conducted within three British Columbia tourism regions: Vancouver and Coast Mountains, Thompson Okanagan, and Kootenay Rockies. The most common weather disturbances to selectively or entirely impact ski operations were high winds, cold temperatures, avalanche hazards, and lightning. Managers used both rules and tools to deal iii with the uncertainty created by weather conditions. In terms of rules, they often relied upon heuristic strategies (cognitive rules of thumb) to help with decision making. They tended to open and close at the same time each year for example. Often these heuristics were based on historical weather data and skier visitation rates. Many managers reported being unaffected by existing biases in their decision making or falling victim to escalation of commitment (often reported in decision making studies). These managers also relied on a variety of tools to reduce uncertainty during decision making. These tools included the use of management teams, reliance on experience and individual expertise, historical weather and skier data, and reliance upon business models. For example, most of those interviewed reported extensive efforts to enhance operational sustainability. They focused on diversification (of winter products and year round activities), slope development (summer grooming), snowmaking, and environmental sustainability initiatives. In each case, the goal seemed one of reducing uncertainty in an inherently uncertain situation. Industry and market trends were impacted by improved ski technology and the increasing popularity of internet and last minute holiday bookings. iv Acknowledgements I would like to thank my supervisor Dr. Ron McCarville for his many hours of guidance and support throughout the entire writing of this thesis. I also want to thank my committee members, Dr. Daniel Scott, for his interest in climate change research and the ski industry, and Dr. Stephen Smith, for his guidance and constructive comments. I would like to take this opportunity to thank Kristin Baker from the Canada West Ski Areas Association. Her help through providing contact information about potential participants was immeasurable. I would like to extend my appreciation to all the individuals who participated in my research. This study would not have been possible without the willingness and cooperation of the sixteen participants, ski area management, who volunteered their time and shared their thoughts and experiences. In addition, I appreciated the efforts of one individual who was unable to participate due to schedule and time constraints, but helped me by organizing many interviews with participants from his ski area. Thank you to my family and friends for your encouragement and support. Particularly, I would like to thank my dad, Ross Keltie, for his support and Aeroplan miles. Additionally, I would like to thank Brian and Laureen Cowie for letting me use their vehicle and chalet while I was in the Vancouver and Coast Mountains area. Finally, I would like to thank Andrew Wheelhouse, who has been there every step of the way. He has been my editor, caregiver, motivator, IT specialist, and best friend. Without his love, encouragement and patience over the last two years, I would not have overcome computer crashes and a broken leg to complete my thesis and this degree. v Dedication I would like to dedicate my research to my Grampy, Ian George Secord Keltie. My grandfather, a Spitfire pilot, Distinguished Flying Cross recipient, and my hero. vi Table of Contents 1 Introduction.......................................................................................................................... 1 1.1 The Process of Decision Making Under Uncertainty .................................................. 2 1.2 Climatic Uncertainty in Leisure and Tourism Settings ............................................... 5 1.3 Statement of the Problem............................................................................................. 6 1.4 Research Questions...................................................................................................... 6 1.5 Definition of Terms and Concepts............................................................................... 7 2 Literature Review ................................................................................................................ 9 2.1 Climate....................................................................................................................... 10 2.2 Climate Sensitivity..................................................................................................... 11 2.2.1 Experiences of BC Weather Anomalies .............................................................. 12 2.2.2 Climate Change Implications for the Ski Industry .............................................. 14 2.3 Vulnerability in Activity Patterns.............................................................................. 17 2.3.1 Skier Segmentation.............................................................................................. 17 2.3.2 Canadian Ski Market ........................................................................................... 18 2.3.3 Ski Tourists.......................................................................................................... 18 2.3.4 Concluding Comments on Canada’s Ski Market................................................. 19 2.4 Ski Industry................................................................................................................ 20 2.5 Risk Management ...................................................................................................... 21 2.5.1 Business Strategies .............................................................................................. 22 2.5.2 Concluding Comments on the Ski Industry......................................................... 26 2.6 Decision Making Under Uncertainty......................................................................... 27 2.6.1 Framing Effects in Decision Making................................................................... 29 2.6.2 The Role of Heuristics and Biases in Decision Making ...................................... 30 2.6.3 Escalation of Commitment within Decision Making .......................................... 32 2.6.4 Loss Aversion ...................................................................................................... 34 2.6.5 Risk Attitudes of Decision Makers...................................................................... 34 2.6.6 Concluding Comments on Decision Making Processes and Results................... 36 2.7 Concluding Comments on the Accumulated Literature ............................................ 36 3 Methodology...................................................................................................................... 38 3.1 Theory Justification and Applicability ...................................................................... 38 3.2 Data Collection .......................................................................................................... 40 3.3 Sample ....................................................................................................................... 43 3.4 Location ..................................................................................................................... 44 3.5 Data Analysis............................................................................................................